Malawi has been reaping bumper maize harvests for the last five years thanks to the donor supported seed and fertilizer subsidy programme. But this may not be sustained if the subsidies behind the success dry up.
Malawi is expected to harvest 3.8 million tonnes this year, up from the 3.5 million the previous year, despite some dry periods during the season. This represents a surplus of 1.2 million tonnes.
The growing season starts around October with the onset of rains and lasts until around March or April.
But the fate of the subsidy programme is unclear as the cash depends on donor aid and the state of government finance.
Malawi has already suffered a heavy blow after Britain, one of its major donors, cut budget support after a diplomatic dispute.
In the last four years, Britain had spent $20 million on the programme, which has been in place since 2004 and has boosted harvests in a country that historically suffered food shortages.
“It’s clear that future funding for the subsidy programme is out and the trend shows that the number of beneficiaries has dwindled … because it’s an expensive undertaking,” Felix Jumbe, Farmers Union of Malawi president, said.
“With donors out of the picture, it will be difficult for government to sustain the programme.”
Malawi has cut the number of small growers who will qualify for its Farm Input Subsidy Programme (FISP) for the 2011/12 season to 1.4 million from 1.6 million in the previous season.
Erica Maganga, the Principal Secretary in the Ministry of Agriculture, said the government was committed to the programme but did not say where the money was going to come from.
In Zambia, where the government solely funds the subsidy, the big concern is whether economic growth remains robust enough for the state to keep the cash flowing, said Oliver Saasa of the Economics Association of Zambia.
Much of its growth depends on the commodity cycle and copper prices and a sharp reversal on this front because of global economic woes would hit state coffers hard.
Saasa said another challenge was that many of the targeted farmers were not benefiting from the programme. Zambia’s FISP, which started in 2002, is aiming for 914,000 farmers in the 2011/12 season, up from 891,500 farmers in the previous season.
Saasa said many people were promptly selling their seeds and fertiliser for quick cash to others.
“Presently a huge quantity of the farming inputs ends up in the hands of people who are neither vulnerable nor farmers,” Saasa said.
Still, even if the programme is not perfect, the fact remains that Zambia’s harvests have been increasing.
Africa’s biggest copper producer is pushing to diversify its economy away from mining and agriculture has been identified as one of the sectors for growth.
“Bumper harvests can be sustained if farmers continue using improved inputs and if the country continues receiving good rains,” said Abedinigo Banda, permanent secretary in Zambia’s ministry of Agriculture.
Zambia and Malawi also face logistical challenges, such as transport to move the produce from rural farm areas to the markets, as well as adequate grain storage facilities.
“The last two years have taught us that we can actually become victims of our own success,” Saasa said.
“Although we had bumper harvests we faced the challenge of collecting the maize from remote areas with bad roads and because of this some of the crop was spoiled.”
Piet Faure, a soft commodities analyst at CJS Securities in Johannesburg, said the countries need to invest more in agricultural infrastructure to sustain the higher grain output.
“If they can increase the infrastructure spend, improve on transportation and have access to outside markets, it can improve production in the countries,” Faure said.
Finding new export outlets for the surplus grain has not been an easy task for the two land-locked nations as they compete with South Africa, the continent’s biggest maize producer and the region’s net exporter of the grain.
A deficit in some countries within the region such as Zimbabwe has provided a market for Zambia and Malawi for now but more market outlets are needed.
“(Zambia is) not the only country having these bumper harvests and we need to find a way of penetrating regional markets for our farmers to remain in business,” said Saasa.
Zambia said in May it will buy 1.3 million tonnes of maize from its farmers to keep tehm in business, despite a surplus of 1.6 million tonnes.
The good crops have helped contain food inflation in Malawi and Zambia but regional prices are heating up and South Africa’s most traded December contract for white maize MAWc3 is currently close to 3-year highs at 2,252.20 rand a tonne.