The Press Release I wrote for FUM

Below is the press release I wrote after a lot of research for the Farmers Union of Malawi (FUM). It has garnered a lot of attention and the government has partially backed off on its decision to be the only one allowed to buy and sell corn in Malawi. They are now going to allow small traders to buy and sell, which will be better for Malawians, especially in remote areas as it will allow them to actually have access to the corn rather than having to travel great distances to get to a government deopt. As well the government has now stated that this directive is only for a short time, while at the time of announcement is was completely open ended.

Farmers Union of Malawi Expresses Reservations Over the ADMARC Directive

September 2008

The Farmers Union of Malawi (FUM), which is an apex body for farmer organization in Malawi commends Government for its efforts to achieve food security in Malawi. This has been demonstrated in a number of ways during the past three years, including the increased budgetary allocation towards agriculture (14-16%) which is significantly above the Maputo Declaration which called for a minimum 10% budgetary allocation towards agriculture. Additionally the Government is to be commended for the steps taken to ensure food security including the Targeted Input Subsidy Programme (TIP) which has turned Malawi from a net food importer to a net exporter. For a long time farmers have suffered exploitation at the hands of unscrupulous buyers who were reaping the benefits from where they did not sow and there was little or nothing done to rescue them. In response, Government introduced minimum market prices so that farmers could be protected from exploitation and then went even further by raising the minimum prices for maize, tobacco and cotton this year, which FUM applauded. In support of agricultural processing, in line with the Malawi Growth and Development Strategy (MGDS), the Government has implemented incentives in the livestock sector with regard to lowering levies on the importation of equipment leading Malawi to enhanced economic growth.
That said, the Farmers Union of Malawi has grave reservations regarding the recently announced plan by the government that ADMARC will be the sole buyer of all the maize produced in Malawi. Concerns have been raised both about ADMARC’s operational inefficiency and the extent to which ADMARC actually provides useful marketing services to smallholder farmers and poor consumers.1 ADMARC last year failed to access many rural areas first blaming it on a lack of funds then on impassable roads due to the rain. Being the sole buyer is not a direction the government is supposed to be going. This directive is not well timed and is in contravention with our current era of market liberalization.
FUM feels that there is a role for both ADMARC and the private sector in maize purchasing and selling, especially in remote areas of considerable distance from ADMARC depots and that the directive enforcing ADMARC as the sole buyer/seller of maize, if necessary, may have been better implemented in partnership with the private sector. Competition is good for creating both effective markets as well as leading to a better livelihood for Malawian farmers, better livelihood leads to increased food security.
FUM recognizes a role for properly licensed and reputable buyers. Properly monitored, the private sector can play a role in alleviating food security problems by enhancing competition and providing effective purchasing and distribution networks. Therefore what is required is for the private sector, with monitoring from Government, to ensure that buyers are credible, honest and reputable. The licensing regime should be strict and punish those who do not meet these criteria. This will provide for a viable private sector marketing structure allowing the Government to ensure food security while continuing to allow the pursuit of a liberalized economy.
While FUM understands the step taken by Government is an attempt to ensure food security, the Farmers Union of Malawi, whose mandate is to safeguard and promote the interests of farmers in Malawi, is interested to see that farmers get a good return on their farming investments in the face of high production costs due to soaring global input prices. It is therefore important not to discourage investment in agriculture leading to lower future production and preventing Malawi from taking advantage of the opportunities available due to rising food prices.
FUM believes that a more appropriate approach is temporary export restriction which was implemented in April of this year. This keeps the produced maize in the country but still allows the private sector and market forces to play their expected role in a liberalized economy. Food security also flows out of farmers, who are the majority of Malawians, receiving an appropriate selling price for their produce including maize. With the increasing cost of inputs especially fertilizer farmers need to ensure that they can adequately plan to buy inputs for the next growing season by pursuing the best price. A 2002 study by OXFAM found that “produce fetches higher prices when sold to private traders and at local markets than at ADMARC.”2
FUM feels that the Government needs a medium to long term strategy to build the capacity of ADMARC to effectively compete in an open and liberalized market. This would allow ADMARC ample time to prepare by enhancing its human, financial and physical capacity. Additionally ADMARC needs to ensure that distribution points are within reasonable distances of Malawians, thereby truly contributing to the stated goal of food security for all Malawians. Traveling great distances to ADMARC depots can be a significant cost to farmers, reducing even further their income. This problem is compounded if ADMARC begins rationing the amount of maize that can be purchased requiring farmers to return multiple times. Currently this rationing has already been seen to occur in ADMARC depots in the Southern Region.
If farmers cannot easily sell their maize to ADMARC then "gray markets", where the product trades at prices below the set price will crop up. If the set price is too low compared to neighbouring countries than there is the possibility of maize crop flowing out of Malawi given the porous nature of our borders. In this case, this may be good for Malawian producers as they will have secured a better price but it could undermine the good intentions aimed at food security the government is trying to protect. Farmers naturally wish to sell to the buyer who offers the best price, if the setting of a maximum price of MK 45/kg forces farmers to sell at that price and no better than this would be detrimental to their interests if the private traders would be offering a better price. The set price of MK 45/kg is on the low side of what farmers were actually receiving this season. This may encourage the growth of black market sales as farmers attempt to recoup the cost of inputs.
ADMARC as sole buyer may be harmful to both traders who are pushed out of the market by the ever changing decisions of government on what ADMARC’s role is, and also to producers whose incomes are negatively affected by ADMARC’s presence.3 Support for private sector structures is more sustainable in the long term as it allows for government to get out of the business of buyer thereby freeing up precious budgetary resources. A World Bank study found that ADMARC has been plagued by a history of failure to guarantee food security with the failure attributed to the extremely high cost of the programs compounded by the large inefficiency in ADMARC’s operation.4 Other problems found with ADMARC in the study were that it consistently bought too late in the year and that it often ran out of money in the middle of the season.5 These were serious concerns and provide a genuine justification for the continued move to a more liberalized market. By implementing this directive indefinitely the Government risks losing credibility both with Malawians and with the international community.

For ADMARC to be able compete favourably in a liberalized market economy FUM recommends the following if:
- ADMARC must ensure that it does not ration the maize distributed, causing families to have to return to distribution points multiple times, often at great distances from their homes.
- ADMARC must ensure that it has depots that are at a reasonable distance from all Malawians.
- ADMARC needs to strive to make the maize available so that it is equitably and efficiently distributed to all people and all areas.
- For traders to turn over the maize they may have in storage, ADMARC may need to offer a higher amount to them to cover both the purchase and storage costs that have already been incurred. Some farmers have received higher prices from buyers and it is fair to assume that the traders need to recoup their costs.
- Additionally it is essential that ADMARC has sufficient cash reserves to pay at the time and point of sale and that appropriate stocking of maize occurs early enough in the season.
- ADMARC must ensure that it reaches areas that may become impassable in the rainy season while the roads can still be travelled and that it tackles operational inefficiencies that it has struggled with in the past.
- Preferential treatment in the selling of commodities at the ADMARC depots must stop immediately.
- Private sector contracts to provide maize to large institutions such as hospitals, schools, the military etc. must be honoured and fulfilled by ADMARC
It is imperative that when setting minimum prices the Government should negotiate these prices with the relevant stakeholders including FUM as representative of the farmers of Malawi. The setting of the minimum price was a communication tool to farmers, allowing them to know the price below which they should not sell. Whether there was effective enforcement or not the producers had a minimum price that they could us as a guideline to attempt to enforce fair prices themselves. With rising fertilizer, fuel and other input costs it is imperative, in light of the goal of making Malawi an exporting rather than an importing nation that farmers receive adequate returns on their investments.
The Union would also like to appeal to farmers, who are the key to food security in this country, on the following:
- To desist from selling their produce to unlicensed buyers
- To not sell their produce while it is still in the vegetative state and the actual yield is unknown
- Bartering is discouraged as there are many instances where farmers are taken advantage of in this medium of exchange
- Not to sell all their maize but to stock enough reserves for household consumption to take you through the year
- To start careful planning for next growing season in terms of sourcing inputs. Farmers must remember that farming is a business; they must not spend/consume the capital for their business
- Farmers must remember that the HIV/AIDS pandemic is real and that prevention is better than mitigation. The good income realized from crop and livestock sales should not make farmers forget that the pandemic is having a devastating impact on agriculture and the economy as a whole.
With the announcement of ADMARC being the sole buyer of all maize the government has turned its back on market liberalisation and has refused to allow farmers to take the best price offered to them.