Whether for profit or social motives - and often both - an increasing number of investors are targeting opportunities in African agriculture. At the same time innovative approaches for deploying aid to support farming businesses linked to smallholders are emerging. This blog provides a snapshot of who is doing what, where and how.

15 February 2011

Record maize prices - but few benefits for African farmers

By Chirs Isaac

The world is staring down the gun of a new food crisis. Global maize prices have doubled in the past six months, reaching record levels. The chart below from IndexMundi shows the extent of the increase, caused by poor harvests and low global stocks. Today the FOB Gulf price for maize (corn) hit $295 per tonne.

That must be good news for African maize farmers, right? Not in the short term. A number of countries in Southern Africa - Malawi, Tanzania, Zambia and Mozambique - have recorded bumper harvests this year following good rains. But surplus crops are flooding local markets, driving prices down, rather than taking advantage of export opportunities.

As this article reports the price of maize in Malawi is currently as low as $3 per 50kg bag - equivalent to just $60 per tonne. That is hardly sufficient for farmers to recover the costs of seeds and fertiliser let alone provide an income.

Why the disconnect? A combination of policy, logistical and infrastructure challenges keep African farmers locked out of international markets. It costs up to $150 per tonne to ship maize from Malawi to an international port, for example. There are also cleaning and storage costs to be taken into account.

The solution? Agricultural growth corridors in Tanzania (SAGCOT) and Mozambique (BAGC), both of which link back into Malawi and Zambia, are a way of leveraging socially-responsible private investment to drive investment along the agricultural value chain, building links from African farmers to regional and international markets.

With more investment, economies of scale along the value chain will start to kick in, driving a virtuous cycle of increased competitiveness, higher productivity and better incomes for African farmers.