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FRA maize floor price is appropriate – Tembo

PATRIOTS for Economic Progress president Sean Tembo has challenged people advocating higher prices for maize to explain how the price of mealie meal will be reduced if the maize price is increased.

Tembo said the current K110 price put up as the floor price by the Food Reserve Agency is good enough considering the cost of producing the staple food.

He hinted that his party had done a review of the costs involved in the production process and deemed it fit “considering all competing variables”.

“Our considered view is that the FRA buying price of K110 is appropriate under the circumstances. We believe that the two main competing variables that must be considered when arriving at a suitable price for FRA to buy maize from farmers is a suitable profit for farmers on one hand and the need to ensure that the price of mealie meal remains affordable to the masses, on the other hand. An appropriate price is one which endeavours to address these two competing and yet equally important variables,” he said. “With regard to the need to give farmers a fair and equitable profit on their hard work, based on our previous practical experience, the average cost of producing 40 bags of maize is K2,000 excluding labour. This is made up of two bags of D-compound fertiliser at K350 per bag (K700), two bags of Urea fertiliser at K450 per bag (K900), a 10kg bag of maize seed at K250 and K150 for miscellaneous expenses. This means that the average cost of a 50kg bag of maize is about K50 excluding labour. Therefore, an FRA price of K110 per 50kg bag of maize gives farmers a markup of about K60 per bag, which in our view is a fair and equitable return for their labour and investment.”

Tembo said with regard to the need to give the masses a fair and equitable price for mealie meal, based on “our practical experience, a 50kg bag of maize gives an average of 35kg of breakfast mealie meal”.

“Therefore, at the FRA price of K110 per 50kg bag of maize, the material cost of producing a 25kg bag of breakfast mealie meal is about K78, excluding all other expenses incurred by millers such as labour, transportation, electricity and related overhead costs,” he said.

Tembo said mealie meal can now be sold at cheaper prices without loss of profits by millers.

“Therefore, by utilizing economies of scale, millers can make a decent profit while maintaining the price of a 25kg bag of mealie meal to less than K100. A price of K100 for a 25kg bag of breakfast mealie meal is reasonably affordable to the masses. Those advocating a higher FRA buying price should explain how the adverse impact on the retail price of mealie meal will be mitigated,” he said.

Tembo advised the government to quickly open the export market for maize so that farmers can export part of their maize and obtain an even better return on their labour and investment.

“It is worth noting that based on available statistics, the country has more than 2,000,000 metric tonnes of excess maize that is over and beyond our required national consumption needs. This maize requires to be exported at the earliest possible time, otherwise it risks going to waste, given our country’s limited grain storage capacity,” said Tembo.

The announced floor price of maize has been received with mixed feelings with most political players especially those in the opposition taking swipes at FRA for the ‘low’ price.

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