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From boom to bust: pigeon pea shortage expected next year

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Traders and economists in Mozambique anticipate a shortage in pigeon pea production next year as the plunge in crop prices has left farmers in crisis.

Farmers had invested heavily in pigeon peas on the assumption their crops would have a guaranteed market in India, after the Indian government committed to importing at least 125,000 tonnes of Mozambican peas in 2017.

However, a bumper harvest in both countries sent pigeon pea prices plummeting from 50mt/kilo in 2017 to around 5mt/kilo this year, well below the cost of production.

These low prices –  and the confusion caused by India’s ban on pigeon pea imports in August, which led to a temporary halt in Mozambican exports – means many farmers have been left without the money to invest in next year’s harvest. Others are losing confidence in the viability of cash crops.

“I think the population is giving up on pigeon peas,” Dino Foi, chairman of International Agrofoods Mozambique, told Zitamar News.

Even though India has now resumed imports of the peas from Mozambique, this is too late for many farmers, whose crops are now rotting in the fields.

“In Nampula people have got so many pigeon peas that the price is 2mt/kilo. We are supposed to export 125,000 tonnes this year, already 40,000 tonnes have gone, which leaves room for 85,000 tonnes. But the crop remaining from last year and this year is more than that,” Foi told Zitamar News.

Devastating impact

Farmers need at least 10mt/kilo to cover the costs of production – particularly if they are cultivating a larger area of land than they can farm themselves. For these small commercial farms, growing pigeon peas costs requires an investment between 5000–10,000mt  per hectare to cover the additional labour costs.

“The overall cultivated area of land next season will go down because the bigger farms that had invested in pigeon peas now don’t have any money to pay labourers,” said Jorrit Oppewal, an economist of the International Growth Centre (IGC), which has been monitoring the situation closely..

“I spoke to one farmer who has 16 hectares of pigeon peas that he is not harvesting because the price of the peas will not even cover the cost of harvesting. The crop is just rotting in the fields.

“Furthermore, he now does not have the resources to contract labour for the preparation of fields for the next season that is starting now, leading to the collapse of the local labour market,” Oppewal said.

The effects of low pigeon pea prices have been compounded by the drop in maize prices, which fell almost 90% from 35-40mt/kilo in 2016 to 4-7mt/kilo this year.

“I wouldn’t be surprised if next year there is a deficit in maize production,” said Oppewal.

In provinces like Zambezia, which are heavily reliant on pigeon pea and maize production, the crash in prices is having a devastating impact on the local economy, Oppewal said.

“Talk to anyone in the major pigeon pea producing areas of Zambezia who owns a shop in the district capitals and they say business is down 50% compared to the same period last year because no one has any money to spend. In in the countryside sales are down still further, as they depend solely on the farmers,” he told Zitamar.

Steadying the market

One trader told Zitamar they will continue to buy pigeon peas this year, even though they know they can’t export them, to try to encourage farmers to keep producing the beans.

India’s minimum import commitment under their five-year memorandum of understanding rises to 150,000 tonnes in 2018, and traders hope the difficulties that both Indian and Mozambican farmers have been facing means there could be a deficit next year.

However, is also possible there will still be more than enough peas to meet demand given the number of pigeon peas already in stock.

If this is the case, sellers are concerned that, with elections coming up in India, prime minister Modi will abandon his deal with Mozambique in favour of domestic farmers.

“Modi’s not going to put himself in hot water because of Mozambique,” said Foi, who said he has quit the pigeon pea business. “You can sell pigeon peas in Mumbai for $800-900/ton. Here you can sell it for $600/ton. But you can’t just send it to India, because the Indians are busy trying to take care of their own producers.”

ICM prepares for next year’s sales

However, Mozambique’s Instituto Nacional de Cereais (ICM) is preparing for next year’s sales on the assumption the full quota will be met. The ICM is now the sole authority for issuing Certificates of Origin for pulse exports to India, which should guarantee the safe passage of the minimum 150,000 tonnes of Mozambican pigeon peas to India, regardless of other import restrictions that are in place.

“What we are doing now is collecting data from the interested companies for the 150 thousand tons for 2018. Then we will have a way of distributing this quota to exporters because we will already know who is exporting,” João Macaringue, ICM president told Zitamar News.

“In principle any company can be awarded a certificate of origin, “as long as it meets the requirements demanded by the ICM,” said Macaringue. This includes accounts showing the company’s last two years of business, documentation showing they exported a minimum of 5000 tonnes of pigeons peas in each of the last two years; proof that they have been involved in agro-processing the peas, a letter of firm commitment to continue buying pigeon peas under the current campaign, and  a statement of the volume of pigeon peas they plan to buy and from which farms.

“These requirements will allow us to prevent pigeon peas from being sold in India from other countries taking advantage of and using the Mozambican quota, as we detected on our last trip to New Delhi,” said Macaringue.

“With this measure the government expects not only to have concrete quota data, but to effectively manage bean traders. Formerly this was done in a disorganized way, with each person to export their own way which resulted in a tremendous confusion, even though sometimes the Camara do Comercio de Moçambique and other entities tried to coordinate.”

© 2017, Zitamar Ltd. Reproduction and dissemination prohibited without written permission.

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