UNCLAS SECTION 01 OF 05 HARARE 001995

SIPDIS

AID FOR DCHA/FFP LANDIS, CRUMBLY, MUTAMBA, PETERSEN
DCHA/OFDA FOR PRATT, BARTON, KHANDAGLE, MENGHETTI,
BORNS, MARX, HALMRAST-SANCHEZ, MCCONNELL
AFR/SA FOR FLEURET, COPSON, FORT, BAKER, MACNAIRN
STATE/AF FOR RAYNOR, DELISI
PRETORIA FOR DIJKERMAN, HELM, DISKIN, HALE
NAIROBI FOR SMITH, RILEY
LILONGWE FOR RUBEY, SINK
LUSAKA FOR GUNTHER, NIELSON
MAPUTO FOR POLAND, BLISS
MASERU FOR AMB LOFTIS
MBABANE FOR KENNA
GABORONE FOR THOMAS, MULLINS AND DORMAN
ROME FOR FODAG FOR LAVELLE, DAVIS

E.O. 12958: N/A
TAGS: EAID PREL US ZI
SUBJECT: Zimbabwe's Food Crises Set to Continue in the Face
of Bleak Production Prospects for the Coming Agricultural
Season

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SUMMARY
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1. As a result of the continuing severe economic decline,
particularly in the crippled agricultural sector, the food
crisis in Zimbabwe is expected to continue into the 2004/05
marketing year. Projections for Zimbabwe's 2003/2004
agricultural season are bleak, largely due to worsening
input supply and financing constraints. All major
agricultural sub-sectors are expected to continue their
decline, even if the weather is favorable. In addition to
the critical foreign and local currency constraints,
serious shortages of seed, fertilizer, crop and livestock
chemicals, fuel, and agricultural equipment and spare parts
all point towards another sub-standard harvest in the
2003/04 season with continuing significant production
deficits, food gaps and international assistance
requirements. End Summary.

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AGRICULTURAL PROJECTIONS
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2. The United Nations estimates a 20 percent decline in the
Zimbabwean economy during the year 2003. This projected
contraction is largely attributable to the demise of the
commercial agricultural sector -- the mainstay of the
country's economy -- through the compulsory acquisition of
farmland under the government's disastrous "fast-track"
program. As a result, the Commercial Farmers Union (CFU)
estimates a further 52 percent contraction in agricultural
output (in real terms) from the commercial sector during
the 2003/2004 season to approximately 15 percent of its
previous historic levels. In addition, farm expropriations
continue unabated, suggesting the possibility of an even
more dismal performance than that projected here.


3. Although "fast-track" has increased the production
potential of Zimbabwe's smallholder agricul

tural sector,
the serious input constraints discussed below are expected
to prevent this sector from realizing this potential
anytime soon and filling the gap left by the demise of the
commercial sector.

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SEED
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4. While different sources provide varying estimates of
seed availability, all sources indicate a serious shortfall
as the planting season approaches. The Zimbabwe Seed
Traders Association and "Seed Co" Company estimates range
from 21,650 MT to 23,275 MT for hybrid maize seed
(excluding possible imports), and 1,500 MT to 4,800 MT for
open pollinated maize varieties (OPV) during the 2003/2004
agricultural season. Aggregate maximum estimates for both
hybrid and OPV commercial maize seed amount to 28,075 MT,
compared to an annual estimated requirement of
approximately 50,000 MT. [Note: Although higher seed
requirements have been cited, i.e., 60,000 MT, most
knowledgeable experts believe that 50,000 MT is the maximum
amount of seed that could possibly be planted during the
coming season (covering an area of 2 million hectares at a
"normal" planting rate of 25 kg/hectare) for the variety of
reasons elaborated below. End Note.] This implies an
estimated maize seed shortfall of 21,925 MT (40+ percent)
for the upcoming agricultural season. Preliminary
estimates of seed shortfalls for other crops are: sorghum
(1,350 MT), pearl millet (1,460 MT), finger millet (1,000
MT), sugar beans (2,420MT) and groundnuts (59,900 MT).


5. These seed shortfalls are primarily attributable to farm
disruptions, which have put many experienced seed producers
out of production, insufficient production from novice
producers, and a lack of seed carryover stocks from the
previous season (including approximately 17,000 MT of seed
not accounted for from government's haphazard crop input
scheme). At present, approximately 5,000 hectares remain
under seed cultivation by 37 experienced producers, down
from the 12,000 hectares of seed maize previously
cultivated by 84 experienced producers attached to Seed-Co
Company, which has an 85 percent market share. In
addition, the future of these 37 remaining farmers is
uncertain, as farm acquisitions/disruptions continue.


6. With the severe forex crisis as well as the difficulties
involved in importing suitable seed stocks from other
countries, it remains highly unlikely that much of this
shortfall will be able to be met this season from either
the GOZ or international assistance. According to FAO, a
total of 592,558 vulnerable households are targeted to
receive international assistance in agriculture for the
2003/2004 season. Planned seed assistance to date includes
maize seed sufficient to plant 171,974 hectares (4,300 MT),
small grains' seed sufficient to plant 242,374 hectares
(2,425 MT), and other crop seeds (e.g., beans, cowpea,
groundnuts, vegetables) sufficient for 54,691 hectares
(1,683 MT), implying total planned seed assistance to date
could cover 469,029 hectares.


7. In addition, seed prices have risen beyond affordable
levels for most ordinary farmers. According to the new
seed prices announced by the Minister of Agriculture on
September 17, a kilogram of maize seed that cost ZW$ 192
last year now costs more than ten times that amount (ZW$
2,100/kg). Access to seed may be further restricted by
nationwide shortages of local currency notes to conduct
local transactions (although the GOZ's recently issued
bearer cheques may alleviate this problem), and increased
transport costs.


8. This diminished access to seed will force farmers to
plant any available seed, including grain from the previous
season. Recycling hybrid grain seed leads to regression of
the seed material with undesirable results, such as
increased susceptibility to diseases and pests, more
variable maturity dates and, most significantly, lower crop
yields.

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FERTILIZER
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9. The shortage of foreign currency to source inputs and
spare parts needed to boost production has led to a severe
contraction of the domestic fertilizer industry. About 40
percent of blended fertilizers and about 50 percent of
tobacco fertilizers have a direct imported component
requiring foreign exchange. The fertilizer industry
estimates that the market has shrunk by about 40 percent
since the advent of the government's 'fast track' land
grab, with a similar estimated current production
potential. For example, Sable Chemicals is the sole
producer of ammonium nitrate (AN) in Zimbabwe. Under
normal circumstances, the company produces 31,000 MT of AN
per month; currently, the company is producing about 12,300
MT.


10. According to government estimates, national fertilizer
requirements are more than one million MT per year. At
peak production in the latter half of the 1990s, the
industry produced about 520,000 MT of fertilizer. As a
result of the capacity constraints noted above, production
estimates for the coming season are about 340,000 MT.
Accordingly, the UN estimates that there will be a
fertilizer gap of approximately 550,000 MT during the
2003/2004 cropping season. As for seeds, these fertilizer
shortages will be compounded by prohibitive prices -- the
price of AN has increased almost 400% from last year, and
the price of Compound D fertilizer has increased almost
seven times (from ZW$ 74 to $ 726/kg). These significant
price increases will inevitably impact negatively on
fertilizer use and crop yields.

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TILLAGE
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11. In the absence of sufficient draught power (decimated
by foot and mouth disease and recent droughts),
availability of fuel for timely land preparation is vital
to the success of the cropping season. In August,
government introduced a dual pricing system for fuel. The
State-owned National Oil Company of Zimbabwe will continue
to supply petrol and diesel to government departments and
public transporters at 8 US cents/liter and 4 US
cents/liter, respectively. Whereas certain private
companies are now allowed to import and sell their own fuel
at prices ranging from US$ 0.30 to US$ 0.35 for both diesel
and petrol. It is not clear whether or not the
agricultural sector will benefit from the special low
prices afforded to the government and public transport
sectors.


12. As a result of the fuel shortages and price increases,
tillage costs have also risen to prohibitive levels for the
average smallholder farmer. At a cost of over ZW$
50,000/hectare, tillage is approximately double what it
cost last year. Therefore, even if sufficient farm
machinery were available and operational, it will likely
remain beyond the financial capacity of most smallholder
producers to access. [Note: On September 25, government
announced it was tendering for private tillage services to
support smallholder (especially resettlement) farmers to
prepare for the coming cropping season. No figures were
provided for the total budget allotment for this scheme.
This is the first (and only) such government support scheme
for this season announced to date - see "Production
Finance" below. End Note.]

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PRODUCTION FINANCE
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13. The Zimbabwe Farmers Union (ZFU), a body that
represents smallholder farmers, estimates that about ZW$
600 billion is required to support agricultural activities
in the forthcoming season. Government has announced plans
to raise about ZW$ 100 billion for the agricultural input
support program. To date, as the planting season
approaches, there is no evidence that anyone has benefited
from this fund (with the exception of the tillage scheme
noted above), nor are there indications as to when these
funds will become available.


14. Support from private agri-businesses is also not
guaranteed this growing season, following breach of
contracts by smallholder farmers last season. For example,
Cotton Company of Zimbabwe (COTTCO) lost millions in
potential revenue when the farmers to whom the company had
advanced seed, fertilizer and chemical credits during the
last cropping season by-passed the company and sold their
cotton to new cotton companies that invested nothing in the
growing of the crop. As a result, COTTCO has since stopped
its ZW$ 3 billion input assistance scheme. Farmers will
thus find it more difficult to raise the significantly
increased amounts of money they need for the forthcoming
season. The ensuing cash shortages could result in many
farmers being forced to rely on retained seed and low/no-
fertilizer and/or tillage practices this season, resulting
in reduced crop yields.

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PROJECTED PERFORMANCE OF KEY AGRICULTURAL SECTORS
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15. Assuming favorable growing conditions [Note: The
Southern Africa Development Community official weather
forecast predicts "average" rainfall for most parts of
Zimbabwe for the 2003/04 season. End Note.] and optimal
seed use and yields, with estimated available commercial
and retained seed stocks, Zimbabwe could theoretically
produce sufficient maize to approach its national
requirements next year (i.e., around 1.5 million MT, as
opposed to a national human requirement of about 1.8
million MT). Such a scenario is highly improbable,
however, as a result of the many serious input access and
affordability constraints noted above. Accordingly, most
knowledgeable experts predict a maximum 2003/04 harvest of
around 1 million MT (i.e., slightly above last year),
leaving a maize deficit on the order of 800,000 MT for the
2004/05 marketing year.


16. Traditionally, the large-scale commercial irrigators
produced more than 90 percent of the winter wheat crop.
Because of the continuing disruptions on commercial farms,
it is estimated that total wheat production this season
will be only 90,000 MT down by about one third from that
produced in the peak 2001 season, leaving a national
shortfall of about 250,000 MT for this marketing year
(i.e., November 2003 to October 2004).


17. Tobacco has traditionally been a major foreign currency
earner in Zimbabwe, accounting, on average, for more than
40 percent of the total agricultural export earnings. As a
result of the land seizures, commercial production in 2003
is estimated at no more than 80 million kg (from 232
million kg in 2000). Judging from the amount of seed sold
and the scale of seed-bed preparation, estimates for
tobacco production in 2003/2004 are no more than 15 to 20
million kg. In addition, it is projected that most of the
tobacco crop will be rain-fed in the coming season, leading
to additional declines in both quality and quantity (and
additional losses of critical FX).


18. Foot and mouth disease (FMD) is now reported across all
provinces of the country, largely due to the unlawful
movement of communal cattle across veterinary boundaries as
a result of the land reform program. The commercial cattle
herd is estimated to be about 150,000 head, down from a
pre-1980 peak of about 3 million head. Due to the outbreak
of FMD, it seems unlikely that Zimbabwe will be in a
position to export beef to Europe in the near future, again
severely affecting forex generations.


19. Other Crops: Soybean production in 2002/2003 was
estimated at about 36,000 MT, a quarter of that produced in

2001. The outlook for 2003/2004 is similarly poor,
depending largely on how many large-scale growers are
permitted to grow a crop in the coming season. Coffee
production in 2003 is estimated at 5,500 MT (from a peak of
10,000 MT in 1998), and falling, also due to the continuing
eviction of large-scale producers. Declines are also
projected in wildlife, pigs and poultry, dairy, barley (21
percent decline over previous year), and horticulture (32
percent decline over the previous year).

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CONCLUSION
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20. Regardless of whether or not good rains fall in
Zimbabwe, it appears that the country's food crisis is set
to continue for some time to come. Continuing (and
increasing) foreign and local currency shortages, that
limit the availability of critical agricultural inputs such
as seed, fertilizer, farming machinery operations, repair
and maintenance, fuel and finance, will result in reduced
agricultural output. Although it is still too early to
accurately predict this coming season's harvest, all
projections point to another sub-standard year, similar to
last year's performance, with concomitant significant
continuing production deficits, food gaps and international
food assistance needs. In addition, continuing contraction
of key export products such as tobacco, horticultural
products, wildlife and beef will translate into further
foreign currency shortages, thus exacerbating input and
production constraints (as well as government's ability to
respond to the crisis through food imports). Put simply,
the country is in a vicious cycle in which deteriorating
agricultural production is reducing its ability to supply
inputs necessary to achieve any significant improvement in
agricultural output. As a result, the food crisis will
continue into the 2004/05 marketing year, and quite
possibly worsen, in the absence of a genuine effort to
address the core political, economic and social problems
the country faces in a realistic and constructive manner.
The Mission will continue to provide updates on the coming
agricultural season when/as new information becomes
available. Sullivan