MALAWI'S FERTILIZER SHORTAGE THREATENS 2005 HARVEST

UNCLAS SECTION 01 OF 02 LILONGWE 001164

SIPDIS

SENSITIVE

STATE FOR AF/S ADRIENNE GALANEK
STATE FOR EB/IFD/OMA FRANCES CHISHOLM
STATE FOR EB/IFD/ODF LINDA SPECHT
TREASURY FOR INTERNATIONAL AFFAIR LUKAS KOHLER

E.O. 12958: N/A
TAGS: ECON EAGR KMCA EFIN EAID MI
SUBJECT: MALAWI'S FERTILIZER SHORTAGE THREATENS 2005 HARVEST

REF: LILONGWE 1089

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SUMMARY
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1. (U) Malawi's farmers are unable to find enough fertilizer
as they near the end of their yearly planting season. The
shortage results largely from Government delays in ordering
stocks for its subsidy programs and confused signalling to
private sector suppliers. While the shortages are expected
to clear by early January, they may have an impact on the
harvest and thus on food supplies for 2005. Opposition
politicians are questioning the competence of the current
Government. End summary.


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NOT ENOUGH, AND SLOW GETTING HERE
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2. (U) With the onset of yearly rains, Malawi's 2005 maize
crop is in the ground and beginning to grow. As the rains
spread from south to north, November through late January is
the time for farmers to apply fertilizer, which is a
necessity in Malawi's nutrient-depleted soil. Virtually all
fertilizer is imported into the country through South Africa
and the Mozambican ports of Beira and Nacala. Malawi was
estimated at the beginning of the season to require 228,000
metric tons of fertilizer. By mid-December, only 121,000 tons
had been landed--a shortfall of 107,000 tons, or 47 percent
of the total.


3. (U) The arrival of product already on its way here should
alleviate the situation by early January. Some 88,000 metric
tons of fertilizer was in transit or on order by
mid-December. But the delivery of product in the supply
pipeline is being delayed by a number of regional
transportation problems. These include weight restrictions
on trucks passing through the South African/Zimbabwean border
crossing at Beitbridge, a shortage in return loads to the
port of Beira, and a number of problems with the rail
connections and port at Nacala.


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GOVERNMENT THE MAIN CULPRIT
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4. (SBU) Though the region's troubled transportation system
is part of the problem, most of the blame for the shortage
lies squarely with the GOM. Political contention over the
Targeted Input Program (TIP) and the fertilizer voucher
scheme (see reftel) delayed Government's decision to place
orders with importers in time. TIP stocks were not ordered
until near the end of October, and private suppliers could
not obtain commercial financing without a government contract
in hand.


5. (SBU) Beyond the direct result of shortages for Government
programs, the GOM's actions have also led to indirect market
disruptions. For example, dealers saw very low early-season
sales following June pronouncements that the GOM would be
able to lower prices with across-the-board subsidies. In the
absence of early sales (August to October),dealers have been
not had the working capital to ramp up stocks to normal
planting-season levels. Private importers also delayed
ordering stocks because, in the absence of a clearly defined
subsidy, they could not project requirements or prices. When
the GOM finally announced the TIP program in October, most
wholesalers sold their entire stocks to the Government. This
has left private buyers (about one-third of Malawi's farmers,
including its highly efficient commercial farmers) with
nothing to buy.


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COMMENT: A QUESTION OF COMPETENCE
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6. (U) With its poor soil and strong preference for maize,
Malawi's farmers need fertilizer to bring in a normal
harvest, even when the region's notoriously unreliable
weather cooperates. If the shortage of fertilizer affects
the 2005 harvest--as seems increasingly likely--the country
will once again experience a food shortage late next year.
The Malawian public is keenly aware of this possibility.
Accordingly, the opposition parties have been raising an
outcry over the situation in recent days.


7. (SBU) Following hard on a controversy over bungled wage
reforms, the fertilizer debacle has provided opposition
figures, and President Mutharika's political enemies within
the ruling party, the opportunity to portray the Government
as disorganized and incompetent. They are taking that
opportunity with gusto. The worst consequence of this
political controversy may be that it makes the Mutharika
government fear the marketplace all the more where critical
commodities are concerned. The reflex is still to seek
statist solutions where there is no room for mistakes;
unfortunately, state intervention itself seems usually to be
the first mistake.
GILMOUR