Govt urged to deal with exorbitant fertiliser prices – NewZimbabwe.com

By Alois Vinga

ZIMBABWE’s home grown financial services firm offering brokerage and advisory services, IH Securities has called on the government to intervene on high fertilizer prices to enable farmers to harness the forthcoming rainy season.

Prices of fertilisers have seen sharp increases of over 71%, a situation that is likely to negatively impact the current winter cropping season and the 2022/23 farming season.

Market watchers have since established that the price of a 50kg bag of A fertiliser increased by 71% to an average of US$94 by the end of June 2022 compared to US$55 during the previous cropping season.

The increases have mainly been blamed on the current Ukraine/Russia conflict, which are the main global producers of fertiliser.

“However, above normal rainfall for the 2022/23 farming season is being forecasted which could potentially result in increased production. High fertiliser prices coupled with decreasing commodity prices could discourage farmers.

“We believe the government will continue implementing initiatives that reduce the cost of farming so as to encourage higher production.

“Assuming this plays out, we forecast increased agriculture production and potentially reduced cereal import bill,” said IH Securities.

With fuel and fertilizer prices still hovering above historical averages, IH Securities expects margins for agro-stocks to come under pressure, just like any other business.

The firm said given such a challenging environment, there is a need to lean towards companies that are defensive in the wake of decreasing agricultural commodity prices.

“These are companies with the ability to exercise monopoly and price leadership. We are also attracted to companies with good management and a culture of value creation for shareholders. Given the anticipated above normal rainfall in the coming farming season, Hippo presents an investment opportunity. Dairibord at current levels looks oversold, speaking to an opportunistic buy,” added IH Securities.

In Sub-Saharan Africa, prices for food account for about 40% of consumer spending in the region, according to the IMF.

With global food inflation on the rise, the region will be negatively impacted, especially the urban population that does not grow its own food. Already, according to Oxfam, one in five people (282mn) is now undernourished and 93 million in 36 African countries are suffering extreme levels of hunger.

The United Nations estimates that food prices in Sub-Saharan Africa are now 30-40% higher than the rest of the world, taking into account comparative levels of GDP per capita.