Mass production of volatile commodities for markets stocks conficts

04Nov 2018
By Guardian Reporter
Dar es Salaam
Guardian On Sunday
Mass production of volatile commodities for markets stocks conficts

A PAINFUL contention is going on around the selling of the cashew nut crop for this year, where farmers or peasants are reported to have boycotted auctions twice or thrice, while the Cashewnut Board of Tanzania (CBT) appears to have stuck to open market ways of doing things and angered....

peopleacross the spectrum.

Not only were the peasants aghast at the prices being offered but regional commissioners of the main cashew growing areas had ideas on how the board should handle the matter but the chief executive stuck to his ways.

He has therefore been sacked. It is not for this forum to look at what the regional commissioners may have suggested and why the ideas weren’t taken up, but there are facts in media reports which show that the situation was largely beyond the control of the board, and the RCs for that matter.

First on the list of worries was apparent glut or oversupply of the product in world markets, such that companies bidding for the local produce shot down from 60 in last year’s auctions to 30 which turned up in the cancelled auctions.

Hardly anyone could have done better with half the bidders-and the price. Looking at the details more closely one datum raises its head as relates to reliance on Vietnamese companies to come strongly for the auctions, and efforts were being made through the Ministry of Foreign Affairs to activate interest from those firms in this year’s auctions.

While these efforts are potentially helpful, they strictly speaking belong to another era; those companies have market monitors in the country as they already have active business links.

They scarcely need visitors from the Tanzanian Embassy in Hanoi or Beijing to tell them about the crop auctions, or prices.

So the problem doesn’t appear to be managerial or communicational though there were some noticeable failings in that regard, the first being a promise circulated at some point that the price of cashews will be shooting up to five thousand shillings a kilo from around four thousand in the past season.

Instead the market is dictating an average price between Sh2,500/- and Sh2,700/- and it is hard to get something more, meanwhile, as habitually, we like to explain decreasing prices from the negative actions of middlemen.

It is an assumption that the broader market wants our product and at prices we are comfortable with, despite that this impression is often just another illusion.

So there is an apparent problem of public institutions engaged in a fist fight against shadows, otherwise known as market forces, and the reason isn’t bad middlemen but product glut in a speculative world market.

Only when production falls in Vietnam and other places would many companies turn up for the local auctions to get cashews to brand for their national and even export markets, and then when their harvests are good enough they stay away, or turn up if the price is good, that is, abysmally low.

These are the risks associated with cash crop cultivation not as a private business but a structural occupation across a zone of the country, here the southern regions, as their expectations are channeled via representation to become promises to be fulfilled at any price.

But the government can’t offer cashew price subsidies to farmers, only minimally.

Thus the political whirlwind that accompanied the issue boiled down to what the government could pay or add as subsidy to the market price as indicated in the boycotted auctions, and it is remarkable that responsible opposition voices didn’t differ from top level government advice on the matter.

Kigoma Urban MP Zitto Kabwe suggested that the farmers be paid 3,000/- per kilo, a subsidy of 300/- per kilo on the basis of the prices being quoted in the auctions, being the highest average prices. That is also the payment level that President Magufuli has subsequently directed.

Despite that cashew nuts had for a while appeared to be a safe crop destined to uplift earnings in the commodity market while several other major crops had perennial price lows like coffee and cotton, this episode shows that no crop or commodity is sacred in world markets.

It means that a collective agro-productivity approach is faulty, or energies spent by regional administrators to enforce crop directives at the village and family levels.

It means that age old ‘laissez faire, laissez aller’ is still the best option, that everyone looks for the best crop he or she expects to get good sales.