US embassy cable - 05LILONGWE143

UNCLAS SECTION 01 OF 02 LILONGWE 000143 
 
SIPDIS 
 
SENSITIVE 
 
STATE FOR AF/S ADRIENNE GALANEK AND BRUCE NEULING 
TREASURY FOR INTERNATIONAL AFFAIRS / AFRICA / LUKAS KOHLER 
 
E.O. 12958: N/A 
TAGS: KMCA, EAGR, ECON, EAID, PREL, MI, Agriculture, Economic 
SUBJECT: MALAWI CROP ESTIMATE: SHORTAGE COMING 
 
REF: A. 2004 LILONGWE 1089 
     B. 2004 LILONGWE 1164 
 
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SUMMARY 
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1. (U) Malawi's first crop estimates show a shortage of over 
20 percent in maize, due mainly to late distribution of 
fertilizer and a developing dry spell. Grain stocks are 
adequate for now, though the hunger season is now reaching 
its peak.  If the crop is seriously impaired, it may begin to 
impact the budget by mid-year, and a poor crop will likely 
weaken political support for ongoing reforms.  End summary. 
 
 
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EARLY REPORTS: SHORT ON MAIZE 
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2. (U) Malawi's Ministry of Agriculture recently released its 
first-round crop estimates for 2005, predicting annual 
production of 1.7 million metric (MT) tons of maize, against 
a requirement of 2.2 million MT.  While the anticipated 
production is average for the past ten years, a strong start 
to the rainy season toward the end of 2004 had led GOM 
officieals earlier to hope for a better-than-average crop. 
Since November, though, it has become clear that delays in 
the distribution of free targeted input packages (seed and 
fertilizer) have combined with a shortage of commercial 
fertilizer to constrain production (see reftels). 
 
3. (U) Other crops are also showing some decline in 
production.  These include burley tobacco, Malawi's chief 
export, and sweet potatoes, a secondary food staple. 
Cassava, the second-largest food crop after maize, is 
expected to increase slightly at 2.6 million MT.  Cotton, 
pulses, chillies, and groundnuts are all expected to register 
sizable increases over last year, owing mainly to increases 
in the acreage planted with these crops. 
 
4. (U) The early estimates may be in for a downward revision 
as a dry spell that began in late January continues beyond 
its usual period.  Because Malawi has very limited 
irrigation, virtually all food production depends on rainfall. 
 
 
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ENOUGH FOOD FOR NOW 
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5. (U) For now, the food supply in the country appears to be 
adequate.  The GOM recently halted its planned purchase of 
70,000 MT of maize intended for the commercial market, even 
though only 30,000 MT had been delivered.  While the 
Government justified the move by citing suppliers' failure to 
deliver on schedule, it has also said that no further 
intervention is necessary.  (NOTE: Donors have pressured the 
Government to limit its intervention in the commercial maize 
market.  GOM interventions have in the past disrupted market 
mechanisms to the point of causing widespread food shortages. 
 End note.) 
 
6. (U) While there is enough food in the country, not 
everyone can afford to buy it, and as subsistence farmers 
reach the end of their annual stores, hunger is beginning to 
spread.  The need for humanitarian food relief this season is 
estimated at 56-83,000 MT, depending on how high food prices 
rise.  As usual, the problem is most severe in the heavily 
populated southern districts. 
 
 
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COMMENT: POOR CROP MAY HOBBLE GOVERNMENT 
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7. (SBU) The continued lack of food security in Malawi, even 
in a year of relatively good rainfall, remains a wild card 
for the Government's efforts at reform.  Up to now, the new 
administration has done a fairly good job of keeping a lid on 
spending.  Lower deficits have enabled the GOM to service a 
massive load of inherited domestic debt, keep inflation to 
low double digits (currently 12-13 percent), and support the 
currency despite heavy foreign exchange pressure. While one 
hopes that the country will be in a stronger fiscal position 
by the next hunger season in late 2005, a poor crop in 
March-April 2005 could impact the budget by mid-year as the 
GOM tries to build its grain reserves with imports.  None of 
this will make it easier for the GOM to channel resources to 
reform and development, where it needs to make visible 
progress.  Perhaps more importantly, the political fallout 
from a poor crop could hit as Mutharika's honeymoon ends and 
the country settles in to the hard work of real reform. 
GILMOUR