Delta to revive malt exports as fx shortages continue to bite

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LIVINGSTONE MARUFU

Delta Corporation has invested close to US$4m in its barley contract-farming scheme, targeting a yield of 35,000 metric tonnes this year and with an objective of earning foreign currency from malt exports.

The push comes at a time companies are struggling to access foreign currency from the interbank market to import key raw materials. This has seen companies going to the parallel market for their forex needs.

Alex Makamure, Delta Company Secretary/Corporate Affairs director, told Business Times that the country’s largest beverage producer was reviving malt exports to earn foreign currency.

“This year, we are contracting 6,000 hectares of barley, rising from 4,000 hectares last year. We expect a harvest of 35,000 tonnes of barley from the 40 commercial farmers we have contracted,” Makamure said. “Under this scheme, we have spent over US$3.5m and planting is in progress at the moment. It will continue until end of June.”

The company has been supporting barley contract farming for the past 50 years. In the past, Delta financed the production of barley and sorghum through a contract arrangement to boost the crops’ supply at the firm. The two crops are some of the key raw materials required by the beverages producer.

Makamure said though the contract uptake now stands above 80 percent, there were some delays in distributing inputs due to serious shortages of basal fertilisers caused by crippling forex shortages needed in acquiring compound fertilisers and other necessary raw materials.

The forex shortages have affected lager production, forcing Delta to revive malt exports to improve forex availability within the company.

“Delta is now redeveloping and reviving malt exports in the region which we stopped a few years ago due to expensive value chains in Zimbabwe like high producer price of wheat which is indexed to barley,” Makamure said. “These [exports] will be used to cover the forex requirements for the lager beer business.”

This comes as Delta recently said that is concerned about the company’s ability to access foreign currency in order to meet its external obligations despite the introduction of the inter-bank foreign exchange market.

“The exchange rate needs to be supported by robust and complementary fiscal and monetary policies as its continued depreciation and cost push inflation is affecting aggregate demand,” Delta said.

Lager beer volume declined 3% in the fourth quarter but remain up 31% for the full year. The SBU has seen reduced demand to the increase in RTGS wholesale and retail prices. The group has been adjusting RTGS prices in line with the movement in the exchange rate but this has seen demand falling.

The barley contract scheme has improved crop yields from 3.4 tonnes per hectare in 2009 to 6.7 tons per hectare in recent years.

In the past, Delta exported barley malt to Zambia, Rwanda and Burundi. However, the establishment of a malting plant in Zambia has affected demand for Delta’s malt. Previously, export alternatives had become less viable as local barley prices rose above the import parity.

The company’s requirements vary every season depending on the projected domestic beer volumes.

He said the company would continue to support communal households through sorghum contract farming.

The scheme provides inputs, mainly seed, to the communal farmers who provide up to 70 percent of output.

The company contracts farmers mostly in Chiredzi, Buhera, Mutoko and Muzarabani, and relies on local raw materials and supports more than 9,000 communal families.

In its latest trading update for the fourth quarter to March, Sorghum beer volume in Zimbabwe contracted by 2% versus prior year for the quarter and grew by 5% for the full year. “Demand for the category remains encouraging despite the cost pressures on imported packaging materials, spares and the repricing of agricultural cereals.”  Chibuku Super contributed 85% of the total category volume.

Currently, the brewer has more than 15 beer brands and over 4,000 employees across Zimbabwe.