Depressed agric sector haunts ZSE

Agriculture Economy Report”, a research conducted by Econometer Global Capital
The local agricultural sector has in recent years failed to perform as a result of limited sources of funding and erratic rains among other factors.
The Ministry of Finance, for instance, said that the sector requires US$2 billion annually to take full advantage of its potential.
Econometer head Mr Takunda Mugaga has projected that if the local agricultural sector remains depressed in the outlook period, this could have a negative a negative impact on counters that have strong linkages to the sector.
“There are about 21 counters which are directly linked to the agriculture sector and its currently depressed state can spread to the entire bourse.
“With foreign buyers that are essentially net buyers dominating on the stock exchange and uninterested in swallowing risk, a depressed agricultural season will bring more stress to the market,” he said.
Taking into account the influence of a depressed agricultural sector, the report has projected the local bourse to close the year with a market capitalisation of around US$3,5 billion.
Reads part of the report: “A market capitalisation of US$3,5 billion underweighted by agriculture stocks is our forecast for December 2012 with the industrial index to shed significantly in the last half of the calendar year.
“Of the top 20 companies by market capitalisation on the ZSE, nine of them come directly from the agricultural sector. These include Delta, Hippo, Seed Co, Aico Africa, Colcom Holdings, National Foods, Dairibord Zimbabwe Holdings and Border.
“The effects of a downturn by such counters are so glaring considering the weight of these counters to the overall size of the bourse.”
The agriculture sector and the manufacturing sector have strong backward and forward linkages, with the former historically supplying the latter with over 60 percent of its raw materials.
The report also noted that of all the crops, maize production has been surpassing other crops of higher export value in terms of output.
“This does not augur well for the nation’s external account as maize’s low value per unit will not improve the trade balance. There is need for a bias towards cash crops as the chronic liquidity challenges cannot be solved by an unimpressive wheat and tobacco trend.
“The current trend leaves the Zimbabwean economy exposed to foreign market dynamics which makes inflation control almost impossible,” reads the report.
It has also been projected that poor performance of the agriculture sector, especially maize production (but not exclusively) will push up food inflation in the short to medium term with food production trend reflecting a flat curve in the very corresponding short run.
Compared to annual human maize consumption of 1,4 million tonnes, and animal consumption of 350 000 tonnes, giving a national maize consumption of 1,75 million tonnes per annum, this year’s maize deficit is estimated to be around 780 000 tonnes.
The looming food shortages as a result of below target maize output of 968 000 tonnes, will most likely result in a higher import bill.
To this extent, Econometer Global Capital projects the country’s headline inflation to close the year at 6,8 percent.