* Funds to help farmers boost food output

* Govt to re-open commodity exchange by year-end

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HARARE, July 10 (Reuters) - Zimbabwe will provide $142 million in its next budget to help small farmers buy the resources needed to boost food production, Finance Minister Tendai Biti said on Friday.

Millions of Zimbabweans are expected to face food shortages in the coming year and their impoverished country is seen needing substantial food aid from abroad.

"We are going to provide $142 million for the provision of inputs for the 2009 summer crop for small-scale farmers," Biti told an investor conference in Harare.

Biti said the government planned to increase support for subsistence farmers in the hope of reversing years of decline in its farming activities. The sector has been in a downward spiral since 2000, when President Robert Mugabe targeted white-owned commercial farms for seizure to resettle blacks.

Farmer groups say output has also been hit by exorbitant costs of inputs such as seed and fertiliser.

Biti also said the government intended to reopen its agricultural commodity market "before the end of the year".

The Zimbabwe Agricultural Commodity Exchange was closed several years ago after a law was passed making the Grain Marketing Board the sole purchaser of maize and wheat.

Agriculture minister Joseph Made said in May that Zimbabwe expected to harvest 1.2 million tonnes of the staple maize this season, more than double last year's output but still less than annual consumption of about 2.2 million tonnes.

Made's comments contradicted earlier statements by Biti, who said in March the country needed assistance with around 80 percent of its cereal requirements.

A report by the United Nations' Food and Agriculture Organisation (FAO) and World Food Programme last month said about 2.8 million people in Zimbabwe will face food shortages in the coming year and will require some 228,000 tonnes of food assistance, including 190,000 of cereals.

FAO forecast production of winter-season wheat of only about 12,000 tonnes, the lowest ever. That reflected the high cost of fertilisers and quality seeds, farmers' lack of financial liquidity and uncertain electricity supply for irrigation. (Reporting by MacDonald Dzirutwe; editing by Mark John)

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