The price of white maize has shot up by 140% since a year ago and con­sumers will feel it in the pocket when they go to shops for their sta­ple

CityPress - - Front Page - DE­WALD VAN RENS­BURG de­wald.vrens­burg@city­press.co.za

The drought ru­in­ing this year’s white maize sea­son will even­tu­ally hit South African con­sumers where it hurts: pap. White maize hit the his­tor­i­cal high of R4 900 a ton this week af­ter shoot­ing up 60% since Novem­ber. The pre­vi­ous high point of R3 800 was in 2014, dur­ing a brief pe­riod of fren­zied maize spec­u­la­tion driven by bad sup­ply in­for­ma­tion.

Since ex­actly a year ago, the price has gone up by 140% and South Africa’s sta­ple is now trad­ing far above the the­o­ret­i­cal max­i­mum level of im­port par­ity.

As a rule of thumb, millers pass through 50% of the rise in maize prices to buy­ers of maize meal, says Wandile Lehlobo, se­nior econ­o­mist at farm­ers’ or­gan­i­sa­tion Grain SA.

Roughly speak­ing, that would send maize meal prices up by as much as 50%, al­though higher prices gen­er­ally take sev­eral months to fil­ter through to shop shelves.

There are all sorts of ad­di­tional knock-on ef­fects when maize prices change, in­clud­ing on the cost of live­stock prod­ucts and meat.

Yel­low maize prices are also near record lev­els, but are be­ing con­strained by the ef­fec­tive max­i­mum prices cre­ated by the avail­abil­ity of im­ports.

The re­sult: white maize is trad­ing at an un­prece­dented and “ex­tra­or­di­nary pre­mium” com­pared with yel­low maize, says agribusi­ness econ­o­mist at Absa Wes­sel Lem­mer.

Yel­low maize has now ba­si­cally re­turned to its pre­vi­ous record – also R3 800 – which was also reached dur­ing the short burst in 2014.

As it turned out, 2014 yielded a record maize har­vest of 14 mil­lion tons and both types of maize saw their prices sud­denly col­lapse by more than 50% that year.

Un­for­tu­nately, that is not go­ing to be the case this time, as the plant­ing sea­son reaches its end with as much as 70% of farm­land ear­marked for white maize still ly­ing fal­low.

Grain SA has pre­dicted that South Africa will need to im­port 5 mil­lion tons of maize this year – an as­tro­nom­i­cal amount for a coun­try that is usu­ally self­suf­fi­cient and ex­ports sur­plus maize in good years.

South Africa con­sumes about 10.5 mil­lion tons of maize a year, half of which is white maize for hu­man con­sump­tion and half is yel­low maize mostly used for an­i­mal feed.

Last year’s crop, al­ready a bad one, was 9.9 mil­lion tons, dou­ble what Grain SA is pre­dict­ing for this cur­rent sea­son.

The 5 mil­lion-ton pre­dic­tion is far from cer­tain, but also not a thumb suck. Ac­cord­ing to Lehlobo, the planted hectares in the cur­rent sea­son are about 1.3 mil­lion – half the hectares planted in the pre­vi­ous sea­son. Mul­ti­plied by the av­er­age yield in South Africa, that gives you a har­vest of roughly 5 mil­lion tons.

The prob­lem is, how­ever, that it is by and large the white maize crop that is go­ing to fail, while more than 80% of the yel­low crop has ac­tu­ally been planted.

The South African maize crop gen­er­ally gets planted in Novem­ber and De­cem­ber, with the har­vest com­ing in June and July.

For­mal crop es­ti­mates will only be re­leased at the end of this month by the Crop Es­ti­mates Com­mit­tee, which is part of the de­part­ment of agri­cul­ture, forestry and fish­eries. While yel­low maize prices are con­strained by in­ter­na­tional prices, there is no equiv­a­lent mar­ket for white maize to cap prices. South Africa is one of only four coun­tries that trades the white vari­ant.

Lehlobo said South African millers would start con­tract­ing white maize from South Amer­ica, where it was also grown but rarely ex­ported in sig­nif­i­cant vol­umes.

The prices be­ing reached in South Africa were start­ing to make this pos­si­ble.

“It’s not cer­tain, but my opin­ion is that is the only likely sce­nario. Some guys will con­tract. If you are Tiger Brands, I don’t think you will start pro­duc­ing yel­low pap,” he said.

Absa’s Lem­mer sees it dif­fer­ently and told City Press that “ev­ery­one must con­sider yel­low maize for con­sump­tion”.

Yel­low maize would prob­a­bly stay el­e­vated at im­port par­ity lev­els for the next year, said Lem­mer.

Many of the coun­try’s maize farm­ers face ruin af­ter last year’s weak har­vest and, for many, this year’s missed har­vest. Farmer lobby group AgriSA has called for more state emer­gency fund­ing, claim­ing that up to R20 bil­lion is re­quired to bail out maize farm­ers.

Even though prices are at record lev­els, this does lit­tle for the farm­ers who are man­ag­ing to raise a crop this year. Most of them would have pre-con­tracted their har­vests at far lower prices, said Lem­mer.

“The price could go to R10 000 with­out ben­e­fit­ing the farm­ers,” said Lehlobo.

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