Maize crop flip-flop

Govern­ment’s early es­ti­mates chal­lenge the pri­vate sec­tor’s bleak out­look

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

The govern­ment this week tried to calm the maize mar­ket by an­nounc­ing its first crop es­ti­mates for the 2016 sea­son a full month ear­lier af­ter in­dus­try play­ers asked the state to speed up the re­lease of the in­for­ma­tion. The prog­no­sis is nowhere near as bleak as the es­ti­mates from the pri­vate sec­tor have thus far in­di­cated, ac­cord­ing to the depart­ment of agri­cul­ture, forestry and fish­eries’ Crop Es­ti­mates Com­mit­tee.

Due to the on­go­ing drought, ear­lier num­bers were “des­per­ately re­quired for in­dus­try to plan”, said Rona Beukes, the depart­ment’s se­nior statis­ti­cian for crop es­ti­mates.

The pre­lim­i­nary es­ti­mate is that South Africa’s drought-rav­aged farm­ers will pro­duce 7.4 mil­lion tons of maize this sea­son.

That would still be the se­cond worst har­vest in a decade, but is a lot bet­ter than the cat­a­clysmic crop pre­dic­tions of only 5 mil­lion tons that came from some or­gan­ised in­dus­try groups.

South Africa needs roughly 10.5 mil­lion tons of maize a year. The split be­tween white and yel­low maize is about 50-50.

The prob­lem is that the white maize crop is where the drought dam­age is most se­vere. Im­ported white maize is far more ex­pen­sive than yel­low maize, and feeds di­rectly into house­hold food bud­gets.

The Crop Es­ti­mates Com­mit­tee’s num­bers are based on a sur­vey of farm­ers and are gen­er­ally in the ball­park.

The es­ti­mate was “the best num­ber you could get”, said Wes­sel Lem­mer, an agribusi­ness econ­o­mist at Absa. “It demon­strates that the pro­duc­ers are not try­ing to push up prices.”

He said if farm­ers were try­ing to keep maize prices high, the com­mit­tee’s sur­vey would not have pro­duced the num­bers it did.

This was the first time the com­mit­tee had at­tempted to es­ti­mate crops this early in the year, and there were no pre­vi­ous data to judge how it would af­fect the ac­cu­racy of the num­bers, Beukes said.

Grain SA, which rep­re­sents farm­ers, greeted the es­ti­mate with a warn­ing that there was no guar­an­tee it would be cor­rect.

The largest mar­gin of er­ror the com­mit­tee had in re­cent years was when it un­der­es­ti­mated the 2014 crop by 14%, caus­ing a short-lived price bub­ble.

Ar­guably, the early es­ti­mate means it could be con­ser­va­tive be­cause some late plant­ing of maize was still pos­si­ble this month.

At the same time, the es­ti­mate in­di­cated that farm­ers ex­pected the yield to be 3.7 tons per hectare – the same as last year.

The yield can vary sharply year to year. It av­er­aged 5.3 tons per hectare in the 2014 sea­son, when maize pro­duc­tion hit a his­toric high.

One rea­son the yield this year could stay the same as last year, de­spite the dryer con­di­tions, was that there was a higher pro­por­tion of ir­ri­gated maize in the ground this year, said Beukes.

The good news seems to have had some ef­fect on the sky-high maize prices on the JSE’s Safex com­mod­ity ex­change.

White maize, which is harder to im­port be­cause so few coun­tries trade in it, was go­ing for as much as R5 300 a ton last week. This week, it traded at R5 016.00 on Fri­day.

Yel­low maize has been trad­ing at al­most ex­actly im­port par­ity. It hit a record of R4 000 last week. This week, it traded at R3 810 on Fri­day.

Prices started fall­ing be­fore the crop es­ti­mate was re­leased. This prob­a­bly had more to do with maize prices now be­ing tied com­pletely to the rand be­cause of the ex­pec­ta­tion that mas­sive quan­ti­ties would be im­ported.

The im­port par­ity price for yel­low maize fell from R3 953 per ton last week to R3 915.15 on Fri­day, mainly be­cause of the rand.

Ac­cord­ing to Lem­mer, the price of yel­low maize would prob­a­bly stay at im­port par­ity and move with the rand, while there was a pos­si­bil­ity white maize prices could fall more dra­mat­i­cally.

White maize is trad­ing at a his­toric pre­mium to the yel­low variant, and that gap could close be­cause of the good news con­tained in the crop es­ti­mates.

The price re­flects con­cerns that South Africa can’t find enough white maize on the in­ter­na­tional mar­ket.

“As soon as the first white mealies are on the ships, the mar­ket may re­lax a lit­tle,” said Lem­mer.

What the com­mit­tee said

The Crop Es­ti­mates Com­mit­tee’s num­bers are based on an­other es­ti­mate – the hectares ac­tu­ally planted in the tra­di­tional plant­ing pe­riod of Novem­ber and De­cem­ber.

This is then mul­ti­plied by the av­er­age yield per hectare from last year, which was 3.8 tons per hectare.

This week’s es­ti­mates claimed that just less than 2 mil­lion hectares of farm­land had been planted with maize this year – 25% less than nor­mal. The drop is far more pro­nounced for white maize. Farm­ers planted 30.5% less land with white maize and 20% less with yel­low maize com­pared with last year’s num­bers.

Com­bined with the far higher cost of im­ported white maize, the prog­no­sis is still se­vere for food prices.

Bad news on beans and nuts

Maize is the ma­jor food crop in South Africa, but the Crop Es­ti­mates Com­mit­tee’s num­bers show sig­nif­i­cant prob­lems de­vel­op­ing else­where.

The dry-bean and peanut crops this year are es­ti­mated to be half of last year’s.

The coun­try is tra­di­tion­ally an im­porter of beans, but the ex­tent of im­port de­pen­dence will sky­rocket this year, with the to­tal crop es­ti­mated at only 35 150 tons. South Africans tend to con­sume about 110 000 tons of beans a year. The year’s peanut crop is es­ti­mated to come in at 29 600 tons – half the lo­cal re­quire­ment.

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