Maize crop could lift the economy

NEW crop estimates for the year have just forecast South Africa’s biggest maize harvest in history.

Coming off the disaster of the 2016 season, inflicted by a devastating drought, the rebound is truly staggering.

Farmers are expected to produce more than 16.4 million tons of commercial white and yellow maize this year, according to the latest estimates released this week.

Less than half of that was achieved last year.

It further helped that farmers were able to extract more from the land, meaning yield is likely to be the highest on record, too.

Typically, South Africa is a surplus producer, with our excess being exported. Last year, however, saw the opposite occur, and the consequences were higher food prices for consumers.

Maize is a critical input cost.

It is cheaper for us to produce our own maize than import it, and this is evident as food inflation begins to soften, bringing marginal relief for now to our cash- strapped population.

Agriculture economist Wandile Sihlobo, writing in Business Day yesterday, made a compelling case for the continuation of this trend, a situation you could say leads – potentially – to an inarguable case for the lowering of interest rates.

But, like most things in life, it is never that simple.

Oil remains a key factor in our inflationary outlook – the fuel price goes up substantially next week, the second consecutive monthly increase.

Likewise, the currency is a topsy-turvy animal, and the ever-present threat of credit downgrades by the three main ratings agencies is undoubtedly keeping the Monetary Policy Committee of the South African Reserve Bank pensive on further rate cuts.

Some sentiment has it that junk status is already priced into government bond yields, meaning any impact would be muted.

Perhaps, but try selling the country as an investment destination on the diminished confidence that would follow.

So with growth almost impossible to come by, aggressive interest rate cuts might be the immediate key to economic stimulation, aided in part by a bumper crop of the staple South African mielie.