Massive maize crop to benefit consumers but farmers face big losses
CONSUMERS stand to benefit as South Africa harvests its biggest maize crop in three decades this season, but farmers who did not use the pricing opportunity earlier this year are likely to lose out, according to agricultural analysts.
The crop estimates committee predicts that this season’s maize crop will be the biggest produced in South Africa in the past 30 years.
Thys Grobbelaar, an analyst at agribusiness Senwes, said this week that maize stocks were expected to be 13.5 million tons or more during this season’s marketing year.
“This is much higher than what is required [to satisfy domestic demand], which is about 10 million tons,” Grobbelaar said, adding that this was because of good rains received in February and March.
Looking back, he said the maize market had reacted nervously to last season’s low stocks.
“South Africa ended the season with very low stock due to good exports, especially to Zimbabwe. Farmers did not expect that Zimbabwe would need so much maize and they ended up exporting a lot of white maize, leaving us with low carry-over stock,” he explained.
Panic in the market pushed maize prices up to R3 800 a ton. However, this season farmers may be sitting with an excess of millions of tons of maize that will need to be exported.
Grobbelaar said the difference between import parity and export parity prices was now R1 300 a ton.
“Now we have to export because our price forms an export parity which is in the vicinity of about R600 to R700 a ton, much lower than the import parity. At this stage this does not favour most [grain] farmers but it certainly does favour the consumers.”
Grobbelaar said the poultry industry and other end-users of maize were set to benefit. Consumers would, however, have to wait for three to four months before seeing a drop in processed maize prices in stores.
He said maize farmers who did not sell in the beginning of the season when maize prices were about R2 200 a ton would lose out because prices had already fallen to about R1 600.
“Input costs for farmers remain very high because they have to import fertilisers, tractors and other equipment for farming,” Grobbelaar noted.
FNB’s head of agriculture information and marketing, Jan van Zyl, echoed these sentiments, saying that low maize prices meant farmers might not be able to recover their costs.
“Farmers who neglected to exercise their pricing options prior to February were in other words forced to accept the July prices or store their maize with the hope that prices will improve,” Van Zyl said.
In terms of revenue, some farmers would forfeit a minimum of 23 percent of their gross income, with most of them unable to recover from high production costs.
“Domestically, maize prices will trend down towards import parity prices.
“Lastly, a weakening rand to the dollar exchange rate would inflate the domestic import and export parity prices, thereby raising the band within which domestic markets are priced,” Van Zyl explained.