Warning of big hike in maize meal, bread prices

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This comes after maize prices reached record highs last year, turning around the fortune of farmers who were concerned that SA's maize surplus of about 3-million tons was going to push prices down and drive farmers into bankruptcy.

Indications last year suggested that market prices would decline towards the end of this year.

In July, the US department of agriculture's World Agricultural Outlook Board released its projections for US summer crops, forecasting major downward adjustments in yields. General market expectations that this year's US maize and soybean crops would replenish world stocks significantly, in part because of expanded acreage, did not materialise due to severe drought in areas of big production.

Dr Ferdi Meyer, head of BFAP research at the university, said last week the BFAP Baseline 2012 had sought to present only a deterministic outlook of commodity and food prices where no risk or uncertainty was taken into consideration.

However, over the past six to nine months it became clear that commodity and food prices would trade higher than illustrated in the baseline, given the most recent trends in world prices, and this was without even considering the effect of local weather conditions for the 2012-13 northern summer crop.

To illustrate a plausible range of commodity and food prices for 2012 to 2013, the BFAP model had made provision for the effect on local prices of the volatility in world maize and wheat prices, the exchange rate and local weather.

Bread and maize meal prices were expected to peak in about February and March next year and to then decline as world commodity markets respond to a major supply shortfall under the assumption of normal weather conditions in that year. The year-on-year inflation for maize meal was projected to peak at about 10%. Brown bread inflation was projected to peak above 20% within the next six months.

Jannie de Villiers, CE at Grain SA, said the high international maize and soybean prices were already encouraging farmers to plant more maize this year to take advantage of these good prices.

This, in turn, was threatening wheat production levels and could see SA failing to produce sufficient wheat to cater for its domestic consumption, in turn leading to the need to import more at higher prices. This combination could cause bread prices to rise.

Source: Business Day