News

Industries

Companies

Jobs

Events

People

Video

Audio

Galleries

My Biz

Submit content

My Account

Advertise with us

Drought-hit SA importing maize to cover shortfall

For the first time since 2004, SA has become a net importer of white and yellow maize due to the drought, which has resulted in lower production during the past growing season. In the next marketing year, starting next month, SA will import 2.7-million tonnes of yellow and 1.1-million tonnes of white maize. The country is traditionally a net exporter of maize, producing an annual average of 12.5-million tonnes.
MaximusTaken via
MaximusTaken via pixabay

Data from SA Grain Information Service (Sagis) show that SA already imported white maize from the US earlier this month, the first time since 2004, amounting to 1,330 tonnes.

CJS Securities trader Piet Faure says SA needs up to a million tonnes of white maize in the coming marketing season. "Fortunately, there is an oversupply of maize in the world at the moment. However, the danger is rising prices in the US, rain in Argentina, and dryness in Brazil," he says. White maize is imported from the US and Mexico, while yellow maize has been secured from Argentina, and Paraguay as well as Brazil.

Yellow maize, used mostly for animal feed in SA, makes up about 95% of world production, while white maize, which is preferred for human consumption in the country, comprises 5% of global production. White maize is, therefore, not as widely produced as yellow maize, which limits its availability on the world market and makes it more expensive than yellow maize.

Maize production

Wandile Sihlobo, an economist at producer group Grain SA, says the drought has led to huge crop damages and lower yields, with SA now expected to produce only 7.1-million tonnes this year, a 28% decrease from last year's crop. Last year's crop was already 30% less than the 2014 crop of 14.3-million tonnes.

He says SA will have to import about 3.8-million tonnes between next month and April 2017 if production projections remain at 7.1-million tonnes. SA has 3.2-million tonnes of maize in stock, comprising 2-million tonnes of white and 1.2-million tonnes of yellow maize.

None of the white maize imports will be genetically modified because US genetically modified traits do not correlate with the genetically modified white maize grown in SA. Yellow maize from South America is genetically modified, as this correlates with the traits of maize produced here.

Sihlobo says about 80% of South African maize is genetically modified.

Maize prices

In domestic trade, maize prices have fallen from highs in January due to a stronger rand. The average price of white maize contracts has declined from about R5,200 a tonne in January to about R4,500. This price is still 66% higher than a year ago. Yellow maize, at R3,200 a tonne, is up 30% year on year.

Sihlobo says the negative news surrounding the domestic maize crop due to the drought has, to some extent, already been factored into prices.

Farmwise trader, Rudi Swanepoel says they are keeping an eye on the rand-dollar exchange rate. "A stronger rand makes imports cheaper, and local maize producers have to compete with these prices."

CJS Securities trader Joss Moss says SA's white maize prices overreacted to the upside early this year once it was clear that summer rains had come too late for optimum plantings and that the harvest would be poor. A maize surplus is important for any country and for the world as a whole, he says. It takes a season - about seven months - to produce a crop.

Supply-and-demand interrelationships

The split between northern and southern hemisphere growing seasons means farmers in opposite hemispheres will try to take advantage of higher prices when a poor harvest is expected in a major growing area.

Important information to look at in world stocks is the stocks-usage ratio, which is a measure of supply-and-demand interrelationships or the carryover volume of maize used in a year as a percentage. The global ratio is about 15%-20% or about two months of carry-over stocks. The US, the world's biggest producer, has a 13% stocks-usage ratio, or about 47 days. SA usually maintains an 11% stocks-usage ratio.

Imports

The first of the white maize from the US is being offloaded in East London, Moss says.

Meanwhile, Zambia lifted the ban on the export of its maize last week after verification showed the country had enough to last until August. Between May last year and now, SA has imported 21,491 tonnes of white maize from Zambia, and might import more, Sihlobo says.

"Most of the deals have been done by big international trading houses. Margins are very low and there is a lot of risk of quality, demurrage and transport," Moss says. "No one (in SA) is benefiting. Farmers do not have a decent crop to sell at high prices, consumers are paying more for food, milling companies are keeping their margins as low as possible, and traders are taking on risk on low margins."

Source: Business Day

Source: I-Net Bridge

For more than two decades, I-Net Bridge has been one of South Africa’s preferred electronic providers of innovative solutions, data of the highest calibre, reliable platforms and excellent supporting systems. Our products include workstations, web applications and data feeds packaged with in-depth news and powerful analytical tools empowering clients to make meaningful decisions.

We pride ourselves on our wide variety of in-house skills, encompassing multiple platforms and applications. These skills enable us to not only function as a first class facility, but also design, implement and support all our client needs at a level that confirms I-Net Bridge a leader in its field.

Go to: http://www.inet.co.za
Let's do Biz