Maize farmers should plant half, trade half

The maize industry is at a crossroads and farmers need to act collectively to stave off financial ruin, said Jozeph Du Plessis, chairperson of the Schweizer-Reneke District Agricultural Union at a recent Solidarity seminar.

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Attended by grain industry players, from traders to bankers, farmers and agricultural unions (although not government), the seminar was convened to formulate a rescue plan for the industry.

The short-term plan asks farmers to produce only half their crop, and trade the other half on the futures market.
“At the moment it is undeniably cheaper to buy maize than to grow it,” said Du Plessis. “If we can reduce plantings by half, supply and demand will be balanced by the end of next season.

“There’s a huge carry-over of stock. This season’s crop will supply the coming year and half of next year’s demand. Most farmers still have this year’s crop in hand. They stand to lose R300/t to R450/t if they sell at current prices. But if we produce too much, prices will most likely fall in January and the next three seasons could be disastrous.

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“We don’t want farmers to forfeit income. Most banks and agribusinesses already have finance packages available for farmers. They can choose how much to plant and how much to buy. This is the best strategy for farmers to recapitalise and stay on the land.”

In the long run, other interventions are needed to improve infrastructure like harbours and rail networks and to increase demand for local crops.

“We need to get the import/export balance right between different types of crops,” said Du Plessis. “We export a lot of maize, but have to import a lot of wheat and oilcake. Grain SA is lobbying government to take steps to increase wheat and soya bean plantings and improve soya processing so that farmers have more alternatives.”

Prof Johan Willemse, agricultural economist at the Free State University, revisited the idea of using surplus maize for ethanol production.

“Grain farmers had huge surpluses in the past three years, which have been exported without adding value,” said Du Plessis. “Had it been converted to ethanol, the economy could have benefited. But government is very sensitive about maize for food security, so grain sorghum could be an alternative.”

The August National Agricultural Marketing Councils’ Food Price Monitor warns against impending pressure on the maize industry. “As the probability of a record crop in the US grows, it’s likely the international maize price could come under pressure within the next month,” said the report.

The Bureau for Food and Agricultural Policy said there will be a shift from maize to sunflower and soya beans in the coming production season.