The hot, dry weather affecting most of SA’s major maize-producing areas is expected to decimate yields this season and, together with an increased demand for ethanol production in the US which has increased global prices, has raised fears that prices could start pushing import parity.
Although the Crop Estimates Committee has predicted white maize production to increase to about 4,66 million tons this season out of a total commercial maize crop of 7,76 million tons – up 11,3% from last year – the yield per hectare is expected to be only 2,78t/ha, compared with last season’s 4,05t/ha.
The yellow maize yield is expected to climb 27,5% to 3,10 million tons from last season, with yields per hectare dropping from 4,29t to 3,36t. This year’s expected commercial maize crop is just 17,2% more than the 6,62 million tons of the previous season, even though the area under production increased by more than 60% to 2,60 million hectares. The Safex white maize price increased from about R1 300/t in January to a current level of 950/t, while the yellow maize price increased from about R1 477/t to about 975/t over the same time period.
While Grain SA does not foresee it would be necessary to import white maize, it said yellow maize imports are expected to increase. There are concerns that the drought could further push maize prices to import parity, which is currently about R2 500/t delivered at Randfontein.
However, Grain chairperson Neels Ferreira said even at current prices, white maize remains good value for money. “kilogram of maize still trades for around and flour is still relatively cheap and affordable. The maize industry might, however, lose some market share to other staple foods such as rice and potatoes due to increased maize prices,” Ferreira said.
Government can also make an important contribution as far as high maize prices are concerned, said Tobias Doyer, CEO of the Agricultural Business Chamber. Imports might be seen as a temporary solution to counter high local prices, but this is not a long-term solution, as imports might be rendered totally unprofitable if the rand drops. It is therefore in the country’s best interest to devise policies to protect the agricultural industry from imports of subsidised products, Doyer said.
Ferreira said in the US a new maize-to-ethanol plant is established almost every week, and this increased demand for the crop has already had an impact on Chicago Board of Trade prices, which are in turn affecting local prices. D oyer said the high maize prices will hit poorer consumers hardest. He said whereas poor people spend about 55% of their income on food, more affluent people spend about 12%. This means every percentage drop in food prices translates into half a percentage point saving, which the poor could spend on education or clothing. Farmers, therefore, have to do their best to lower production costs to help maintain food prices at affordable levels, he said.