Safex is predicting a dramatic drop in white and yellow maize prices by July, based on the good rains and the large areas planted to maize. C oupled with the SA Reserve Bank governor, Tito Mboweni, opting not to increase interest rates for now, consumers have reason to feel more optimistic about food prices. “The producer price index on the agricultural level has declined a little,” said Jean-Francois Mercier, Citigroup economist.
“This moderation will find its way to the processor and eventually the consumer.” However, a big factor in increasing food inflation is the depreciating rand. The currency is currently trading at over R7 to the US dollar, which increases the import parity price and thus the local price of commodities such as maize. A ccording to Dr John Purchase, head of the Agricultural Business Chamber, farmers’ profitability is being squeezed by high fertiliser, fuel, electricity and machinery costs. “Most producers still have enough breathing space, but we could see farmers leaving the sector because of poor management or bad luck,” he said. “However, currently, profitability is good and pressures are manageable.”
Based on the favourable weather conditions, Safex foresees white and yellow maize prices dropping from current levels of R1 815/t (white) and 925/t (yellow), to 500/t (white) and 600/t (yellow) in July. Wheat is projected to increase from its current R3 500/t to 600/t in July. M ercier said the predicted high maize yield would help stabilise food inflation, but wheat is still determined by international prices and puts pressure on current inflation levels. “Prices only start to normalise once we know maize yield and the area planted to wheat,” said Mercier. “Levels should start to even out by July.” – David Steynberg