Grain SA’s CEO Dr Kobus Laubscher warned that grain producers are in for a tough time in 2009. The situation has deteriorated to such an extent that he cautioned producers who are currently planting maize to seriously consider whether they should continue.
“Prices are dramatically lower than hoped for because of the declining local and international demand due to the global recession,” he said. “This will impact strongly on profit margins and I urge farmers to produce grain, maize in particular, more efficiently and to do more with less, should they decide to continue planting.”
He added that while inputs could come down because of the lower Brent crude oil prices, the smaller profit margins will continue to put extreme pressure on grain production.
The current crisis was caused by declining international prices, the importation of poor-quality cheap wheat, the reluctance of input suppliers to adjust prices downwards and abnormal rainfall patterns. “We’re extremely worried about the fact that the input suppliers are very lax in lowering prices and we urgently call on them to take a long-term view of the survival of grain production in South Africa and to accommodate producers price-wise. They could even consider applying a percentage of past profits in order to set inputs on the market at lower prices.”
Laubscher is also anxious about the rumours that the quality of locally produced wheat is questionable. “The already-struggling wheat industry is harmed even more by having to compete with poor-quality Argentinian wheat, while our local product is of much better quality. This distortion is evident in prices. The Safex price for wheat was R500/t lower at the end of 2008 than the US price for wheat of the same standard.
Laubscher says the changes in the demand structures for grain are also concerning. “There’s a clear indication the more profitable protein demand for grain will continue to decline, while the demand for grain as a staple food will increase. The return to grain as a staple because of the global recession is a worldwide phenomena, which will impact negatively on profit margins.
“The demand for biofuel, and ethanol in particular, is decreasing rapidly because of low fossil fuel prices, which also impact negatively on prices. I hesitate to say it, but the outlook for the next season is bleak and producers should prepare themselves,” Laubscher explains.
He admitted that it’s difficult to formulate any projections based on the number of hectares planted to summer grains so far. Some 2,56 million hectares were planted earlier in the season – down 8% on the previous season.
The South African demand for maize amounts to 9 million tons a year. “Nevertheless,” says Laubscher, ”we have enough carry-over maize for export and a small surplus. However, we remain very concerned about the Safex maize price hovering between R1 400/t and R1 700/t for 2009.” – Annelie Coleman
