The beginning of 2016 saw heightened concerns around erratic rainfall distribution, with previous maize projections being revised downwards to ‘severe’ and ‘disaster’ scenarios. Many fear that Southern Africa may be on the brink of the worst drought in recorded history, surpassing that of 1992.
There are, however, several differences between the situation then and the present. Firstly, regional dynamics are different in that there are more surplus producers in the region today: Zambia, Tanzania and Malawi in addition to South Africa.
Secondly, the region is far more exposed to global food markets, and regional food markets are somewhat more integrated than before, enabling more grain to be moved from one place to another.
Thirdly, a steadily growing population has been matched by a declining proportion of people that are food-insecure.
Given these structural changes in national, regional and global food markets, the region faces a new challenge: ensuring that food is available to the entire regional population at an affordable price.
For the next 18 months at least, Southern Africa will not have sufficient grain from its own production and carry-over stocks to feed the population. A significant amount of maize and other grains will have to be imported from outside the region. Likely sources are Argentina, Brazil, Mexico, the US and Ukraine.
In a normal season, gross estimated available maize for the SADC averages 30 million tons, against a requirement of
27 million tons. Moreover, there have been record harvests in South Africa, Zambia and Malawi in the recent past.
During the previous season, a less favourable climate led to lower maize production that reduced the crop by around 30% in South Africa, 17% in Zambia, 26% in Malawi and 50% in Zimbabwe. Fortunately, the region could count on its carry-over stocks to stabilise prices, which remained reasonably low throughout.
A second consecutive drought throughout Southern Africa has meant that all net exporting countries are under severe pressure. Much of the region’s crop has been written off, triggering expectations of a further significant decline
in output. Revised expectations are that Zambia’s output will decline by a third to 1,6 million tons, and in South Africa this season’s harvest could be between five and six million tons. The situation is worse in net importing countries such as Zimbabwe, where production is predicted to be half that of the previous season.
The expectation is that South Africa may have to import at least five million tons of maize (two million tons of white and three million tons of yellow). Zimbabwe will have to import about 1,2 million tons. In contrast, minimal imports are expected in Tanzania, with good rainfall supporting production estimates of above six million tons.
Reports suggest that Zambia may have to import maize, although an estimate is not yet available. The country’s balance sheet, however, suggests that its carry-over stocks and a 500 000t strategic grain reserve could reduce its imports. This means that Zambia’s capacity to export into the region is curtailed.
Aggregate regional total maize imports could be at least seven million tons, most of it deep sea imports.
White maize and GM concerns
Ideally, at least half of this quantity should be white maize meant for human consumption. While yellow maize is readily available in the global market, white maize remains in limited supply amid a growing import need in the SADC and a few Latin American countries.
Outside of Africa, Mexico is the only major white maize producer, producing roughly 22 million tons of maize, with more than half of this being white. Mexico is followed by the US, which produces between three and four million tons of the grain.
Reports suggest that Mexico has current surplus stocks of at least 1,5 million tons of non-GMO white maize available for export markets. This falls short of the import demand for Southern Africa, and Mexico is currently the only global supplier of non-GM white maize. It is therefore imperative that the region communicates its message to northern hemisphere producers on time to allow them to increase white maize plantings.
The current price signal of white maize on the JSE Agricultural Derivatives Market should stimulate this production.
Northern hemisphere countries, including Mexico and the US, will enter the planting season between March and April. There remains a potential for these countries to expand white maize production if there is sufficient demand from the SADC.
In addition, Brazil, despite not traditionally being a white maize producer, is yet to plant its second crop, which presents an opportunity for SA importers to contract Brazilian farmers.
Concerns about GM maize have been raised, with US GM maize being asynchronous with the South African GM varieties. The price issues seem to be different in that the FOB Chicago yellow maize price is $168, while the Mexican FOB white maize prices are around $245, making Mexican maize more expensive. It is unclear what additional premium the US farmers would receive for planting white maize. If the difficulty of asynchronous approval of GM maize is resolved, the supply problem of white maize can be averted. If not, there will be a real possibility that some yellow maize could end up being consumed for human use, a scenario reminiscent of the 1992 drought.
South African stocks of white maize (carry-over and new harvest) should last until September or October at least, assuming that the country has roughly one million tons of carry-over and a 1,5-million-ton harvest in June/July 2016. This coincides with the harvesting in the US and Brazil in October/November, with deliveries expected to reach Southern African shores from November/December.
If Mexico’s available surpluses are not imported, there is a possibility that Southern Africa will not have white maize supplies for two months. If regional carryover stocks, maize deliveries and imports can sustain the Southern African market until November, stocks should be sufficient to see the region through until white maize imports arrive.
If the SADC becomes entirely dependent on deep-sea imports, the question is whether infrastructural capacity is sufficient to accommodate at least 6,2 million tons of maize imports, and an additional five million tons of other grains, such as rice, wheat, soya bean and soya bean oilcake.
In the recent past, South Africa has used mainly the Durban, Cape Town, Port Elizabeth and East London ports, all of which have a combined capacity of roughly 4,8 million tons. While it is unclear what the maximum grain import capacity is, industry experts suggest that ports do have additional capacity, and can handle imports of roughly seven million tons. Moreover, it has been argued that additional capacity can be created at non-grain ports, such as Richards Bay.
Concerns have also been expressed about potential traffic congestion at the ports and on the roads that will affect the turn-around time of grain trucks. This is important considering that 80% of all grain transported inland is moved by road.
Traffic congestion could be averted, or at the very least reduced, by increasing the use of rail transport. Provisional estimates from Transnet show that out of the 308 wagons in its fleet, 108 are grain containers that have the capacity to transport 7 920t/day.
All estimates on import requirements and port capacity are based on expectations and assumptions that might not necessarily reflect the outcome.
Summer crops are still at an early growth stage, and there is no certainty about final crop production volumes. These factors will affect import volume and price, and the picture will be clearer within the next two to three months once crop assessments have been completed across the SADC region.
A synthesis of the initial sentiments reflects that despite the drought being severe, the task of ensuring food availability is not insurmountable, given the options available. However, a coordinated commitment from governments and the private sector across the region will be required to ensure that sufficient maize supplies can be imported. A higher level of coordination will be necessary, particularly with regard to export planning, to prevent congestion of port infrastructure.
At the same time, the issue of GM maize is one that will need to be seriously addressed. Governments will have only two or three months to make policy decisions that can guide private and public sector players to contract northern hemisphere and Brazilian farmers to plant white maize. While GM maize fears are acknowledged, the gravity of the problem calls for a review of the region’s stance on GM policies with a view to improving food security.
This is an edited version of an article first published in The Greenkeeper, the Agbiz discussion platform for agribusiness.
Email Tinashe Kapuya at [email protected]