South African maize prices have surged by up to 18% in the past week alone, and traders say the rally may still have some way to go after one of the driest seasons in years.
An industry group has drawn comparisons with events five years ago, when soaring prices forced the government to provide aid to millions of poor South Africans for whom maize is a staple.
The most active March and July contracts earlier this week flew to five-year peaks after forecasts of a potentially poor harvest. And the chances are prices will keep climbing as worries about the 2006/07 crop deepen, traders said.
”We might see a bit of a correction but I think the price is still up. The market is sort of seeing that the crop is going to be lower than 7,7-million tonnes,” a dealer at a major domestic bank said.
”That means we have to import white maize. We’ve never done that. There is uncertainty.”
In its first production forecast for 2006/07, the crop estimates committee last week put the harvest at 7,757-million tonnes, less than the annual requirement of roughly 8-million.
Such estimates often fall as the season progresses. — Reuters