South African maize futures continued their rebound from a two-week slump as the market reversed a heavy selling trend, traders said on Tuesday.
Prices have fallen since the Crop Estimates Committee (CEC) unexpectedly hiked South Africa’s maize crop forecast for the 2006/07 season two weeks ago.
But the trend shifted on Monday and continued on Tuesday, with yellow and white maize for the most traded March contract, due for delivery next year, up by the maximum R45 daily limit.
”I think a rebound was definitely on the cards. We’ve seen a bit of short covering and some follow-through buying from yesterday [Monday]. Basically I would say we’re recovering from the heavily oversold position we were in,” one trader said.
March white maize was up 2,72% to R1 698 a tonne and yellow rose 2,55% to R1 811.
July white maize prices jumped 3,16% to R1 467, while yellow maize rose 2,39% to R1 500.
The December contract, in its delivery month, was also up. White maize for the month gained 2,71% to R1 705 a tonne, while yellow maize was 3,90% up at R1 890.
The rise in prices reflected a positive shift in sentiment, and traders said it was likely to influence more buying in coming days.
”To me two days up definitely indicates a trend reversal, we’ve seen a lot of participants in the market coming back and we may see traders getting involved because of that,” another trader said.
Over the past two weeks, negative sentiment about maize supply has had a big impact on market activity. Many traders had doubted the accuracy of the CEC’s final maize crop estimate of 7,125-million tonnes, which they believed was too high.
South Africa experienced a drought this season that raised expectations of a maize shortage and fuelled futures buying. The drought also pushed prices up to R2 000 a tonne for white maize in March and a similar level for yellow maize in November.
Traders say the country will need to import more than a million tonnes of yellow maize to cover the supply gap.
South Africa imported 916 tonnes of white maize from Zambia last week compared to 1 633 tonnes in the previous week, the South African Grain Information Service (Sagis) said on Tuesday.
White maize exports were 9 204 tonnes, up from 5 051 tonnes in the previous week.
Yellow maize exports fell to 1 300 tonnes from 1 335. No yellow maize imports were recorded for the second consecutive week, Sagis said on its website. – Reuters