SA farmers see depressed maize prices in 2011

South Africa’s maize prices, which have largely been depressed this year, will remain under pressure in 2011 unless the country secures new export markets and the rand weakens, an industry official said.

Kobus Laubscher, chief executive officer of farmers’ group Grain SA, told Reuters in an interview on Tuesday the South African grain market is out of balance as supply surpasses demand, weighing on prices.

South Africa, the continent’s largest maize producer, harvested 12,815-million tonnes of the grain in the 2009/10 season, making it the country’s biggest crop in three decades.

South Africa’s annual maize consumption is between eight and nine million tonnes, leaving it with a surplus of about four million tonnes. The government has said it is still looking for additional export markets for the surplus to cushion the fall in prices.

“We have to be more aggressive in terms of exports in the new year, we have to find new markets. If we can not utilise the export markets, the local market will remain under strain,” Laubscher said.

He added: “Unless the rand weakens, we will not see significant price increases. The strong rand meant that our prices remained low.”

A strong rand makes South Africa products expensive for foreign buyers. The currency has strengthened 25% since the start of 2009.

South Africa’s benchmark December white maize contract has dropped 20% this year, with yellow maize for delivery in the same month falling 11%.

Limited exports markets
South Africa had to look for new export markets outside Africa this year after some of its traditional markets within the continent recorded maize surpluses.

South Africa has this year exported most of its yellow maize variety to South Korea and Kuwait. Other buyers include neighbours Mozambique, Lesotho, Namibia, Botswana and Swaziland.

“We have to open new markets, may be China, Japan, and the Middle East, but it all depends on demand,” Laubscher said.

South Africa exported 1,8-million tonnes of maize in the May 2009-April 2010 marketing season. The exports in the 2010/11 marketing season stood at 891 000 tonnes at the end of October.

The Department of Agriculture has since applied to the competition authority for an exemption to allow farmers to reserve the surplus grain for exports. The current law does not allow for the establishment of an export pool for the grain.

The agriculture minister has also said South Africa must review its biofuels policy to include maize to allow farmers to use their surplus crop for energy production.

The government unveiled blending ratios for biofuels three years ago but said maize could not be used to make biofuels to ensure food security and keep a lid on high prices. – Reuters

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