The one thing that South African consumers can smile about in the near term is the relatively lower cost of basic foodstuffs, and this could be the key theme for the rest of the year.
On average in May 2018, a 5-kilogram bag of super maize meal in South Africa was down by 22 percent from the same period last year. A litre of milk was down by a percentage point from May 2017. A 2.5-kilogram bag of sugar was down by 9 percent from May 2018. Even the price of imported products, such as rice, has declined by 3 percent from May 2017. Some other basic household products, such as cooking oils and vegetables, have also declined from levels seen last year.
This good news is largely underpinned by an improvement in agricultural output – thanks to good rainfall, albeit arriving late in some parts of the country. Just last week, as I was packing my bag to leave my desk for a weekend, the United States Department of Agriculture released its monthly World Agricultural Supply and Demand Estimates report covering a wide range of commodities, but most importantly – painting a positive picture for South Africa.
The agency lifted its estimate for South Africa’s 2017/18 maize production by 2 percent from last month to 13.8 million tonnes. While it indicates above-average production of 12.5 million tonnes, it is lower than the previous season’s record harvest of 17.6 million tonnes due to a decline in area planted and expectations of average yields in some areas.
This is in line with the local Crop Estimate Committee’s estimate for overall production (commercial and non-commercial). The non-commercial production, which is subsistence farming, accounts for a 4 percent share in the estimated harvest of 13.8 million tonnes.
The key message from these numbers is that South Africa’s maize market will be well supplied in the 2018/19 marketing year, which ends in April 2019. Total maize supplies could reach 16.7 million tonnes, well above the local demand of 10.8 million tonnes, according to data from the national Supply and Demand Estimates Committee. The maize supplies figure combines opening stocks and expected production.
This essentially means that during South Africa’s 2018/19 marketing year maize exports could, at least, amount to 2.5 million tonnes, slightly lower than the volume exported in 2017/18. Most importantly, this suggests that the SAFEX maize prices could remain at relatively lower levels for some time, all else being equal.
This might not be good news for farmers (lower prices), but it will certainly help ease pressure on constrained consumers over the next couple of months.
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