SA’s maize supplies for the 2018/2019 production year are shaping up better than feared in January 2019. This is when dryness in the western parts of the country threatened to delay plantings.
On June 26, SA’s Crop Estimates Committee left its 2018/2019 maize harvest estimate essentially unchanged from May, at 10.9-million tonnes. About 5.5-million tonnes is white maize, with 5.4-million tonnes being yellow maize. While it is comforting to see that there were no downward revisions, the expected harvest is 13% lower than last season’s harvest due to a slight reduction in area planted and poor yields on the back of dryness during the season.
The harvest process now underway in most parts of the country and the yields have, thus far, confirmed my inclination: generally varied between below-average to average. This is the case across the country, although the eastern regions received better rainfall than the western areas of SA where the harvest process has not started.
As the Agricultural Business Chamber of SA (AgBiz) has consistently pointed out over the past few weeks, with the maize harvest currently expected at 10.9-million tonnes in the 2018/2019 production season (which corresponds with 2019/2020 marketing year), added to an available opening stock of 2.8-million tonnes when the 2019/2020 marketing year started on May 1 2019, SA should have sufficient maize supplies to cover its annual consumption of about 10.8-million tonnes.
Moreover, SA is likely to remain a net exporter of maize in the 2019/2020 marketing year. The exports, however, could decline by half from the 2018/2019 marketing year to about 1.1-million tonnes.
Overall, I see no reason for today’s maize harvest expectations data to have a meaningful impact on prices. The data did not introduce any developments that were unknown among market players. At the core, the major factor driving SA maize prices over the past couple of weeks are rather outside developments — most notably the slow plantings in the US farm-belt due to excessively wet weather conditions. Although US farmers have now made progress regarding planting, albeit well behind their normal schedule, there are indications of possible poor maize yields this year. This could present upward pressures on prices in the coming months.
The other development that is key to watch, as it could have an implication for SA maize prices, is the looming Southern and East Africa maize needs. AgBiz’s calculations suggest that Zimbabwe, Kenya and Mozambique could need at least about 2.5-million tonnes of maize. For weeks, there has been a lack of clarity about where these countries would source the needed supplies.
Fortunately, earlier this week, Tanzania indicated it would avail a million tonnes of maize to Kenya within the 2019/2020 marketing year. Under such a scenario, SA, Zambia, and possibly Mexico, would then be key suppliers of maize to Zimbabwe and Mozambique. This would ultimately mean that the maize shortfall in the region would not be as severe as initially feared.
With that said, there is still a great deal of uncertainty on the matter and it is something worth monitoring over the coming months.
These dynamics have supported domestic maize prices. On June 25 2019, the white and yellow maize spot prices were at R2,893/tonne and R2,862/tonne, respectively, up by 40% and 32% from the same period last year, respectively. These are indeed interesting times in the maize market.
*Written for and first published on Business Day on 27 June 2019.
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