In times of uncertainty, as we are in during COVID-19 and a 21-days lockdown in South Africa, any unusual rise in prices of goods which society relies on the most can be discomforting. This is particularly the case with South Africa’s staple white maize prices, which on 23 March 2020 reached the highest levels last seen in 2016, which was a drought period, at R3 981 per tonne.
The question some might be confronted with is whether such price moves should be a concern to the extent that policymakers might need to intervene in the market by setting a price cap? The short answer is no.
Temporary price fluctuations are largely a result of currency volatilities and Zimbabwe’s entrance back into the market after the ban on GMOs was lifted. These volatilities will self-correct, as a new supply of maize hits the market. It appears that the demand spike in Zimbabwe and the COVID-19 crisis were coincidental, and the latter has little bearing on the observed market movements beyond the effects on the exchange rate. Ultimately, we conclude interventions are not needed to curb white maize price volatilities.
Download a paper I worked on today here.
Follow me on Twitter (@WandileSihlobo). E-mail: wandile@agbiz.co.za
