Those closely following the South African maize market may have noticed today’s significant price increase. The yellow maize spot price closed at R6,000 per tonne, up R880 from the previous Thursday. The white maize spot price closed at R6,050 per tonne, up by R771 from Thursday last week.
Such daily price jumps would ordinarily worry people and raise concerns about whether we will continue to see such increases and the subsequent impact on food inflation. But I think we should not be as concerned.
My reading of the price drivers is that, among other things, we had traders who needed to close their positions, as this was the last day of the current contract months.
Now, with minimal physical stocks in the market due to the late season, we are seeing what appears to be artificial demand as traders scramble to close their positions. And I must stress that closing positions is a normal behaviour in the futures markets.
I say this because if one looks at the contract month prices for white and yellow maize in May 2025, July 2025, September 2025, and December 2025, they are down from the levels we saw last Thursday. The significant increase in prices is primarily reflected in the prices for the nearest contract month.
The stocks in the market are tight — we are coming from a drought season where we had a poor harvest.
Additionally, the 2024-25 season is approximately a month later than the usual planting time. Moreover, continuous rains also mean that the harvest may be delayed further. These are all the issues that are adding to tight stocks.
But we believe all this is temporary. When the harvest finally begins, we can expect a decent supply and some easing of prices. The crop appears promising, and the upcoming season looks relatively favourable. For example, the Crop Estimates Committee forecasts South Africa’s 2024-25 maize harvest at 14,6 million tonnes, up 13% year-on-year. Thus, we see the other contract month prices under pressure; an anticipated better harvest will reach the market in the coming months.
Of course, the daily price increases are not necessarily material for food inflation. So, there is no need to worry about this issue.
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