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April 2018
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White maize meal prices and
trends from shortage to deficit
T
he maize meal value chain experi-
enced many challenges through-
out the 2016/2017 marketing year.
South Africa found itself in a situa-
tion where the drought caused a shortage in
the South African white maize market. This
phenomenon resulted in drastic increases
in maize and maize meal prices. The rand
depreciated and therefore contributed to
higher maize prices.
CEO’s of milling companies reported that
the season was one of the most challeng-
ing in a long time. It was underpinned by
very high maize prices, an unpredicted for-
eign exchange market and weak consumer
demand.
The 2017/2018 season turned out be South
Africa’s biggest crop ever with maize prices
decreasing to export parity levels.
This article provides information on the
trends of maize and maize meal.
Price trends
The prices of the four main nodes in the
food chain are the average producer price,
the mill door price, the list price and the con-
sumer price. In this case, the average pro-
ducer prices and retail prices will be used
to estimate the farm value, farm-to-retail-
price-spread, retail value and farm value
share.
The calculations of these items are based
on the assumptions that:
The producer price (also known as
the farm gate price) is derived from
the Safex spot price minus the aver-
age transport differential and handling
costs.
The transport costs from the farm gate
to the silo are calculated as the average
Safex transport differential to all the ma-
jor maize silos.
The handling costs are based on re-
sponses from silo owners about the es-
timated average handling costs and the
daily storage tariff (per ton).
Specific mill site costs are only avail-
able on an annual base. Therefore, the
monthly mill site costs are kept constant
throughout the year.
Graph 1
illustrates trends of white maize
prices in South Africa. The average spot
price for white maize started to increase in
December 2015.
The spot price peaked at the begin-
ning of January 2016 and rapidly in-
creased even further to above import
parity in March 2016. The average spot price
for white maize was at R3 988/ton in Decem-
ber 2016.
Graph 2
displays the retail value of maize
meal as calculated by the National Agri-
cultural Marketing Council (NAMC) and the
spot price of white maize. Graph 2 shows
the transmission time or lag between maize
and maize meal prices.
RELEVANT
DR CHRISTO JOUBERT,
manager: Agro-Food Chains, Market and Economic Research division, National Agricultural Marketing Council
and
RIKA VERWEY
, senior economist: Agro-Food Chains, National Agricultural Marketing Council
Graph 1: Import parity, export parity and South African Futures Exchange (Safex) for white maize.
Source: Grain SA (2017)
Part 2