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The impact of drought and early deliveries
on the supply of maize
r
ole-players in the grain industry was shocked on 26 Febru-
ary by the National Crop Estimates Co mittee’s prediction
that the drought may lead to a decline of 31% in maize pro-
duction compared to the previous year’s bumper crop.
High retail prices may impact the ultimate consumption of
maize, early deliveries during March and April 2016 can decrease
the need for imports and follow-up crop estimates may also signifi-
cantly impact the demand for additional or less imports. In this arti-
cle we give a perspective on the possible outcomes.
Impact on staple foods and animal feeds
The Supply and Demand Estimates Committee, under the auspices
of the National Agricultural Marketing Council (NAMC), followed
with a press release on 4 March stating: “The current drought con-
ditions that is widespread in South Africa’s grain production areas
can severely impact on the availability of one of South Africa’s ma-
jor staple foods, namely white maize, as well as on yellow maize
that is crucial in the livestock industry. The availability of maize in
turn affects prices of maize and hence the price of maize meal and
animal feeds.”
Significant imports needed
The Supply and Demand Estimates Committee estimated that South
Africa will have to import approximately 600 000 tons of yellow
maize from March 2015 to April 2016. According to the Committee it
is possible that the current estimated imports of yellow maize could
increase to around 900 000 tons. “There are some concerns regard-
ing white maize stocks, which, according to the estimates will be
34 days (one month), but cognisance should be taken that around
350 000 tons were estimated to be used in the industrial and ani-
mal feed market. If this situation changes, i.e. it is used for human
consumption, the situation will improve, but will translate into ad-
ditional imports of yellow maize.
“Thus, it is possible that the current estimated imports of yellow
maize could increase to around 900 000 tons. However, market
dynamics, especially the availability of international yellow maize
stocks and the interplay between white and yellow maize prices, will
determine the level of substitution taking place.”
NAMC assumptions
The NAMC’s estimate is based on the underlying assumption that:
South Africa typically operates on a 45 days pipeline in terms of
available stocks.
The major factor that is affecting white maize demand is that
it will mainly be utilised in the human market, whereas a
significant portion was allocated to the animal feed market dur-
ing the past season.
Yellow maize demand continues to increase on the back of a
growing demand for animal feed.
White maize exports remain more or less the same based on
regional demand, but there is a significant drop in the exports of
yellow maize (in particular deep sea exports).
Access to objective information is crucial
Grain SA fully supports the work of the Grain and Oilseeds Sup-
ply and Demand Estimates Liaison Committee (comprising stake-
holders in the grain industry) and the Grain and Oilseeds Supply and
Demand Estimates Committee.
As stated, the drought has an impact on food security and the socio-
political economic climate of South Africa. It is very important to
have access to objective and reliable information, as the relentless
price volatility experienced is mainly passed on to the producer. Ob-
jective information is now very important as different versions of
supply and demand estimates circles around in industry and may
create confusion among producers and may impact their marketing
decisions.
The historical pipeline requirement
South Africa operates on a 45 days pipeline. The 45 days pipeline
number is useful to determine if it is going to be necessary to import
maize in the projected supply and demand for the following year.
It is indicated for example in
Table 1
that the shortfall required
above the pipeline will necessitate the importation of about
1 075 000 tons in the 2007/2008 marketing year. An actual number
of 1 120 000 tons of maize were imported.
A similar situation occurred in 2011/2012 and is expected to occur
in 2015/2016. Since 2007/2008 it seems as if processors are
more comfortable lately with a tight pipeline requirement. For in-
stance, during the 2013/2014 marketing year it was expected that
660 000 tons of maize should be imported, but imports of only
80 000 tons realised.
What is the impact of early deliveries
during March and April on stock levels
at the end of April?
The early deliveries of maize for March and April varied between
91 000 tons and 842 000 tons over the past ten years.
WESSEL LEMMER,
senior economist, Industry services, Grain SA
GRAIN MARKET
-overview
– 17 March 2015
ON FARM LEVEL
April 2015
40
– for the March/February reporting period