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August 2017
Can too much of a good thing ever be bad?
i
really grew up poor. There was always enough to live from but
almost never too much. Nevertheless, somewhere in my life
my mother taught me the lesson of ‘too much of a good thing
is not good’ – like eating too much sweets and drinking too
many cool drinks at a party of the rich kids in town. You then
develop a stomach ache and can even become nauseous with
negative results.
Year after year we dream of bumper crops and in our prayers, we
wish it for each other when the planting season begins or with birth-
days. Now we are there with regards to the current summer grain
crop. This really is abundance! Can too much of a good thing ever
be bad?
The abundance of maize definitely has extraordinary challenges. The
chaser bins groan, the trucks are getting full, the grain elevators are
overflowing, but the bank accounts remain empty. How must one
evaluate such a situation?
It is still too early to review the season, but let us start by being grate-
ful. The same grain fields that are now yielding record crops for most
of us, were almost blown away a few months ago. Filling the chaser
bins last year was a long process. Our grain elevators had to make
space for foreign maize from far away countries.
Grain SA was still in the midst of discussions about drought relief
and new research plans to import drought and heat resistant maize
cultivars from overseas when the producers pressed the ‘reset’ but-
ton requiring us to start searching for export markets. These events
and extraordinary fluctuations resulted therein that the marketing of
maize became even more important. It is definitely one of the most
expensive lessons we have learnt from this year of abundance. The
prices hurt deeply, very deeply!
The continuous calls to our office about training in how to do better
hedging are clear proof of it. Hopefully the reaction to the past two
years of extremes – new research to counter drought and improved
knowledge to manage price risks – is the combination required to
remain sustainable.
‘To know or not to know’ is the story of the wheat tariff. Following a
very successful court application to force the Minister to announce
the old tariff, the Minister requested that the whole tariff system
be investigated again. They were of the opinion that the tariff was
too high.
High food prices, a weak exchange rate (and we know who caused
that) and an election were the main drivers for their decision.
Grain SA spent hours and hours preparing documentation and ne-
gotiating. Our main purpose was to keep the old model and keep
the tariff as high as possible – especially in the knowledge that the
government had only one goal in sight – it had to be lower.
The tension in the wheat industry was at a breaking point and the
leaders were later of the opinion that a lower tariff announced now
would be better than a tariff not being published. Just let the uncer-
tainty stop, they asked. Nothing was traded.
The final outcome thereof was a lower tariff, but not so much as
we expected at one stage. That some producers were not expecting
it, leaves question marks with regards to our communication skills,
or the reading ability of producers. The market came to a standstill
for months waiting for the announcement that could only have one
outcome. Yet it was a surprise for some of us.
Part of sustainability is definitely to read and keep your ears open
– especially if it is about the prices of your products. Despite
better agricultural conditions most grain producers are suffering
financially.
Our plans are not yet at an end. Keep the faith, producers!