Maize market
Markets
Oktober 2013
100
An overview of the maize market
FUNZANI SUNDANI, ECONOMIST, INDUSTRY SERVICES, GRAIN SA AND
WANDILE SIHLOBO, ECONOMIST, INDUSTRY SERVICES, GRAIN SA
The international maize market, level of the rand and crude oil prices,
opportunities in the domestic market and exports, all have a strong
impact on the domestic maize prices.
International maize market
Over time, USA free on board maize prices have sharply declined in
comparison to the past year. At current levels, the USA maize prices are
trading at $223 per ton, compared to $328 per ton the same time last year,
showing a notable decrease of 47% (
Graph 1
).
International maize prices are pressured by expected high ending stocks
for 2013/2014 from the USA compared to the drought stricken year of
2012. On the latest USDA report, USA maize production was forecasted
at 80 million bushels higher, at a record of 13,8 billion bushels.
The average yield was forecasted at 155,3 bushels per acre, up 0,9 bushels
from last month’s projection. According to estimates by the International
Grains Council, world maize stocks are expected to rise by 24% to
150 million tons in 2013/2014. If this is realised, stocks would be at their
highest level since 2000/2001 (
Graph 2
).
The exchange rate and Brent crude oil
prices
From 19 September 2012 to 19 September 2013, the South African rand
has weakened by approximately 18%; from R8,19 to R9,64. During the
same period, Brent crude oil prices have shown an increase of 2,5%; from
$107,80 a barrel to $110,59 a barrel.
There are a number of factors that have contributed to this high volatility
in the rand value. Among the major ones are labour unrest, the high
unemployment rate, an unstable political climate, low interest rates,
policy uncertainty and declining competitiveness. Regarding the Brent
crude oil price, the tension in the Middle East (Egypt and Syria) has had
a major impact on the prices, even though the concerns over US military
action against Syria, have been eased.
On the global markets, some of the key driving factors to the weakening of
the exchange rate were the uncertainty over the US Federal Reserve Bank
(US Fed) stimulus tapering, however the US Fed recently announced that
they will maintain their current monetary stimulus programme. Thus, the
rand value has recently gained some strength and is currently trading
around R9,60 per dollar (
Graph 3
).
Opportunities in the domestic market
Since the introduction of the basis premiums trading on the Johannesburg
Stock Exchange (JSE), there has been a great response, with notable
high traded premiums mainly for the North West Province. Final offers
reached about R200/ton for white maize in Mareetsane and Vryburg
respectively (
Table 1
). This clearly indicates that there are opportunities
for the producers to exploit.
On the JSE, the premium for white maize prices are above that of
yellow maize prices, indicating that the market is more favourable for
white maize due to the strong demand from the neighbouring countries.
Currently, the premium for white maize above yellow maize is about
R196/ton (
Graph 4
).
South African maize exports
There is still continuous demand for South African maize from countries
such as Mexico, Japan and neighbouring countries. Recent weekly
exports of 13 September 2013 reported by SAGIS shows that Mexico
imported about 19 803 tons of white maize, while Japan took 18 608 tons
of yellow maize.
Yellow maize exports are projected at 970 000 tons, with 961 918 tons
already exported and white maize exports are projected at 585 000 tons,
with 387 070 tons already exported (
Graph 5
and
Graph 6
).
Zimbabwe is still showing an increasing demand; the country was
recently reported to be looking for 220 000 tons of white maize until their
next harvest. Zimbabwean 2013/2014 white maize imports from South
Africa are currently at 49 968 tons compared to only 6 079 tons the
previous year (2012).
The majority of white maize thus far has been exported to Mexico (49%)
and the majority of yellow maize has been exported to Japan (62%).
Projected yellow maize exports have already been reached by September
of the 2013/2014 marketing year. This, coupled with the strong export
demand for white maize to Zimbabwe, strengthens the expected support
for domestic maize prices until the end of the 2013/2014 marketing year.
– 20 September 2013
Basis premiums traded on (16/09/2013)
Grade
Silo owner
Silo location Traded premium
White maize
WM1
SWK
Mareetsane
R200
WM1
SWL
Vryburg
R200
TABLE 1: BASIS TRADED PREMIUMS.
