Weather and volumes impact the maize prize

March 2019

Ikageng Maluleke, Junior Economist, Grain SA. Send an email to Ikageng@grainsa.co.za

Production is determined by area planted as well as yield; however, these two variables are contingent on weather.

Considering the uncertainty brought by weather on intentions to plant, this article hypothesises different scenarios for exportable surpluses using the crop estimate’s committee (CEC) intentions to plant and average yield as the baseline (Table 1).

In Table 2, we can see that the CEC has estimated area of production for maize at 2 448 400 hectares (horizontal axis), while the average yield is 4,98 t/ha (vertical axis). Given the area planted and average yield a possible surplus of 3 591 545 tons can be seen on the table. The exportable surpluses shown in the sensitivity analysis are green when there is less than 1,5 million tons for the season and red when there is more than 1,5 million tons. The cells are indicated in bright red with a strike through if there is no exportable surplus.

Going towards the right of the CEC intentions, if area planted deviates by +10%, +15% or +20% above the intentions at the average yield of 4,98 t/ha, this could leave us with a surplus of between 4 809 624 tons and 6 027 703 tons. With the current weather conditions, this is highly unlikely to happen.

Going towards the left of the CEC intentions, if area planted deviates by -10%,-15% or -20% less than the intentions at an average of 4,98 t/ha, the surplus could be between 2 373 466 and 1 555 387 hectares. With the same hectare deviation but lower yield, the extreme is that there will be no surplus.

Production has an implication on supply and demand, which in turn has an implication on prices. With an exportable surplus below 1,5 million tons, prices will most likely move towards import parity level (higher); this is due to a shortage in production. With at an exportable surplus above 1,5 million tons, prices are more likely to move towards export parity (lower), this is due to surplus production. It is clear that with the current weather conditions, area planted for maize is most likely going to be below CEC intentions, which could lead to prices being supportive.

Publication: March 2019

Section: Pula/Imvula