Drought Could Result in Huge Maize Price Hikes

Import prices of around N$3 000 per tonne for white maize can be expected early in 2016 as white maize stocks become depleted.

White maize from South Africa as the biggest exporter to Namibia will be sufficient to get to the next harvest in 2016, but any negative effect on the 2016 harvest will have a huge upward effect on local prices.

This shock was evident with the extreme price hike during March this year already as market sentiments realised that a drought was imminent.

Prices moved from N$1 910 ex-Randfontein (Safex) on January 14 to N$2 998 on February 16, which constitutes an increase of 57 percent within a month. White maize is currently trading around N$2 700 ex-Randfontein for the up-coming new harvest. Expectations are that prices will remain at these levels and will start to move upwards slowly from September 2015, due to storage and interest. The above prices do not account for any sudden hikes on United States prices or the exchange rates.

Ian Collard, Chief Executive Officer of Namib MillsFeedmaster and Namib Poultry Industry, predicts even tougher times ahead for the agricultural sector as the full implications of a rainless February start to hit the market.

He told New Era that southern Africa was severely hit by a mid-summer drought and this had a detrimental effect on most of the summer crops in the region. Namibia was very hard hit by the total lack of rain for the month of February, and rains in March came too late to save the dry-land crops – particularly mahangu and maize.

The effect was that the total dry-land production of specifically maize was nearly wiped out, and expectations for the total dry-land crop of Namibia are well below 10 000 tonnes.

Taking the above into account, Namibia expects a maize harvest of between 35 000 and 40 000 tonnes, compared to last year’s harvest of approximately 78 000 tonnes.

The mahangu harvest was also aersely affected, which has created the need for drought relief as the livelihood of subsistence farmers is affected due to the lack of their staple food.

South Africa has been exposed to the same rainfall conditions as Namibia, especially in the western parts. Thus the dry-land summer crops also suffered quite substantially. The current crop estimate for South Africa is 9.8 million tonnes of white and yellow maize.

Harvesting already started in South Africa and the yields are in the region of 1.5 to 2 tonnes per hectare in the North West Province.

The irrigation production is percentage-wise much higher than Namibia, therefore the above crop estimate.

The reason why referral is made to South Africa, regarding maize, is that it is the only exporting country of white maize on a continuous basis in the region. Taking the above into account, prices on the Safex Commodity Exchange started to move from export parity to import parity.

The early weather expectations will thus have a big effect on market movements later in the year. Weather scares, during the planting and pollinating period, will therefore have very negative effects on prices, as prices will then shoot up.

The majority of maize produced world-wide is yellow maize, which is mainly earmarked for animal feed. White maize is thus not that readily available, apart from pre-planting contracts with farmers in the United States or Argentina.

Normally these contracts come at a premium and stock will only be available nearing the end of 2016, provided that the contracts are in place around March 2016.

“To date, such measures were not yet necessary as we await the coming rainy season, starting in October 2015 in South Africa. Namib Mills have already procured enough maize for normal to slightly above our normal demand for the shortfall in South Africa.

Current expectations are that South Africa will have enough white maize for up to the end of April 2016, when the new harvest becomes available,” said Collard.

Source : New Era