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February 06, 2012

Maize exports threaten South Africa’s food security


A government-backed plan to export a record maize surplus may leave local silos drained of South Africa’s staple food by the end of April. The price of white maize has risen to a record in Johannesburg and the country is importing yellow maize for the first time in two years.

Gina Schoeman, an economist at Absa, said in mid January that millers, chicken producers and cattle breeders faced a surge in costs, and food inflation might quicken to as much as 15 percent from 11.1 percent in November last year.


“It is clear now that exports were done irresponsibly,” said Chris Schutte, the chief executive of chicken producer Astral Foods. The price hikes “will hit that section of the market that can afford it the least.”

Facing a record surplus two years ago after the biggest crop in almost three decades, farmer bodies such as Grain SA, which represents 7 000 commercial growers, pushed the government into helping find new maize markets from South Korea to Italy and Mexico.

“There will be very little maize left in silos come April 30,” said Christo Booyens, the assistant general manager for Grainlink marketing service at grain storage firm Senwes. “Ideally you want about six weeks’ stocks to ensure smooth supplies to millers.”

South Africa needed to import 700 000 tons of maize between January and July, Grain SA chief executive Jannie de Villiers said. Senwes said the crop would mostly be delivered to silos in June and July.

South Africa has exported 2.14 million tons of maize in the marketing year that began in May, compared with 2.07 million tons in all of last season, according to the SA Grain Information Service (Sagis).

Maize inventories plunged 40 percent in November from a year earlier, the biggest drop in that month since 2000, Sagis said. Measured in dollars, the price of white maize has risen 69 percent over the past year on the SA Futures Exchange to about $335 a ton, while the benchmark price of maize in Chicago has fallen 8.8 percent.

Agriculture Minister Tina Joemat-Pettersson said in April last year that the government had successfully drained a grain surplus that could have damaged the maize industry.

Simphiwe Ngqangweni, the acting director-general of the Department of Agriculture, said in January that the price increases were a result of demand and supply forces in a free market.

While South Africa had traditionally bought maize from Argentina in times of need, that country now produced much of its grain using a genetically modified seed variety that had not yet been approved locally for import, said Schutte at Astral Foods.

The price spike is the latest disruption caused by government management of the country’s food supply. In 2005, officials overestimated the size of the crop, driving prices to a record low and forcing some farmers out of business.



“If it wasn’t for supplies from the Black Sea countries, South Africa would be in very big trouble,” Schutte said. “Does it make sense for a country where maize is the basic foodstuff to export it at R1 400 a ton and buy it back at R2 800?”

Sagis said 81 885 tons of Romanian maize had arrived in the country since December 10, and 58 321 tons of white maize have been imported from Zambia this season. South Africa has shipped maize to Zambia in three of the past nine years.

In rand, local maize prices have almost doubled in the past year.

“It would have been a different story if it wasn’t a basic foodstuff, and if food security wasn’t the third priority on the government’s agenda,” said Schutte. “In such a case, you need a more comprehensive strategy.”

Bloomberg

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