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November 20, 2008

After 2008 bumper harvest,South Africa to reduce maize cultivation in 2009

by Edward-John Bottomley

Farmers will be scaling down production in 2009 after this year's record maize harvest, but there will still be enough to feed the country.

The National Crop Estimates Committee (NCEC) published a report in October indicating the area that farmers are planning to plant in the coming season. According to the report 8.5% less maize will be put into the ground. According to the NCEC, farmers have indicated that the reduction is chiefly because of "the availability of credit and the cost of finance, higher input costs and the currently lower global maize price."

According to Ernst Janovsky, head of AgriBusiness at Absa, falling global grain prices place a ceiling on local prices.

Because South Africa is producing a maize surplus this year, it is being sold at lower export parity prices and the ceiling prevents maize prices from rising easily.

The fall in international prices is owing to the chaotic overseas markets, explains Janovsky. "Money is being withdrawn from international markets and the consumer is under pressure. This has a negative effect on the price. The weakening of the rand against the dollar counteracts this to some extent, but there is still a general decline."

Rising input costs are also squeezing farmers' profitability. If prices drop sharply finance will become a critical issue because companies won?t lend money to loss-making enterprises.

Farmers can compensate for lower prices by planting less. "The surplus is then smaller and prices rise," says Janovsky.

According to the NCEC report, maize farmers will plant 2.56m ha in the coming season, compared with almost 2.8m in the past one. After the wet conditions experienced this year, the next season promises to be an average year climate-wise, but price-wise an above-average year, expects Janovsky.

The report also expects soya bean plantings to increase by 37.5% to 227 500ha. Janovsky reckons this increase can be attributed to good prospects after a poor season.

Soya bean plantings also need less nitrogen (and thus less fertiliser, which is expensive). This helps farmers reduce their input costs. Fewer mealies are then planted in favour of soya beans.

The NCEC expects about 2.1m tons of wheat to be produced this year. This is 3.68% lower than the NCEC's previous estimate. It attributes this to the poor weather conditions in the Free State. This falloff is however countered to some extent by good rains in the Western Cape, where crop yields have been higher.


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