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September 13, 2009

Low prices and poor rainfall threaten SA farmers

by Ethel Hazelhurst

South African farmers face a dry summer and a difficult planting season, but grain prices are not likely to rise over the next few months.

In fact, US maize crop prospects are improving, lowering global prices, according to the quarterly Food Price Monitor released by the National Agricultural Marketing Council (NAMC) during the last week of August. The NAMC said maize export prices had fallen from $190 (about R1 480 at current exchange) a ton to $160 a ton, over the past two months.

Wheat markets are also well supplied, though there are concerns about Argentina's crops, according to the NAMC. Like South Africa, Argentina will be affected by the El Ni241o system, which is expected to delay summer rainfall. However, the NAMC said supplies remained plentiful for the moment.

"On the local front, (a crop of) more than 11.6 million tons of maize is expected and large volumes of maize have already been exported," it said.

But the NAMC warned the situation might not last - both because of El Ni241o and because relatively low grain prices are likely to cause farmers to hold back on planting. This could put upward pressure on prices next year.

Meat prices could move in either direction over the rest of this year. Because of a seasonal increase in demand at the festive season, meat prices tend to rise in October and November.

"But this year the increasing price trend could be dampened by a significant positive shift in the supply of beef," said the NAMC.

Meat supply has increased because the cost of feeding calves has decreased in line with grain prices.

However, vegetable prices are high and are expected to stay high due to "severe cold weather in parts of the country, where the crop is not normally affected by frost", cutting crops scheduled for early delivery. At the same time, demand for vegetables remains firm, as consumers "shift towards home entertainment" buying fresh food to be prepared at home, according to the NAMC.

Statistics SA last week said vegetable prices at the farm level rose nearly 35 percent between July last year and July this year. While farmers are getting lower prices, consumers, for the most part, pay more because of supply chain costs.

The NAMC said the cost of a basic food basket rose from R345 to R374 over the year to July; but most of this was in the second half of last year, while prices were almost flat from January. Rural consumers paid R8.03 more than urban consumers for selected food items in July last year and this increased to R16.72 this July.

Rising prices are a bigger burden for the poor than for more affluent shoppers. The cost of food, as a share of monthly income of the poorest 30 percent, rose from 29 percent to 33 percent over 12 months. But food as a proportion of the income of the wealthiest 30 percent increased from 2.3 percent to 2.6 percent.

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