Droughts To Reduce Maize Output

BMI View: We are maintaining our forecasts for South African corn production to reach 11.6mn tonnes in 2012/13 despite warnings of droughts in key producing regions. Notably, the country is expected to produce more yellow maize than white maize for the first time in almost 20 years despite relatively unfavourable pricing. Although parts of the country declared an emergency due to droughts, we believe this will have a comparatively minimal effect on the country's corn crop, one of the largest in Sub-Saharan Africa. We believe the country will remain the pre-eminent corn exporter during the current season.

We continue to see South African corn production reaching 11.6mn tonnes in the 2012/13 season, the harvest for which runs May-August. This represents a 8.2% year-on-year decrease. There have been concerns about maize production for several months, as local observers noted dry weather in the country's key growing regions as early as mid-March. The dryness continued into September to the point where the north-west province (generally responsible for one-third of all corn production) declared a state of emergency due to droughts. The official declaration means emergency relief can be relayed to both commercial and small farmers, with total applications for aid approaching 20,000 as of late September.

Big Divergence
South Africa White & Yellow Maize (ZAR/tonne)

Although the consensus estimates for 2012/13 South African corn production have been downgraded in recent months, the country's maize prices have fallen as supply has come online. The 2012/13 season will mark the first season in 20 years that production of yellow maize (usually made for animal feed) will outpace white maize (used for human consumption). We do not believe this represents a systemic shift, largely because the ratio between white and yellow maize prices tends to mean revert. The sowing season for South African maize begins in October, and currently the ratio is favouring white maize due to the poor supply prospects. Indeed, the spread between white and yellow maize is favouring white maize to a degree not seen since 2005. This is likely to encourage greater production of white maize for the upcoming 2013/14 season.

A Constant Player
South Africa - Corn Exports(As % Of Sub-Saharan African Total Exports)

Overall, we continue to expect South Africa to be the pre-eminent corn exporter on the continent, as its exports represent around 70% of total Sub-Saharan corn exports (Zambia is the other key exporter). Globally, we continue to see corn prices averaging lower in 2013 and 2014 owing to significant supply improvements from the United States, the world's largest producer and exporter.

SOUTH AFRICA Corn Production & Consumption
2012 2013f 2014f 2015f 2016f 2017f
Notes: e BMI estimates. f BMI forecasts. Sources: 1 DEPARTMENT OF AGRICULTURE, FORESTRY AND FISHERIES.
Corn Production, '000 tonnes 1 12,417.0 11,400.0 12,768.2 13,611.4 14,015.9 14,420.4
Corn Consumption, '000 tonnes 1 10,700.0 e 10,700.0 10,991.1 11,292.4 11,604.3 11,927.2
This article is tagged to:
Sector: Agribusiness
Geography: South Africa, South Africa, South Africa, South Africa

Enter your details to read the full article

By submitting this form you are acknowledging that you have read and understood our Privacy Policy.