Limited Upside For Yield Growth
BMI View: We maintain our 2013/14 forecast for Tanzanian corn production to 4.2mn tonnes as the latest official estimates show a smaller decrease in output than previously anticipated. We believe the country will experience its first corn production deficit in four years, which will limit export potential. Over the medium term, we expect corn production growth to stall as limits to area available to plant with the crop are reached. Yield growth will remain subdued on the back of the corn crop vulnerability to disease outbreaks as well as the country's resistance to authorise GM field tests and plantings.
We maintain our 2013/14 forecast for Tanzanian corn production to 4.2mn tonnes as the latest official estimates show a smaller decrease in output than previously anticipated. This is because corn prices during plantings held up better than expected, encouraging production. Also, the impact of the recent black caterpillar outbreak was less than expected on plantings for the 2013/14 corn harvest. The USDA forecasts area harvested at 3.1mn hectares in 2013/14, which is in line with the five-year average, while yields are forecast at 1.4tonnes/ha, compared with 1.3tonnes/ha on average over the past five years. Growth in output in the past decade has come mainly from a steady increase in area planted, while yields have actually declined over the period, especially towards the end.
|Tanzania - Corn Area Harvested ('000 ha) And Yields (tonne/ha, RHS)|
Tanzania has become a steadier corn exporter, even if it was only able to export small amounts of the crop each year. This happened on the back of several strong production surpluses between 2010/11 and 2012/13, which enabled the country to restock and sell corn on export markets, especially as corn prices were rising steadily at the time. In 2013/14, we expect this situation to change, as we forecast a production deficit of 350,800 tonnes and increasing deficits through our forecast period. In addition, corn prices have collapsed by 42.7% since the start of 2013, which will encourage domestic consumption and make the crop less lucrative on the export markets.
|Front-Month CBOT Corn Prices (USc/bushel, weekly)|
Over the medium term, we expect corn production growth to stall as limits to the area available to plant with the crop are reached, while yields growth will remain subdued. Also, low global corn prices will discourage farmers from investing significantly in the crop in the coming years. Still, we forecast corn consumption in the country to increase by 31.2% over our forecast period on the back of rising living standards and population expansion, as well as lower global prices and better potential for imports.
Our cautious view on yield growth in the country is linked to the corn crop vulnerability to disease outbreaks as well as the country's refusal to authorise GM field tests and plantings. The country suffered from a massive infestation of black caterpillars at the end of 2012, which put at risk more than a quarter of the crop. The country's farmers are generally ill equipped to respond to these kinds of infestations and they asked for support from the government, which has been forced to hire aircraft to spray pesticide on affected areas. The infestation also came at a time when farmers were already struggling with the late arrival of seasonal rains. This is the last of several examples of disease outbreak in the crop, making yields particularly volatile.
|South Africa On Top|
|Select African Countries - Corn Yields (tonne/ha)|
We believe the strict stance the country has taken against GM crops will limit farmers' ability to plant more resistant seeds, especially against pest attacks. Monsanto introduced its MON810 corn variety into South Africa in the 2000s with an objective to sell also to Mozambique, Uganda, Tanzania and Kenya. The MON810 corn variety is designed to combat insects and pest infestations as the inserted gene enables the corn to produce a protein that harms the attackers when they try to eat it. Under Tanzania's 'strict liability' rule, however, anyone associated with importing, moving, storing and using GM products is liable if someone makes a claim of harm, injury or loss caused by the products, which has therefore discouraged use of the MON810 corn in the country. Other projects, such as the 'Water Efficient Maize for Africa project', have incorporated a gene from a common soil bacterium into corn, enabling plants to produce kernels even while short of water. The modified corn is expected to increase yields by 25% during moderate drought. Tanzania is a member nation in the project, but the above mentioned regulations are still preventing it from making any progress in implementation.
|Corn Production, '000 tonnes||4,341.0||4,300.0||4,200.0||4,062.0||4,158.0||4,298.0|
|Corn Consumption, '000 tonnes||4,100.0||4,300.0||4,550.7||4,815.2||5,091.3||5,379.2|
|Notes: f = BMI forecast. Source: USDA.|