SA maize farmers expect profit bonanza

Johannesburg – The respite from high food and other agricultural prices, reported last week, is likely to prove brief, as grain prices surge on international markets.

However, maize farmers are in for a profit bonanza as the worst floods in 15 years in the US Midwest have already wiped out more maize than South Africa’s total output. The Midwest is a key maize producing region, according to the International Grain Council, which has cut its US crop estimate by 17 million tons to 295 million tons.Osie van der Merwe, an assistant economist in the South African Reserve Bank’s research department, said the international maize price was rising sharply on the Chicago Board of Trade and had broken through the N$2 000 a ton level for the first time since 2002.Figures from Statistics SA last week show food prices at the agricultural level rose less than one per cent over the year to May and fell 6,3 per cent in the month due to an 11 per cent monthly fall in the price of fruits and nuts, a 0,7 per cent decline in vegetable prices and a 6,3 per cent drop in grain prices But John Purchase, the chief executive of South Africa’s Agricultural Business Chamber, said the fall in grain prices was “a seasonal blip” that would be reversed because of mounting price pressures in international markets.Bloomberg reported on Friday that maize prices had gained 33 per cent this month.They are rising not only because of demand for the physical commodity but as a hedge against inflation.In other words, there is more trade in financial securities based on maize, which boosts overall demand.The price surge created by the shortfall in US production is an opportunity for farmers in other countries with a surplus.Purchase said local farmers were harvesting a maize crop of 11,6 million tons, while local requirements were only 8,9 million, including demand from Botswana, Namibia, Lesotho and Swaziland.This leaves a substantial surplus for export.Emerging farmers had increased maize planting by 44 per cent this season.Due to good conditions, their harvest was expected to be up 117 per cent from last year, he said.South Africa’s bumper season comes after a drought last season, when crops had to be imported.This season was an opportunity to make up for previous bad years, Purchase said.But he warned that profits in the next season would deteriorate because of soaring costs.”Diesel prices are up 80 per cent and fertiliser, which makes up 25 per cent of input costs, is up by 100 per cent.Machinery and implements prices are up because of rising steel prices.”Jim Rankin, the chief executive of agricultural consultancy Agfacts, said: “Overall prices of agricultural machinery have risen 17,5 per cent year on year.”And the outlook depends on the strength of the rand, because probably 80 per cent of the value of agricultural machinery is imported.”Purchase said grain prices had a knock-on effect on other food prices, as it was used as feed stock for poultry and beef.Business ReportThe Midwest is a key maize producing region, according to the International Grain Council, which has cut its US crop estimate by 17 million tons to 295 million tons.Osie van der Merwe, an assistant economist in the South African Reserve Bank’s research department, said the international maize price was rising sharply on the Chicago Board of Trade and had broken through the N$2 000 a ton level for the first time since 2002.Figures from Statistics SA last week show food prices at the agricultural level rose less than one per cent over the year to May and fell 6,3 per cent in the month due to an 11 per cent monthly fall in the price of fruits and nuts, a 0,7 per cent decline in vegetable prices and a 6,3 per cent drop in grain prices But John Purchase, the chief executive of South Africa’s Agricultural Business Chamber, said the fall in grain prices was “a seasonal blip” that would be reversed because of mounting price pressures in international markets.Bloomberg reported on Friday that maize prices had gained 33 per cent this month.They are rising not only because of demand for the physical commodity but as a hedge against inflation.In other words, there is more trade in financial securities based on maize, which boosts overall demand.The price surge created by the shortfall in US production is an opportunity for farmers in other countries with a surplus.Purchase said local farmers were harvesting a maize crop of 11,6 million tons, while local requirements were only 8,9 million, including demand from Botswana, Namibia, Lesotho and Swaziland.This leaves a substantial surplus for export.Emerging farmers had increased maize planting by 44 per cent this season.Due to good conditions, their harvest was expected to be up 117 per cent from last year, he said.South Africa’s bumper season comes after a drought last season, when crops had to be imported.This season was an opportunity to make up for previous bad years, Purchase said.But he warned that profits in the next season would deteriorate because of soaring costs.”Diesel prices are up 80 per cent and fertiliser, which makes up 25 per cent of input costs, is up by 100 per cent.Machinery and implements prices are up because of rising steel prices.”Jim Rankin, the chief executive of agricultural consultancy Agfacts, said: “Overall prices of agricultural machinery have risen 17,5 per cent year on year.”And the outlook depends on the strength of the rand, because probably 80 per cent of the value of agricultural machinery is imported.”Purchase said grain prices had a knock-on effect on other food prices, as it was used as feed stock for poultry and beef.Business Report