Falling rand drives South African corn prices higher


Yellow maize futures in South Africa hit a three-week high, as currency becomes the main driver of a market that will be dependent on imports to meet domestic demand.

"The currency has been dominating the market," said Wandile Sihlobo, at AgBiz, South Africa's agricultural business group.

South Africa is usually a net corn exporter, but corn production was sharply down in the harvest just finished after three successive years of drought.

The shortfall in production will force South Africa to import significant volumes of corn, with the USDA forecast imports to rise to 3.5m tonnes over the year to April 2017.

Bridging the gap

Mr Sihlobo pointed out that that corn imports for South Africa, as of August 16, were at 17% of the total which will be needed to meet demand until the next harvest.

The harvest just finished will meet demand until the rest of the year, but imports will be needed to bridge the gap until the harvest starts in April.

"All of that makes us trade on the import parity price," Mr Sihlobo.

Rand tumbles

And that import parity price rose sharply up, as the rand falls sharply against the dollar.

The rapid drop in the rand over tha past two days has been driven by a police investigation into Pravin Gordhan, South Africa's finance minister.

Mr Gordhan has been contacted by the Hawks, an elite police unit, and is expected to report for questioning on Thursday.

The rand was down 1.3% on the dollar on Wednesday, after falling by over 3% on Tuesday.

"All of this has been massively hurting the rand," said Mr Sihlobo, which is "playing the part in the yellow maize price".

Futures jump higher

Mr Sihlobo said that some certainty over the next crop would emerge before the end of the year, with rainfall and acres being closely watched.

AgBiz currently sees the coming corn crop at 12.5m tonnes, which allow South Africa to return to a net exporter, while the USDA sees the coming crop at 13.0m tonnes.

Yellow maize futures finished up 2.7%, at 3,211 rand a tonne.


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