White maize futures plunge 17% in two weeks

29.09.2016

White maize prices in South Africa are plumbing their lowest level in nine month, under pressure from the strengthening rand, an upgrade to estimates to the crop just finished, and ideas that supplies could be imported from the US.

The most-traded December white maize contract closed down 2.6%, at $3,589 rand a tonne.

This is a contract low, and the lowest level for the third-month contract so far this year, down 17% from September 13.

Currency effect

"The first thing was the strengthening of the currency," said Wandile Sihlobo, at the South African farmers body Agbiz.

The rand was down against the dollar on Thursday, but has been strengthening in the longer term, after the very low levels seen at the start of the year.

South Africa will have to import around 1m tonnes of white maize to meet its domestic demand, after the drought damaged 2016 harvest, leaving the market highly exposed to exchange rate fluctuations.

Higher crop estimates

Mr Sihlobo also noted an upward revision to estimates of the crop just finished.

The final summer crop production estimates from South Africa's National Crop Estimate Committee bought an upward revision to the maize crop.

White maize production was seen at 3.25m tonnes, up 2% from the previous estimate, where analysts were expecting a trim.

And yellow maize production was seen at 4.28m tonnes, a 5% upgrade.

Good prospects for next season

And after the severe drought of 2015, weather has improved for the next campaign, which is set to start next month.  

"The prospects for the next season are looking good," said Mr Sihlobo.

The USDA has forecast South Africa's 2016-17 maize production at 13.0m tonnes.

But Mr Sihlobo also noted that although conditions in the rest of Southern Africa were looking good for white maize, there were concerns around seed availability.

Due to this year's small harvest, there are concerns that small-scale substance farmers in other countries in the region may struggle to source seed corn.

US supplies

Additional pressure on the market is coming from the idea that South Africa may be able to import white maize from the US.

Given that few countries export the variety - Mexico being one of the few notable origins - any additional origins would help to ease the market.

Currently, South African restrictions on genetically modified varieties are keeping US supplies out of the market.

But there are ideas in the market that these regulations may be reviewed to help South African importers source supplies.

"We will see what the regulators and government will say over the coming weeks". Mr Sihlobo said.


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