Coming harvest season recovery in doubt

Business Day
by Wandile Sihlobo September 05 2016
THE debate about SA’s 2016/17 summer crop production has returned to the top of the agenda as we enter the new production season.
Normally, different organisations make different projections, based on assumptions about the future. Output bottomed out in 2015/16 due to drought, so the outlook for the next production season is more positive, particularly for maize.
The Bureau for Food and Agricultural Policy recently estimated SA’s 2016/17 maize production at 12.3-million tonnes, while the International Grains Council’s estimate is 12.9-million tonnes and that of the US Department of Agriculture is 13-million tonnes.
All these estimates suggest that SA’s maize production could fully recover from this season’s harvest of 7.3-million tonnes. This means that the country, which has annual consumption of 10.5-million tonnes, could again be a net exporter.
However, all these estimates are underpinned by the assumption that weather conditions could improve. In the past few months, weather forecasters such as the Earth Institute at Columbia University and the Australian Bureau of Meteorology, have championed a view that SA could experience a La Niña event in the late spring to summer season.
In recent weeks, however, the view has changed, with the Australian bureau revising down the chances of La Niña occurrence from 65% to 50%. This implies that SA might experience a moderate La Niña event, which could lead to normal rainfall. However, there is still a possibility that SA might receive below-normal rainfall. Even the South African Weather Service hinted recently that we are not out of the woods just yet, with its weather models presenting mixed views on the coming season.
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In the 2015-16 season, conditions turned out slightly better than expected at the start of the season, when organised agriculture suspected that production could drop as low as 5-million tonnes. To supplement domestic supplies, maize imports are forecast at 3.8-million tonnes from May 2016 to April 2017, which, at the import parity price of about R3,200 per tonne, could cost SA at least R12bn.
Within the forecast 3.8-million tonnes of maize imports, about 2.7-million tonnes have to be yellow maize and 1.1-million tonnes white maize. There are large supplies of yellow maize in the market, and SA will be able to import, but it is unclear whether it will be able to source the required white maize imports, due to the scarcity of the commodity. By August 31, SA had imported just 21% of the forecast 1.1-million tonnes. About 90% of global traded maize is yellow maize. Moreover, with Zambian maize exports banned, SA could potentially see additional demand from the region, particularly from Zimbabwe, Mozambique and the BNLS countries (Botswana, Namibia, Lesotho and Swaziland). Together, these countries could see a shortfall of at least 2-million tonnes of maize this season.
Looking at the supply side, outside Africa, the major white maize exporters are the US and Mexico. About 70% of the US’s white maize production is genetically modified, and their genetically modified variety is not yet cleared for importation in SA. Therefore, the regional demand could depend on Mexico and, at the moment, it is unclear whether Mexico will be able to supply the required regional volumes.
This does not call for panic, since deliveries from the current harvest have eased supplies in the short to medium term. However, it is important to keep in mind that SA and the region are not yet out of the woods regarding maize supplies for the current season, or the coming season. Against the projection of a rebound in maize production in the 2016/17 season, South Africans might see some relief in food prices in mid-2017. That said, one will have to monitor the weather developments as the season progresses, and hope things work out for the best.