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Record harvest forecast

Business Report
The decline in the price of maize could lead to a decline in the price of food in the long run. This is the view of Wandile Sihlobo, agricultural economist and head of agribusiness research at the Agricultural Business Chamber.

“The prices of maize are down by 65percent across the board as compared to 2016. Currently the price of white maize is around R1741 a ton while the yellow maize is R1882 a ton, much lower than the price seen in 2016,” said Sihlobo.

In addition to the lower prices, the Crop Estimate Committee (CEC) reported that South Africa will harvest a bumper crop in the 2016-17 season. “So far the incoming evidence in line with the national CEC's view of a possible record crop this season which is estimated at 15.63million tons. As indicated in our previous note, the country will generally have large supplies in the season under review,” added Sihlobo.

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FILE PHOTO: A farmer inspects his maize crop at a farm in Senekal, South Africa

The overall expected crop supplies will be 16.05million tons, much higher than the country’s annual maize consumption of 10.50million tons. If the expected harvest is reached, South Africa will have an oversupply of more than 5million tons.

“Generally you would expect that the country will export the oversupply to nearby markets to earn an income for our farmers. Our neighbours like Zimbabwe, Zambia and Malawi have enough maize supply,” said Sihlobo. He added that there are very few countries that consume white maize so the market is very limited in the global front.

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This is a much better scenario as compared to 2016 where the country was expected to import maize to cover for its shortfall. Minister of agriculture Senzeni Zokwana said in July 2016 that the department’s estimates showed that the country would import 2.4million tons of yellow maize and 1.9million tons of white maize by the end of April 2017 to cover the shortfall.

Sihlobo added that the regional markets, which are traditional buyers of South African white maize, were well supplied due to higher domestic production. Malawi is expected to harvest 3.6million tons, with Zimbabwe harvesting 2million tons and Zambia with 3.2million tons.

“My estimate at this stage is that the price of food will have to come down by at least 10percent later in the year.

"If you take other factors into consideration like the expected drop in fuel price in July, signs are there that consumers can expect to pay lower prices for products such as maize meal,” said Sihlobo.

However, he cautioned that consumers must not expect a decline in the price of beef as farmers slaughtered fewer cattle following the drought that almost brought the agricultural sector into its knees in the last three years or so.

BUSINESS REPORT

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