El Nino gives SA farmers shot at US markets

Bloomberg

Poor quality maize like this, reaped from an Ohio farm last month, is typical of the drought affecting crops in the US. But weather experts say a looming El Ni�o event may affect the scope of South African farmers to make the most of the resultant high prices.

Ethel Hazelhurst

Drought in the US maize belt and in parts of Europe critical to maize production could provide an opportunity for South Africa’s farmers. Jerry Norton, a top US agricultural official, said yesterday that reduced supply, due to the drought, had driven global maize prices to record levels and this should prove an incentive to southern hemisphere planters.

He was speaking at the South African Agricultural Outlook Conference in Pretoria.

But he warned that an El Niño event was looming, which could limit farmers’ scope to make the most of the opportunity. El Niño is a weather pattern that normally brings hot, dry weather to South Africa’s summer rainfall regions, at a time when the maize crop is at its most vulnerable.

Cobus Olivier, a scientist at the SA Weather Service, confirmed an El Niño was on the way. It was still relatively weak but could strengthen and last through the summer.

Norton noted that South American producers were best placed to benefit because they would get better rainfall. Olivier said South Africa, Indonesia, China and Australia were countries most likely to be dry, while parts of South America could have more normal rains.

Andre Jooste, a senior manager at the National Agricultural Marketing Council, said the planting season would start in October-November and the decision on how big a crop to plant would depend on the price and expectations about weather conditions at that point.

Nick Vink, a Stellenbosch University agricultural economist, said the dollar price of yellow maize had risen to between $250 (R2 100) and $300 a ton from about $150 at the start of 2010. And the rand price was running at R2 000 to R2 500 currently from less than R1 500.

Prices are likely to go higher, according to Norton, who told the conference that the poor 2012/13 maize outlook had boosted price prospects sharply “with [maize] prices at the farm level projected at a record $295 to $350 a ton”.

Norton said US exports were expected to decline for a third consecutive year and it would be left to the rest of the world to meet a 3 percent rise in maize usage outside the US. “[Maize] production in the rest of the world for 2012/13 is projected at a record 575 million tons, up 2 percent in the year.”

But this would not be enough to offset reduced US exports and the net effect would be a drawdown of global stocks, Norton said.

The latest report of South Africa’s Bureau for Food and Agricultural Policy noted that an oversupply of local maize last year “created an opportunity for traders to lock in profitable deep-sea export business to countries such as Mexico in advance”. The higher exports, together with a 2012 maize crop that was smaller than initially anticipated, reduced domestic stocks.

Jooste said existing stocks remained relatively low when compared with previous years. But he said the higher prices were likely to induce farmers to plant a normal crop – though they would have to factor in the El Niño risk at the time. page 16