Tiger Brands to pass surging grain costs

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Johannesburg - Tiger Brands Ltd., South Africa’s biggest food company, will pass on a portion of surging local grain prices to consumers as it seeks to maintain profits amid a potential corn shortage after a drought.

White corn rose to a record 2,999 rand ($277) a metric ton on the South African Futures Exchange in Johannesburg on January 6 after climbing 19 percent since the beginning of December as too little rain caused the smallest harvest since 2007 last year and also affected the current season’s planting.

“Whilst we continuously look for ways to reduce and manage costs to the consumer, we will not be in a position to absorb all the increased white maize costs and therefore some costs will be passed to the consumer,” Alex Mathole, a spokesman for the Johannesburg-based company, said in an e-mailed response to questions.

Maize is the term South Africans use for corn.

Cornmeal made from the white variety is a staple food in South Africa, where inflation was 5.3 percent in November.

The yellow type, which is used to feed animals bred for meat such as beef and chicken, also climbed to a record this month following the drought that affected farmers in the North West province, whose proportion of national output declined to 21 percent last season from 31 percent a year earlier, according to the Crop Estimates Committee.

Food producers such as Tiger Brands, whose products include Jungle Oats, Ace Maize Meal and Albany Bread, are also under pressure from a weaker currency as it makes imports more costly.

The South African rand has fallen 22 percent against the dollar since the beginning of last year.

Even so, Tiger Brands will consider importing corn if there is a supply shortage, Mathole said.

“Our first preference is to support local farmers but when faced with a shortage in supply, we will have to consider importing maize,” he said.

Tiger Brands closed unchanged in Johannesburg yesterday. - Bloomberg News

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