South African maize farmers have lauded the government for assisting with opening maize export opportunities with China.
Grain SA (GSA) announced on Friday that Minister of Agriculture, Forestry and Fisheries Senzeni Zokwana signed a protocol with China for phytosanitary requirements for maize exports.
This means that both countries had completed the pest risk assessment and were ready to trade maize.
Local farmers expect a new trade partnership will benefit farmers and stabilise the domestic food security.
Following this GSA announcement, the spot price of white maize, which is used to make maize meal for human consumption, on the JSE ended up R43 a ton at R2 085 a ton on Friday. The spot price of yellow maize, which is used in animal feed, closed up R33 at R2 110 a ton. The closing prices for white and yellow maize on the JSE were both the highest levels since May.
China mainly uses rice for human consumption and imports yellow maize for animal feed. So South Africa has an opportunity to export yellow maize to China following the signing of the agreement.
Wessel Lemmer, an economist at GSA, said China’s growing demand for maize was driven by population growth as well as economic growth.
“What is nice about this is that as soon as we have a (greater) global market for our maize we can produce more. If China comes on board it will be another country that will get maize from South Africa,” Lemmer added.
Thys Grobbelaar, an analyst at agribusiness Senwes, said the Chinese deal was good news for local agriculture.
However, he said local prices were at least R250 per ton higher than competing international maize exporters like US, Brazil or Argentina.
“I am not sure if farmers will make lots of profit because our maize price is above the average export parity,” he said.
What made local maize less competitive was the cost of shipping it from South Africa to China, explained Grobbelaar. China had become a major importer of maize in recent years. The country has imported on average 2.9 million tons of maize per year over the last five years, Grain SA said.
Annual imports varied from 980 000 tons to 5.2m tons, GSA added.
China is the world’s fifth largest importer of maize behind Japan, the globe’s largest maize importer, followed by Mexico, South Korea and Egypt, according to the US Department of Agriculture (USDA) website.
The USDA estimates that for the latest marketing year, China will import about 3.3 million tons of maize.
On the other hand, South Africa is the world’s fifth largest exporter of maize after the US, Brazil, Ukraine and Argentina.
At the end of the marketing year to April 2014, South Africa exported 2.2 million tons of maize and was expected to export a similar amount in the marketing year which ends in April next year.
Since late April, South Africa has exported maize to countries outside Africa, such as Taiwan, South Korea, Japan, Saudi Arabia, Portugal and Italy.