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Global demand for local grain to put consumers under stress

Ayanda Mdluli

South Africa’s animal feed industry, poultry producers and consumers face greater strain as the international demand for local grain products looks set to diminish the domestic maize surplus.

This would place the country back at last year’s position where a shortage of maize was forecast as a result of excessive exporting by traders.

The problem would be that as soon as a significant level of supply was extracted from the market, prices would move away from export parity to import parity, as seen in late 2011 and earlier this year, said André Jooste, the executive director at the National Agricultural Marketing Council.

The latest food price monitor released by the council on Friday paints a gloomy picture for local and international food price trends.

Domestic white maize prices increased by 41 percent in July from a year earlier, the research revealed, while local yellow maize prices rose by 37.53 percent year on year.

Urban consumers paid 16.2 percent more for a 5kg bag of super maize meal and 46.35 percent more for a 5kg bag of special maize meal in July compared with July last year. Rural consumers experience a 36 percent increase for a 5kg bag of maize meal during the same period.

Domestic wheat prices increased 14 percent year on year in July. In urban areas consumers paid R8.25 for a 700g loaf of brown bread and R9.34 for a loaf of white bread in July. These figures represented increases of 3.25 percent and 4.94 percent, respectively, from the same month last year, according to the monitor.

In July, international maize prices advanced by 23 percent month on month, surpassing the peaks of 2008 and last year. Since August 2010, maize has risen more than 100 percent.

The situation is exemplified by the 6 percent rise in the Food and Agriculture Organisation’s food price index in July from June. The increase is largely influenced by the worst drought to hit the US since the 1950s, which saw the US Department of Agriculture slash its grain production forecast to levels last seen 25 years ago.

Jooste said the record high prices would continue to put pressure on the feed industry, but it would also stimulate planting in the new season between October and November.

Some media reports quoted Grain SA as saying that the 995 000 ton surplus, which was available for this marketing season, would diminish if the country continued to export maize at the current rate.

According to Grain SA, about 522 000 tons of white and yellow maize was exported between May and the second week of August this year.

Animal Feed Manufacturers Association executive director De Wet Boshoff said since the industry was a price taker, it would face challenges associated with higher prices for feed commodities.

He disclosed that the feed manufacturers would increase their feed prices “drastically” to cover input costs, which would also result in higher food inflation.

The poultry industry had also been hit, as the high number of imports from Brazil had depressed prices, which would result in job cuts.

“If retailers keep importing cheap poultry products, prices will be depressed. [The] government and industry need to sit around a table and find a way to create jobs and economic growth,” he said.

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