Ethel Hazelhurst
The danger of rocketing food prices globally has receded, according to data from the UN Food and Agriculture Organisation (FAO). But Elna Moolman, the South Africa economist at Renaissance Capital, warned that the benefits of lower international prices would be counteracted “to a large extent” by a weaker rand.
The FAO reported a week ago that food prices were 8 percent lower on average during the first 10 months of this year, compared with the same period last year.
Moolman said the 8 percent fall in the FAO index “would translate into a gain of about 5.6 percent in rand terms” in the period. The rand softened to R8.8293 to the dollar yesterday, before recovering to be bid at R8.7858 at 5pm.
She said: “In the absence of relief from global food prices, forecast domestic food inflation would be even higher.”
Farmers plan to put more land under production, despite the threat of El Niño, which normally brings hot, dry weather to the summer rainfall regions. El Niño has developed in the Pacific as expected, according to Cobus Olivier at the SA Weather Service. “But the effect hasn’t reached South Africa yet.”
Recent weather had not been abnormal for this time of the year, Olivier added.
Though the chances El Niño will materialise remain high, according to Olivier, farmers are counting on a normal season and the market shows fewer concerns about supply.
Johann Theron, the head of agricultural trading at RMB, said white maize futures for December had fallen from a peak of R2 863 a ton in July to R2 423 now. This remains much higher than the R2 160 in January, but represents a significant improvement.
He said the December futures contract reflected “supply and demand fundamentals” in the country.
According to the Department of Agriculture, Forestry and Fisheries’ October estimate, commercial farmers intend to plant 2.735 billion hectares of maize in the coming season – 1.3 percent more than last season. This is apparently in expectation of higher prices due to the failure of the US crop. The increase has come from yellow maize, with hectares up 6.8 percent compared with last season, while hectares for white maize are down a projected 2.2 percent.
The planting season started last month and will continue over the next few months, depending on the weather. The first production estimates will be released in February, according to the department. Planting intentions for sunflower seeds, soya beans, sorghum and dry beans are also up.
Surplus crops and a weak rand would see farmers’ export revenue rise.
Globally, the production outlook improved after a drought in the US sent prices sharply higher mid-year. The problem was compounded by weather events in Russia and Brazil.
Prices were falling, “largely due to reduced international prices of cereals and oils/fats, which… offset increases in sugar and dairy prices, while meat values remained unchanged”, the FAO said.