The conditions of very hot temperatures and very low rainfall experienced the last month over the dryland maize areas, has very negative influence on the growth of summer crops and is lowering the expectations of a good crop.

This also is having an influence on the SA maize prices. During this period, there was little fluctuations in international prices and a slight drop in international prices was offset by a moderate weakening of the ZAR against the USD, leaving import parity prices for inland maize around R2900-R3000/ton and export parity prices for inland maize around R1600-R1700/ton.

At mid January maize prices for delivery in July 2015 traded as SAFEX around R2000/ton for yellow maize (YM) and R1950/ton for white maize (WM), relatively closer to export parity than to import parity with an estimated 2
.656 million hectares planted to maize.

At this price level it can be interpreted that the market was comfortable with stock levels and foreseen 2015 crop that will be sufficient for domestic use and some exports to African countries. As much needed rainfall did not materialized and temperatures remained at very high temperatures, the dryland crops deteriorated fast and the possibility of a good maize crop also diminished. the market reacted to this with an increase in maize price since then. By mid February SAFEX maize prices for delivery in Jul 2015 traded around R2400/ton for YM and R2750/ton for WM, an increase of about R400/ton for YM and R800/ton for WM.

The much higher increase for WM can be attributed to the fact that very little WM is produced under irrigation systems and apart from Mexico, basically no WM is produced outside Southern Africa and imports of large quantities of WM would not be possible. The impact on WM would directly lead to higher prices on maize and maize products for human consumption. YM is mainly used in animal feeds which will lead to an increase in prices of feeds. Farmers and feedlots will have to carry this cost of increased feed cost for a period of time.

The price of meat will have to increase to ensure levels of sustainable production and if this does not happen or prices is slow to respond, it will have a negative impact on production. This will result in a lower supply that will eventually put pressure on meat prices. It is thus expected that WM products and feeds will increase in price immediately, while higher feeding cost will lead to increases in meat prices later on.

I further suggest that this e-mail be sent to all DMC members to be notified of the current state of affairs and with a request that they should familiarize themselves with the situation and keep monitoring the situation from this point onwards to see if the situation worsen or improve.

FOR FURTHER INFORMATION: Andre (Blackie) Swart Department of Agriculture, Land Reform & Rural Development Directorate: Agricultural Economics 5-7 Elliott Street P/Bag X5018, Kimberley, 8300 Tel: 053-839 7800/21 Fax: 086-771 8994