File picture: Kim Kyung-Hoon File picture: Kim Kyung-Hoon
Johannesburg - South Africa's sky-high maize prices may return to earth next year after a drought decimated plantings, with some projections calling for a bumper 2016/2017 crop as rains return.
White maize prices could drop to around R4 300 ($300) a ton while yellow maize is expected to fall to around R3 600, according to a Reuters poll of traders and analysts.
The US Department of Agriculture expects 2016/2017 corn production almost to double to 13.0 million tons following the anticipated improvement in conditions associated with a La Nina weather pattern.
Prices are seen falling next year after the early-February pollination stage passes if La Nina conditions materialise, the head of economic and agricultural intelligence at the agricultural business chamber, Wandile Sihlobo, told Reuters.
“(We) will be seeing pretty much some levels of normalisation and prices coming pretty much back to what we saw in 2013/2014,” Sihlobo said.
La Nina, which generally affects the same regions as El Nino, tends to produce above-average rainfall and in some cases cooler temperatures.
Forecasts indicate a 55 to 70 percent chance of a La Nina developing towards the end of 2016, the UN Food and Agriculture Organisation said in a report.
There is a high probability of above-normal rainfall early in summer as an El Nino pattern continues to weaken and a transition into La Nina would lead to a good 2016/2017 crop, said Paul Makube, senior agricultural economist at FNB bank.
“Should weather forecasts remain on course, we can expect agricultural production to bounce back by mid-2017 resulting in significant moderation in food prices, particularly grains,” Makube said.
Maize prices in South Africa, the continent's top producer of the staple, were at record highs following a drought in 2015, brought on by an El Nino that caused the driest year since records began in 1904.
White maize, used for human consumption, doubled in price in 2015 and the July contract hit a historic peak of almost R5 400 a ton in January, according to Thomson Reuters data.
The government's Crop Estimates Committee expects a 7.16-million-ton harvest in 2016. That would be 28 percent lower than the 9.95 million tons reaped last year because of drought and late plantings.
Consumers will likely have to wait until around March for price relief, when maize stocks are fully replenished.
“Although the impact of La Nina will not be felt immediately, it will bring long-term relief to struggling consumers that are currently finding it difficult to make ends meet,” FNB's Makube said.
REUTERS