Report Highlights:

Post forecasts that in the 2014/15 MY, the declining trend in hectares planted with wheat in South Africa will continue. Producers are expected to plant only about 500,000 hectares with wheat and that could realize a crop of 1.8 million tons. As a result, wheat imports are expected to reach about 1.7 million tons. On the other hand, post forecasts that South Africa will have sufficient stocks to export about 2.5 million tons of corn in both the 2013/14 MY and 2014/15 MY, as commercial production is expected to exceed 12.0 million tons in both years.

Executive Summary

Post forecasts that the declining trend in hectares planted with wheat will continue in the 2014/15 MY, as famers will plant about 500,000 hectares. An area of 500,000 hectares will, on average yields, realize a wheat crop of about 1.8 million tons. In the 2013/14 MY, the area planted with wheat was at a record low of 505,500 hectares and produced a wheat crop of 1.8 million tons. Wheat imports for the 2014/15 MY are expected to increase by six percent from 1.6 million tons to 1.7 million tons, as a three percent increase in wheat demand is expected.

Post forecasts that the area planted to corn later in 2014, for the 2014/15 MY, will be around 3.2 million hectares. Based on national average yields, an area of 3.2 million hectares could realize a total corn crop (commercial and subsistence producers) of about 13.0 million tons. Since the beginning of February, South Africa’s corn producing areas received particularly good rains; hence post adjusted its January estimate for South Africa’s 2013/14 MY total corn crop upwards by eight percent to 13.2 million tons, seven percent more than the 2012/13 MY’s corn crop of 12.4 million tons. For both the 2014/15 MY and 2013/14 MY, post estimates that South Africa will have sufficient stocks to export about 2.5 million tons of corn, as commercial production is expected to exceed 12.0 million tons.

For the 2014/15 MY, post forecasts a four percent increase in rice imports to 1.3 million tons. Post estimates that South Africa will import 1.2 million tons of rice in the 2013/14 MY, up 32 percent from the 907,824 imported in the 2012/13 MY. Relative high prices of the substitute products to rice, inter alia, white corn and wheat are contributing to the increase in demand for rice.

WHEAT

Production

In the 2013/14 MY (October 2013 to September 2014), South Africa’s area planted with wheat was at a record low, as producers preferred to plant more profitable crops like canola, oats, corn and soybeans. There is declining trend in hectares planted with wheat and the gap it created between the production and demand for wheat in South Africa. Post forecasts that the declining trend in hectares planted with wheat will continue in the 2014/15 MY, as famers will plant about 500,000 hectares. Unless there are drastic technology changes that could improve wheat yields, the decreasing trend in hectares planted with wheat in South Africa will continue in future. An area of 500,000 hectares will, on average yields, realize a wheat crop of about 1.8 million tons.

South Africa’s 2013/14 MY wheat crop is estimated at 1.8 million tons on 505,500 hectares. Although the area planted was at a record low, a good season in the Western Cape, where almost fifty percent of South Africa’s wheat is produced, contributed positively to a 1.8 million tons wheat crop, marginally less than the 1.9 million tons produced in the 2012/13 MY.

Consumption

South Africa’s wheat consumption decreased marginally by five percent in the 2012/13 MY to 3.1 million tons, due to an 18 percent increase in the local wheat prices. Local wheat prices are currently at record high levels, hence post expects only a marginal increase in wheat consumption in the 2013/14 MY to 3.2 million tons. For the 2014/15 MY, post forecasts only a three percent increase in wheat consumption to 3.3 million tons, as upwards inflationary pressures and weak economic growth are dimming consumer demand.

Trade

Wheat imports for the 2014/15 MY are expected to increase by six percent to 1.7 million tons, as a three percent increase in wheat consumption is expected.

In the first five months of the 2013/14 MY (October – March), South Africa already imported 787,889 tons of wheat and imports are expected to reach 1.6 million tons at the end of the marketing year. Russia (358,728 tons) and Ukraine (281,014 tons) were the major suppliers. Lower imports from the United States are expected due to the depreciation of the Rand against the US$ and quality improvements on Russia and Ukraine wheat.

In the 2012/13 MY, South Africa imported almost 1.4 million tons of wheat, down 20 percent from the previous marketing year, due, inter alia, to a 18 percent depreciation of the rand against major currencies. Most of the wheat was imported from Ukraine (341,976 tons), Russia (245,228 tons), Brazil (234,733 tons) and Australia (189,925 tons).

South Africa also exports wheat to the Southern Africa region and acts as a conduit for imported grain. For the 2013/14 MY (October – March), 135,175 tons of wheat (94,861 tons own stock and 40,314 tons imported wheat) has already been exported to neighboring countries. In the 2012/13 MY, South Africa exported 278,299 tons of wheat from its own stocks to neighboring countries and 33,993 tons of imported wheat. Botswana (93,796 tons) and Lesotho (95,671 tons) were the main markets.

Local wheat prices increased by almost 16 percent in the past year due to higher international wheat prices and the depreciation in the value of the rand against major currencies. The rand has depreciated by almost 20 percent against the United States dollar in 2013 and by nearly 8 percent in the first month of the 2014. The rand stumbled to a fresh five-year low against the dollar in January, after the start of another labor strike in the mining sector. South Africa's budget and current account deficits, strikes in the manufacturing and mining sectors, and the 2014-elections, make the currency more vulnerable than most emerging market peers during a period of global risk aversion.

CORN

Production

Post forecasts that the area planted to corn later in 2014, for the 2014/15 MY, will be around 3.2 million hectares. Commercial farmers will plant about 2.7 million hectares and subsistence farmers 500,000 hectares. This forecast is based on the average hectares planted with corn in the past five years in South Africa. Based on national average yields, an area of 3.2 million hectares could realize a total corn crop of about 13.0 million tons.

Since the beginning of February, South Africa’s corn producing areas received particularly good rains; hence post adjusted its January estimate for South Africa’s 2013/14 MY commercial corn crop upwards by nine percent to 12.5 million tons. This is in line with the first production estimate for corn by the Crop Estimates Committee (CEC) on February 27, 2014. The CEC estimated the commercial corn crop at 12.4 million tons on 2.7 million hectares. Post estimates that subsistence corn crop at 700,000 on 500,000 hectares. Hence, post estimates South Africa’s total corn crop for the 2013/14 MY at 13.2 million tons, seven percent more than the 2012/13 MY’s corn crop of 12.4 million tons.

Consumption

The commercial demand for corn for food increased on average by two percent per year the past 15 years, while the commercial demand for feed corn increased on average by three percent per year. Post projects that this marginal increases in demand will continue in the 2014/15 MY, as South Africa’s economy is expected to grow by less than three percent in 2014 and 2015, due to labor unrest, upward inflationary pressures and electricity constraints. Thus, total commercial demand for corn is estimated to reach 10.2 million tons in the 2014/15 MY.

For the same reasons, post estimates that the commercial demand for corn for human consumption and animal feed will increase only marginally in the 2013/14 MY to 4.7 million tons and 4.6 million tons, respectively. This means total annual commercial corn demand is expected to reach 10.0 million tons in the 2013/14 MY, marginally more than the estimated 9.8 million tons demand in the 2012/13 MY. Post increased the January estimate for corn consumption in the 2012/13 MY by 200,000 tons, as new data from the South African Grain Information Service (SAGIS) indicates that corn consumption will be higher.

Trade

For both the 2013/14 MY and 2014/15 MY, post estimates that South Africa will have sufficient stocks to export about 2.5 million tons of corn, as commercial production is expected to exceed 12.0 million tons.

For the 2012/13 MY, post estimates that South Africa will export around 2.0 million tons of corn, up five percent from post’s January estimate. In the past ten months of the 2012/13 MY, South Africa already exported 1.9 million tons of corn of which 1.1 million tons were yellow corn and 797,715 tons white corn. Post foresees that South Africa will continue corn exports to its neighboring countries for the remainder of 2012/13 MY.

Prices

Both white corn and yellow corn prices are currently at record highs and increased by more than 20 percent the past two weeks as wet fields made it impossible for producers to harvest early corn. On a year-on-year basis, white corn and yellow corn prices are, respectively, 61 percent and 66 percent higher. This price increase occurred despite international corn prices decreasing, as domestic corn prices moved away from export parity price levels to import parity price levels. The movement to import parity prices was driven by the anticipation of possible corn imports realizing as stock levels are under pressure. The deterioration of the rand exchange rate is also supporting higher corn prices. Post foresees that local corn prices will move gradually back to export parity levels as soon as harvesting of 2013/14 MY crop starts.

RICE

South Africa does not produce rice commercially, due to the high water requirements of the crop. Hence, South Africa is totally dependent on rice imports to meet the local demand. Rice imports are duty free and consumption is based on the import data supplied by the Global Trade Atlas. 

For the 2014/15 MY, post forecasts a four percent increase in rice imports to 1.3 million tons, as it correlates with the average annual increase in the demand for rice in South Africa the past 15 years. 

Post estimates that South Africa will import 1.2 million tons of rice in the 2013/14 MY, up 32 percent from the 907,824 tons imported in the 2012/13 MY. Rice imports are higher due to the price increases of the substitute products to rice, namely, white corn and wheat. Since May 2013, local wheat and white corn price increased by 14 percent and 70 percent, respectively, while the average price of imported rice to South Africa decrease by 15 percent. In the first eight months of the 2013/14 MY, South Africa already imported 882,000 tons of rice. 

In the 2012/13 MY, Thailand lost its position as South Africa’s biggest trading partner in rice to India. India and Thailand, together, supply 80 percent of South Africa’s rice demand