Report Highlights:

First estimates for the 2013/14 MY indicate that South African commercial corn producers planted 2.7 million hectares, up four percent from post’s previous estimate. This could yield a commercial crop of about 11.5 million tons, which will place South Africa in a position to export approximately 2.0 million tons of corn.

Executive Summary

First estimates for the area planted to corn by commercial farmers for the 2013/14 MY [1] (the 2014/15 MY in South Africa) indicates that commercial farmers planted 2.7 million hectares of corn, four percent more than post’s October 2012 estimate of 2.6 million hectares. In addition, post estimates that subsistence farmers planted about 500,000 hectares of corn. This means total corn plantings, at 3.2 million hectares, are at the same level as in the 2012/13 MY. Weather conditions so far this season are a mixture of satisfactory growing conditions in the east and drought conditions prevailing in the west. Hence, post kept its total corn crop estimate for the 2013/14 MY unchanged at 12.2 million tons.

Post forecasts that the local commercial demand for corn will only grow marginally, to 9.7 million tons, in the 2013/14 MY, with high corn prices decelerating a greater growth rate. On the other hand, exports are expected to reach 2.0 million tons. Post estimates that South Africa will export around 1.9 million tons of corn in the 2012/13 MY.

CORN

Production

The first estimate for the area planted to corn by commercial farmers for the 2013/14 MY was released by the Crop Estimates Committee (CEC) on January 28, 2014. According to the CEC, commercial farmers planted 2.7 million hectares of corn. This estimate by the CEC is four percent more than post’s October 2012 estimate of 2.6 million hectares. In addition, post estimates that subsistence farmers planted about 500,000 hectares of corn. This means total corn plantings, at 3.2 million hectares, are at the same level as in the 2012/13 MY. Commercial farmers planted 1.6 million hectares with white corn and 1.1 million hectares with yellow corn.

The prevailing drought conditions in the western side of the corn producing area are impacting negatively on corn yields. However, growing conditions in the rest of the corn producing regions are satisfactory, especially in the Mpumalanga and the eastern Free State provinces. Hence, post kept its total corn crop estimate for the 2013/14 MY unchanged at 12.2 million tons.

Consumption

Post forecasts that the local commercial demand for corn will only grow marginally, to 9.7 million tons, in the 2013/14 MY. Since 2008, the demand for corn for human consumption and animal feed has flattened, due to relatively high corn prices and slow economic growth. Corn meal is a staple food for many South Africans, but can be substituted, at the right price level, by bread or rice. Hence, the demand for wheat and rice increased by respectively, 12 percent and 22 percent the past five years. On a year-to-year basis the price of wheat only increased by six percent, compared to the 50 percent increase in corn prices, explaining the growth in the demand for wheat.

Post estimates total commercial corn consumption for the 2012/13 MY at the same level as in the 2011/12 MY, i.e. 9.6 million tons. Hence, the commercial demand for corn for human consumption and animal feed in the 2012/13 MY will stay relatively constant at approximately 4.6 million tons and 4.4 million tons, respectively.

Trade

For the 2013/14 MY, post forecasts that South Africa will have sufficient stocks to export about 2.0 million tons of corn. For the 2012/13 MY, post estimates that South Africa will export around 1.9 million tons of corn. In the first nine months of the 2012/13 MY, South Africa already exported 1.7 million tons of corn of which one million tons were yellow corn and 674,273 tons white corn.

Where Mexico was South Africa’s major market in the 2011/12 MY, receiving 45 percent of total corn exports (mainly white corn), South Africa’s six neighboring countries are currently the major markets with 35 percent of total corn exports (481,807 tons white corn and 136,571 tons yellow corn). Drought in many parts of southern Africa impacted negatively on crops, rising food security concerns. Post foresees that South Africa will continue corn exports to its neighboring countries, while some mills at the coast might start importing corn in the remainder of the 2012/13 MY.

Prices

Since post’s last report in October, both white corn and yellow corn domestic prices sharply increased by 38 percent and 60 percent, respectively, to reach record levels. This price increase occur despite international corn prices decreasing, as domestic corn prices moved away from export parity price levels and closer 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 drought conditions prevailing in the Northwest province also played a role in the increase corn prices. On a year-to-year basis yellow corn and white corn prices are respectively, 48 percent and 50 percent, higher.

The deterioration of the rand exchange rate is also supporting higher corn prices. The rand has depreciated by almost 20 percent against the United States dollar on a year-to-year basis and by nearly 5 percent in the first three weeks of the 2014. The rand stumbled to a fresh five-year low against the dollar on January 24, 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