Highlights

South Africa should return to being a net exporter of corn in the 2017/18 MY and 2016/17 MY on higher production. South Africa is expected to import 2.4 million tons of corn in the 2015/16 MY, due to an extreme drought that had a negative impact on production. South Africa’s total corn crop for the 2016/17 MY is estimated at 14.6 million tons, which is 78 percent higher than the 2015/16 MY’s drought-reduced corn crop of 8.2 million tons. On the other hand, post forecasts that South Africa’s wheat imports for the 2017/18 MY will be almost 40 percent higher than in the 2016/17 MY, at 1.8 million tons, due to an expected decrease in local production. Rice imports are expected to be around 1.0 million tons in the 2017/18 MY.

Executive Summary

The area under wheat production in South Africa increased by five percent in the 2016/17 MY, mainly due to the drought conditions in the summer grain producing area last year that forced farmers to increase winter wheat production as an alternative. Post does not foresee the same trend in the 2017/18 MY as the corn area planted drastically increased due to more favorable climatic conditions. Hence, post forecasts that South Africa will plant about 480,000 hectares of wheat in the 2017/18 MY, as the declining trend in hectares planted with wheat will continue. An area of 480,000 hectares could, on average yields, realize a wheat crop of about 1.75 million tons. As a result, South Africa’s wheat imports for the 2017/18 MY will be almost 40 percent higher than in the 2016/17 MY, at 1.8 million tons.

An expected bumper corn crop in the 2016/17 MY and resulting lower local corn price levels will put downward pressure on the area to be planted with corn later in 2017, for the 2017/18 MY. As a result, Post forecasts that around 2.4 million commercial hectares of corn will be planted later in 2017, which is nine percent less than the area planted in the 2016/17 MY. Under normal climatic conditions and taking into account the subsistence farming sector, South Africa’s corn crop for the 2017/18 MY could reach 12.0 million tons. As a result, South Africa could export about 1.0 million tons of corn in the 2017/18 MY, mainly to neighboring counties.

South Africa’s total corn crop for the 2016/17 MY is estimated at 14.6 million tons on 3.0 million hectares, which is 78 percent higher than the 2015/16 MY drought-reduced corn crop of 8.2 million tons. South Africa should return to being a net exporter of corn, especially white corn, in the 2016/17 MY on higher production. Post estimates South Africa could export about 2.0 million tons of corn in the 2016/17 MY.

In the 2017/18 MY, South Africa’s rice imports are expected to decrease by four percent to 1.0 million tons on decreased demand. In the 2016/17 MY post estimates South Africa will import about 1.04 million tons of rice as consumption increased by seven percent, mainly due to last year’s extreme drought that increased the prices of corn products. For the 2017/18 MY, post forecasts a seven percent decrease in South Africa’s rice consumption to 820,000 million tons, due to an increase in corn production on favorable weather conditions and thus relatively lower prices for corn products.

WHEAT

Production

Although the area under wheat production in South Africa increased by five percent in the 2016/17 MY, it was mainly due to the drought conditions of last year in the summer grain producing area that forced farmers to increase winter wheat production as an alternative. As a result, the wheat area in, especially, the Free State province increased by 38 percent or by 30,000 hectares. Post does not foresee the same trend continuing in the 2017/18 MY, as corn area planted drastically increased this year due to more favorable climatic conditions. Hence, Post forecasts that the declining trend in hectares planted with wheat of the past twenty years will continue in the 2017/18 MY. Post forecasts that South Africa will plant about 480,000 hectares of wheat in the 2017/18 MY which could, on average yields and normal climatic conditions, realize a wheat crop of about 1.75 million tons.

The wheat industry in South Africa is currently busy with a process to identify factors that could assist in reviving the industry. These include inter alia higher yielding cultivars, changes in the wheat grading regulations, and an end-point royalty system to counter farm saved seed. However, unless drastic technology changes occur that could improve wheat yields, producers will continue to switch to more profitable crops like canola, oats, corn and soybeans and the decreasing trend in hectares planted with wheat in South Africa will continue in the future.

The Crop Estimates Committee (CEC) released its final estimate for wheat production in South Africa for the 2016/17 MY on February 28, 2017. The CEC estimates that South Africa produced 1.9 million tons of wheat on 508,365 hectares, which represents an increase of 33 percent from the previous year on increased area planted and better climatic conditions, especially in the Western Cape province. In the Western Cape province wheat production increased by 57 percent to 1.1 million tons from the previous season and represents more than 50 percent of total wheat production in South Africa. Another major wheat producing area in South Africa is the Northern Cape province, where irrigated wheat production represents about 14 percent or 266,000 tons of the total wheat crop. The Free State province increased wheat production by 75 percent to 308,000 tons, mainly due to increased area planted as last year’s drought conditions decreased corn area planted and forced farmers to increase winter wheat production as an alternative. These three provinces together produced about 85 percent of the wheat crop in South Africa.

Consumption

Annual wheat consumption in South Africa has increased on average by only about one percent per annum the past five years, mainly due to slow economic growth and the availability of cheaper alternatives like corn and rice. Corn, the staple food for many South Africans, also showed price inelasticity after retail prices almost doubled over the past two years, due to the drought, but the per capita demand stayed constant. With the prices of corn products expected to decrease after last year’s drought, post does not foresee major shifts in wheat consumption in the 2017/18 MY. Wheat demand in the 2017/18 MY is expected to be around 3.23 million tons. Post estimates that wheat consumption for the 2016/17 MY will be around 3.20 million tons, in line with a one percent growth rate and marginally higher than the 3.17 million consumed in the 2015/16 MY.

Trade

Post forecasts that South Africa’s wheat and wheat products imports for the 2017/18 MY will be almost 40 percent higher than in the 2016/17 MY, at 1.8 million tons, mainly due to an expected eight percent decrease in local production.

Post estimates that wheat and wheat products imports in the 2016/17 MY could drop to 1.3 million tons as a result of a 33 percent increase in production. For the first five months of the 2016/17 MY, South Africa only imported 366,477 tons of wheat, mainly from Germany, Poland and Russia. For the 2015/16 MY, South Africa’s wheat imports and wheat products reached 2.2 million tons to supplement local production that was effected by drought conditions.

South Africa also exports wheat to the Southern Africa region and neighboring countries and acts as a conduit for imported grain. In the 2015/16 MY, South Africa exports dropped by 80 percent from 274,255 tons to 54,008 tons to neighboring countries due to the decrease in production. South Africa’s wheat and wheat products exports are expected return to normal levels of 300,000 tons in both the 2016/17 MY and 2017/18 MY.

A new Economic Partnership Agreement (EPA) between South Africa and the European Union (EU) that came into effect late last year, allows for duty-free imports of 300,000 tons of wheat from countries in the EU. This duty-free allowance is effective from February 1, 2017 to October 31, 2017. The current import tariff for wheat imports into South Africa is R1,591.40 per ton (US$120.74/ton). An annual quota of 108,279 tons of wheat was also announced that can enter South Africa at a rebate of 14.4 percent on the full duty.

Prices

Local wheat prices have moved downwards, away from import parity levels, since August 2016 to reflect the higher wheat crop of the 2016/17 MY. Currently, wheat prices are trading around R3,954 per ton (US$300/ton) and are 16 percent lower than for the same period a year ago. However, local wheat prices are expected to trade upwards again to reflect an expected lower wheat crop in the 2017/18 MY.

Wheat

Market Begin Year

2015/2016

2016/2017

2017/2018

May 2015

Oct 2016

Oct 2017


New Post

New Post

New Post

New Post

New Post

New Post

Area Harvested

482

482

508

508

0

480

Beginning Stocks

997

997

907

1238

0

948

Production

1440

1440

1910

1910

0

1750

MY Imports

2200

2170

1700

1300

0

1800

TY Imports

2100

2100

1500

1100

0

1600

TY Imp. from U.S.

230

230

0

0

0

200

Total Supply

4637

4607

4517

4448

0

4498

MY Exports

300

202

300

300

0

300

TY Exports

250

250

250

250

0

250

Feed and Residual

30

25

30

30

0

30

FSI Consumption

3400

3142

3420

3170

0

3200

Total Consumption

3430

3167

3450

3200

0

3230

Ending Stocks

907

1238

767

948

0

968

Total Distribution

4637

4607

4517

4448

0

4498

CORN

Production

Expected lower local corn price levels will put downward pressure on the area to be planted with corn later in 2017, for the 2017/18 MY, especially for the white corn area, as a record white corn crop is expected in the 2016/17 MY. Hence, post forecasts a 15 percent drop in the 2017/18 MY for the commercial area planted with white corn to 1.4 million hectares. The expected commercial yellow corn area planted in the 2017/18 MY should be at average levels of about 1.0 million hectares as only a normal yellow corn crop is expected in the 2016/17 MY. As a result, Post forecasts that around 2.4 million commercial hectares of corn will be planted later in 2017, which is nine percent less than the area planted in the 2016/17 MY. Under normal climatic conditions and taking into account the subsistence farming sector, South Africa’s corn crop for the 2017/18 MY could reach 12.0 million tons, which is 18 percent less than the expected corn crop of 14.6 million tons in the 2016/17 MY.

The Crop Estimate Committee (CEC) released its first production estimate for the 2016/17 MY summer crops on February 28, 2017. According to the CEC the expected commercial corn crop is 13.9 million tons on 2.6 million hectares. This represents an increase of almost 80 percent from the 2015/16 MY commercial corn crop of 7.8 million tons. A historical high commercial white corn crop of 8.3 million tons is expected, 144 percent more than in the previous season. The commercial yellow corn crop is estimated at 5.6 million tons, 28 percent higher than the previous season. The good rainfall between October and December of last year in many of the areas of South Africa that were affected by the severe drought the previous season was followed by even better rainfall in February. Many corn producing areas in South Africa recorded far above average rainfall in February. As a result, the corn crop across South Africa is in a very good condition. Although the fall army worm was detected in South Africa, the impact on production is expected to be limited. More than 85 percent of the South African corn crop has been planted with genetically engineered seed, which protects the crop against fall army worm. In addition, many commercial pesticides, to control fall army worn, have been legally registered since the first detection and are now available for producers to control the pest.

Post estimates the subsistence sector’s corn crop for the 2016/17 MY at about 700,000 tons on 400,000 hectares. This means South Africa’s total corn crop for the 2016/17 MY is estimated at 14.6 million tons on 3.0 million hectares, which is 78 percent higher than the 2015/16 MY’s drought-reduced corn crop of 8.2 million tons.

The CEC finalized the size of the 2015/16 MY commercial corn crop on February 10, 2017 at 7.8 million tons, after taking into account producer deliveries and on-farm usage. Hence, South Africa’s drought-reduced total corn crop (including commercial and subsistence farming) for the 2015/16 MY was finalized at 8.2 million tons on 2.2 million hectares, which is 23 percent lower than the 2014/15 MY’s crop of 10.6 million tons. Commercial white corn production was finalized at 3.4 million tons, 28 percent lower than the previous season, while commercial yellow corn production finalized at 4.4 million tons, and 16 percent lower than the previous season.

Consumption

The commercial demand for corn for food increased on average two percent per year the past 20 years, while the commercial demand for feed corn increased on average three percent per year. Post projects that this marginal increase in demand for corn will continue in the 2017/18 MY. South Africa’s economic growth is expected to continue to be sluggish in the next few years, due to structural and policy constraints, which will limit the increase in the demand for animal protein and hence animal feed. As a result, the demand for corn feed is expected to increase marginally to 5.4 million tons. The human demand for corn, the staple food for many South Africans, especially for the lower to middle income group, is expected to grow in correlation with population growth to 5.1 million tons. The per capita consumption of corn has stagnated at around 90kg per annum for the past 10 years. Thus, total commercial demand for corn is estimated to reach about 10.8 million tons in the 2017/18 MY. With higher rainfall leading to increased production and thus relatively lower corn prices, post forecasts a two percent increase in the commercial demand for corn in the 2016/17 MY to 10.6 million tons. Post expects that South Africa will use 5.0 million tons of corn for human consumption and 5.3 million tons of corn for animal feed, excluding corn utilized by the subsistence farming sectors and commercial on-farm usages.

Post kept the commercial demand for corn in the 2015/16 MY unchanged at 10.4 million tons. This means that the total commercial demand for corn is expected to drop only marginally in the 2015/16 MY, from the 10.5 million tons of corn consumed in the 2014/15 MY, despite the higher drought-induced corn prices.

Trade

Post estimated that South Africa could export about 1.0 million tons of corn in the 2017/18 MY, mainly to neighboring counties. South Africa should also return to being a net exporter of corn, especially white corn, in the 2016/17 MY on higher production. Post estimates South Africa could export about 2.0 million tons of corn in the 2016/17 MY.

For the 2015/16 MY, post dropped its previous estimate of 3.0 million tons of corn imports, to 2.4 million tons, after taking into account the total current import data. Up to March 3, 2017, South Africa imported 2.0 million tons of corn for the 2015/16 MY, mainly from Argentina (994,000 tons of yellow corn), Mexico (559,000 tons of white corn), Ukraine (231,000 tons of yellow corn) and the United States (102,000 tons of white corn and 16,000 tons of yellow corn). It seems that corn imports have slowed down the past few weeks in anticipation of possible early corn deliveries from irrigated fields. However, post estimates that at least another 400,000 tons of corn have to be imported in the remaining two months of the 2015/16 MY to satisfy demand. South Africa continued to export corn to its neighboring countries in the 2015/16 MY, despite the lower production due to the drought. So far, South Africa has exported 674,000 tons of corn. Post estimates that South Africa’s total corn exports for the 2015/16 MY could reach 800,000 tons.

Prices

Local corn prices started to move downwards, away from import parity levels, in mid-December 2016 and accelerated to export parity levels since mid-February after the good rains and the realization that a bumper crop could be possible.Year-on-year local yellow corn and white corn prices are, respectively, 27 percent and 52 percent lower, indicating the better climatic conditions compared to the last season. Currently, yellow corn is trading at R2,169 per ton (US$165/ton) and white corn at R2,223 per ton (US$169/ton) With the expected over supply of corn in the local market, especially white corn, corn is likely to trade at import parity levels for the rest of the 2016/17 MY.

Corn

2015/2016

2016/2017

2017/2018

May 2016

May 2016

May 2017

South Africa

New Post

New Post

New Post

New Post

New Post

New Post

Area Harvested

2213

2213

3100

3029

0

2800

Beginning Stocks

2448

2448

1262

1063

0

1981

Production

8214

8215

14600

14618

0

12000

MY Imports

2600

2400

100

100

0

100

TY Imports

2579

2579

1800

2000

0

0

TY Imp. from U.S.

110

110

0

0

0

0

Total Supply

13262

13063

15962

15781

0

14081

MY Exports

800

800

2000

2000

0

1000

TY Export

759

759

1800

800

0

0

Feed and Residual

5700

5700

5800

5900

0

6000

FSI Consumption

5500

5500

5900

5900

0

6000

Total Consumption

11200

11200

11700

11800

0

12000

Ending Stocks

1262

1063

2262

1981

0

1081

Total Distribution

13262

13063

15962

15781

0

14081


RICE

Production

South Africa is totally dependent on rice imports to meet the local demand as no rice production takes place in the country, due to the high water requirements of the crop. As a result, rice imports are duty free and local consumption is derived from import data as supplied by the Global Trade Atlas.

Consumption

Post forecasts a seven percent decrease in South Africa’s rice consumption in the 2017/18 MY to 820,000 million tons, due to an increase in corn production on favorable weather conditions and thus relatively lower corn prices. Consumers can substitute rice, wheat and corn products based on price and taste preferences.

Post lowered its previous local rice consumption estimate for the 2016/17 MY by nine percent to 880,000 tons based on updated trade data. Post also lowered the estimated consumption of rice in the 2015/16 MY to 820,000 tons, after taking into account the actual trade data. This means rice consumption increased by seven percent in the 2016/17 MY, mainly due to last year’s extreme drought that increased the retail prices of corn products.

Imports

In the 2017/18 MY, South Africa’s rice imports are expected to decrease by four percent to 1.0 million tons on decreased demand. In the 2016/17 MY post estimates South Africa will import about 1.04 million tons of rice. So far in the 2016/17 MY (May, 2016 to January, 2017), South Africa already imported 775,477 tons. South Africa’s rice imports for the 2015/16 MY was finalized at 944,192 tons. India and Thailand, together, supply about 90 percent of South Africa’s rice demand.

Exports

South Africa imports a small amount of rice to export to neighboring countries. These exports, show an increasing trend in recent years. In the 2015/16 MY South Africa exported 131,370 tons of rice to neighboring countries, seven percent higher than the previous year. Hence, post estimates rice exports would increase to 150,000 tons in the 2016/17 MY and to 170,000 tons in the 2017/18 MY.

Rice

2015/2016

2016/2017

2017/2018

May 2016

May 2016

May 2017

New Post

New Post

New Post

New Post

New Post

New Post

Area Harvested

0

0

0

0

0

0

Beginning Stocks

13

13

10

6

0

16

Milled Production

0

0

0

0

0

0

Rough Production

0

0

0

0

0

0

Milling Rate (.9999)

0

0

0

0

0

0

MY Imports

943

944

1000

1040

0

1000

TY Imports

954

954

925

925

0

900

TY Imp. from U.S.

1

1

0

1

0

1

Total Supply

956

957

1010

1046

0

1016

MY Exports

126

131

100

150

0

170

TY Exports

145

145

90

120

0

150

Consumption and Residual

820

820

880

880

0

820

Ending Stocks

10

6

30

16

0

26

Total Distribution

956

957

1010

1046

0

1016