While most of the world sits on a generous corn stockpile, the situation for South Africa is vastly different. The country faces one of the worst corn harvests ever on the back of a devastating, historic drought.
Even though South Africa produces only 12 million tonnes of corn on average, it is usually a net exporter. It is also Africa’s largest corn producer and is relied upon by neighboring Sub-Saharan nations to bolster their own corn supplies.
For the second year in a row, the southern African nation will become a net importer of corn. Ending stocks are predicted to shrink nearly 70 percent on the year, and South Africa may import one of its largest volumes of corn in recent memory.
The situation is unique for South Africa because just more than half of its corn crop is the white variety, which is not widely produced around the world and so is more difficult to replace. But for the people of South Africa, white corn is the all-important ingredient in their main staple – a starchy, cake-like substance called “pap.”
The white corn crop has taken a bigger hit than yellow with only 3.1 million tonnes expected to be reaped this year, half the volume of two years ago and easily the lowest white corn tonnage in at least 20 years.
Yellow corn, which is used for animal feed, has fared slightly better than white, though it too has been reduced by nearly 30 percent from recent average. Total corn crop expectations range from 6.5 million to 7.1 million tonnes, but with much of the grain still in the ground, these estimates remain temporary, and the import volume is still uncertain.
The Recovery Plan
Despite the enormous supply disruption, South Africa’s agriculture minister is confident that the country will be able to import enough corn this year to meet the consumption needs of both humans and animals. Yellow corn will most likely be sourced from South America, a straight shot across the Southern Atlantic Ocean. Abundant South American supply and relatively low export prices should help facilitate the smooth influx of yellow corn to South Africa, but white corn will come from farther away and possibly at a much higher cost.
Mexico and the United States are highly likely to restock South Africa with white corn, but Mexico could be more expensive. Both the weaker peso and increased demand from drought-suffering Central American nations have driven up local prices.
“With our calculated carry over stock of 1.1 million tons at the end of the marketing year 30th April 2016 and an expected crop of 3.2 million tons, a usage of 410,000 tons a month [means] we have to start import from October 2016. We also need a minimum pipeline supply of 6 weeks stock,” he said.
By October, the 2017-harvested crop will already be going into the ground, hopefully under better weather conditions for South Africa. Citing record high local corn prices, particularly for white, USDA’s Pretoria attaché projected that under average weather assumptions, 2016-17 corn planted area could exceed the five-year average by 10 percent.
So if South Africa can pull out of the drought toward the end of this year, and all other things being equal, the country could achieve comfortable supply levels by mid-2017 and once again become a net exporter.
Source: Reuters
