Maize prices to drop as farmer

Maize prices to drop as farmers expect record crops

But will consumers see lower maize prices on supermarket shelves in coming months?

Maize prices to drop as farmer

South African farmers are expecting a bumper summer grain and oilseed harvest which could prove to hit a record high in 2020/21 and lead to lower maize prices. But as is often the case with food prices a decline in cost in the supply chain rarely translates to lower prices on the shelves.

Agricultural Business Chamber of South Africa chief economist Wandile Sihlobo said  in his Agricultural Economics Today blog that the 2021 production season promised to yield another good harvest for the country’s farmers.

Sihlobo said data released by the Crop Estimates Committee (CEC) revealed that the country’s 2020/21 summer grain and oil seed production could grow by 5% to 18,5 million tonnes.

“While this is still the first production estimate for this season, with eight more to follow, this could be the largest on record if it materialises,” Sihlobo said.

Wandile Sihlobo – chief economist, Agricultural Business Chamber of South Africa

Maize prices could drop in coming months

Sihlobo said the crop increases were expected across all summer grains and oilseeds, except sunflower seed, the latter which was expected to fall by 10% year on year, mainly because of a decline in planting. The impact on maize prices may be seen in the coming marketing season.

“Farmers switched some typical sunflower seed hectares to maize because of favourable prices. The overall expected increase in summer grain and oilseed production is due to an expansion in area planting and expected higher yields. The weather conditions have generally been favourable since the onset of the season and thus supportive of the production conditions and subsequently the yields,” he said.

Farmers 2021 crops by numbers 

  • Maize is forecast at 15,8 million tonnes, up by 4%
  • Soybeans are forecast to yield 1,6 million tonnes, representing a hike of 30%
  • Sunflower seeds are expected to record 712 940 tonnes, which is a decline of down 10%. 

Sihlobo said as a result of the current production data SA would remain a net exported of maize in the 2021/22 marketing year, which starts in May.

“This could also add downward pressure on maize prices, especially as we expect a good harvest in South Africa and across the Southern Africa region, which was a major importer in the previous year. Over the past few months, the weaker domestic currency, growing demand for South Africa’s maize in the Southern Africa region and the Far East, coupled with generally higher global grain prices, provided support to the domestic maize prices,” he said.

“But we think the domestic crop conditions will matter more for price movements in the future than has been the case over the past few months.”

He added that soybean price drivers were s similar to maize. However, an increase in the soybean harvest would still not impact prices much because South Africa imports around half a million tonnes of soybean meal. 

“The country will most likely continue being dependent on imports, even at these harvest levels, to meet the growing demand for soybean meal by the poultry sector. Global soybean market dynamics will continue to influence local prices,” he said.

However, despite lower international maize prices, the best consumers can probably hope for is that maize prices will at least not go up too much in the near future. Hopefully, some food manufacturers and supermarkets will consider passing on the lower prices to customers, even if it’s only by running a few specials.