February 16, 2004

 

 

South African Corn Imports Seen At 1.1 Million MT

 

South Africa's, current, 2003 corn and wheat crops have both been severely damaged by drought. This was on top of severe cutbacks in the area planted mainly due to poor price prospects. The total area planted to corn dropped from 3.65 million hectares in 2002 to 2.95 million hectares in 2003, the press release said. The 2003 crop is currently only expected to yield about 6.6 million tons, after 9.7 million tons were produced in 2002. As a result 2004 import needs are expected to jump to about 1.1 million tons compared to the 200,000 tons estimate for the current season.

 

The demand is for yellow corn and will mainly come from Argentina, because it is able to comply with South Africa's GMO requirements. For the 2004 crop to be planted from October this year, we see the area planted increase again to about 3.5 million hectares allowing a 9 million tons plus crop if weather conditions are favorable. Because of the run down in stocks we still foresee a healthy import demand in 2005.

 

South Africa's 2003 wheat crop is currently estimated at 1.4 million tons after 2.4 million tons were produced in 2002, the press release said. The decrease is mainly due to a 193,000 hectares cutback in area planted, and a drop in average yield. South Africa took advantage of the market and imported 870,000 tons in 2002/03, which created a 900,000 tons carry over. The big carry over helped cut back 2003/04 import needs to 1.2 million tons. About 300,000 tons is reexported annually. For the 2004 crop to be planted from May this year we foresee a return to a bigger area planted allowing for a much better crop. Imports will still stay high in 2005.

 

Production

 

The National Crop Estimates Committee released its preliminary commercial area planted estimate for summer crops for the 2003/04 season on Jan. 20, 2004. The area planted to corn is estimated at 2.6 million hectares, nearly 20% down on the 3.2 million hectares planted in 2002. This is the lowest area planted since 1939. Farmer's initial intention was to cut back the area by 12% for economic reasons; the additional 8% cutback was due to the

November/December drought.

 

The ratio of white to yellow corn plantings is 65:35. The area planted to white corn is 1.67 million hectares, down 25.4% from the previous season's 2.23 million hectares, while the yellow corn plantings are estimated at 892,000 hectares, down 6.4% from 952,500 hectares last year. It is unlikely that the area planted increased much after the mid-January estimate as the summer solstice was on Dec. 21 and one would prefer not to plant much after mid summer.

 

Later plantings were probably for fodder, the press release said. In the eastern areas the first frost could be expected by April 15 limiting the length of the growing season.

 

Forecasting production is even more difficult as weather conditions are, and have been, very poor. Soil moisture was low after a long, dry, winter and early spring rains also disappointed.

 

November and December rainfall was under normal while good rains only arrived in mid-January. Rainfall has also been very patchy while temperatures have been above normal.

 

Unfortunately South Africa's summer grain growing areas are not homogenous but have different soils and microclimate areas, making forecasting difficult, the press release said. To forecast the 2003 crop we have to look at what happened over the past five seasons. The following table contains the average for the past five seasons after commercial crop estimates were adjusted based on deliveries and farm retentions.

 

The 2003 area planted could have produced a 7.7 million ton crop at average yields, which means that the area cutback is the reason for a 1.3 million ton or 14.5% drop in expected production. The lower yield expected caused another 1.3 million ton or 14.5% reduction in the expected crop for a total decrease of 2.6 million ton or 29% on the five year average. This forecast is based on normal weather for the rest of the season.

 

For the 2004 crop, to be planted from October this year, it can be assumed that farmers will return to their previous planting patterns. The main reason for this assumption is that stocks will be low after the 2004/05 marketing year, and farmers will be encouraged by the higher prices. As usual, we base our predictions on normal weather.

 

Exports

 

For the nine months between May 2003 and the end of January 2004, South Africa exported 800,000 tons of white and 97,000 tons of yellow corn, for a total of 897,000 tons, or about 100,000 tons per month. Exports to Customs Union Partners, the so-called BLNS countries amounted to about 329,000 tons or 36,500 tons per month. Normal BLNS sales are estimated to be about 40,000 tons per month. Total My 2003/04 sales are expected to reach about 1.2 million tons.

 

In addition to the BLNS sales, some other regional sales are also foreseen for 2004 pushing the 2004/05 seasonal total to about one million tons.

 

Imports

 

A severe shortage of yellow corn is developing in Southern Africa. Since May 2003 South Africa has imported about 59,000 tons of yellow corn but this pace is expected to jump to about 50,000 per month over the next few months for a My 2003/04 total of about 200,000 tons, the press release said. The crunch is coming in the new MY 2004/05 season, when yellow corn import needs could jump to about 1.1 million tons, or nearly 100,000 tons per month. The model for the 2004 crop indicates that the shortage may continue well into 2005/06. Coupled to the anticipated monthly need of 100,000 tons of wheat, and the corn and wheat exports, pressure on the transport sector is increasing.

 

Stocks

 

The official marketing year runs from May to April, but there has been a recent tendency for early deliveries to increase. It amounted to 120,000 tons in March and April 2001 but increased to about 740,000 tons 2002 and 760,000 tons in 2003. This was mainly due to irrigated production and early seasons. Including the new seasons' deliveries in the carry over stocks creates confusion as some analysts were adding the whole new season crop estimate and thus double counting the early deliveries. We have adjusted the series over time while awaiting a change to the official marketing year.

 

Policy

 

The import tariff on corn is only R16.50/ton, or $2.35/ton at R7 to the U.S. Dollar and trade is free. The Government is considering implementing a strategic grain reserve to curb excessive price movements, but at the moment the strong Rand and weak Dollar are keeping prices in check.

 

Local prices are set at Randfontein from where railage to Durban is R135/ton and about R185/ton to the Cape. Corn can thus be imported cheaper in the coastal areas. South Africa allows the production of genetically modified crops under controlled conditions.

 

Only certain events are registered for use on corn. They are Bt11, Bt 176, Cry1F, Mon810, Mon810+Nk603, MonGA21, Nk603, T25. Imports are thus restricted to corn only including these events, effectively barring U.S. corn from the market.

 

Production

 

According to the sixth production estimate, the 2003 wheat crop is estimated at 1.428 million tons, compared to the 2.39 million tons produced in 2002. The main reason for the decline is a 20.5% cutback in area planted, due to dry conditions at planting from May 2003, especially in the Free State. The November/December 2003 drought further damaged the crop.

 

The 2004 crop, to be planted from May this year, is facing a similar predicament. All indications are that soil moisture in the Free State, the main spring wheat area, will again be low after the current dry, hot summer. On the other hand there is a big area lying fallow, which has not been planted to summer or winter crops, and farmers may decide to increase the area planted to wheat again. The following table highlights the recent production history and our 2004 forecast.

 

Consumption

 

Commercial consumption amounted to 2.606 million tons in 2001/02 and 2.626 million tons in 2002/03. Current indications are that the consumption rate has picked up since October 2003 and consumption for the year is estimated at 2.645 million tons, which could increase to 2.655 million tons in 2004/05 if current high corn prices continue.

 

Trade

 

South Africa acts as a conduit for wheat trade in the region, but has recently developed as a net importer of wheat.

 

The 2004 import demand will be especially high as a result of the smaller crop. Since the beginning of October up to Jan. 31 about 392,000 tons were imported at about 98,000 tons per month. To move the anticipated local and regional import demand of about 1,200,000 tons for the season, the rate will have to be pushed up to more than 100,000 tons per month. Currently the U.S. share of the trade is about 66% and this could continue through the season leading to U.S. sales reaching 600,000 to 800,000 tons. Fortunately there is no import duty on wheat.

 

Source: USDA