March 10, 2017 / 5:46 PM / in 3 years

South Africa's low maize prices could put farmers under pressure

BOTHAVILLE, South Africa, March 10 (Reuters) - A big maize crop following recent rains has pulled South African maize prices to two-year lows, eroding farmers’ ability to pay for inputs for the new season, Grain SA said on Friday.

The government’s Crop Estimates Committee (CEC) said last month that Africa’s top grain producer will probably harvest 13.918 million tonnes of maize in 2017, 79 percent more than last year as rain boosted production.

The previous year’s crop was hurt by a scorching drought triggered by an El Nino weather pattern, pushing up food prices and fuelling inflation, before rains started pounding South Africa late last year.

This year South Africa is likely to export to neighbouring Zimbabwe, which was already relying on maize imports and food aid to meet domestic demand and is now prone to an outbreak of fall armyworm, an invasive South American species that attacks maize.

Industry officials said low grain prices mean farmers will struggle to buy seeds, fertilizer and chemicals, whose prices were high last season because the rand currency was weaker.

“When we drop to 2,000 rand ($150) a tonne level, that’s not profitable at all to farmers,” said Jannie de Villiers, chief executive of Grain SA, which represents grain producers.

“If they sell the maize that they are going to harvest in May, June, July, they won’t be able to pay off their debts,” he told Reuters, referring to farmers’ bank loans. De Villiers was speaking on the sidelines of an annual agricultural trade fair in the maize belt west of Johannesburg.

The white maize contract ending in May fell to more than a two year low on Friday after it closed 24 percent down to 1,950 rand.

De Villiers said the higher prices could put further strain on farmers who are still recovering from a severe drought, triggered by an El Nino weather pattern.

“This is going to be an extremely difficult year as well. Last year with the drought we had zero tonnages and very high prices, this year we have lots of tonnes but we don’t have the price,” he said.

Malawi’s maize production may also rise in 2017 by a third to 3.2 million tonnes despite damage inflicted by the fall armywormn.

A survey taken at the Bothaville conference by more than 200 farmers showed that as many as 42 percent had not hedged any of their crop prices before planting, officials said.

The chief economist at the agricultural business chamber, Wandile Sihlobo, said farmers who had not hedged their maize prices before the harvest would be squeezed.

Sihlobo was hopeful that the high maize volume and potential exports could compensate for the low prices that farmers are expected to get. ($1 = 13.1800 rand) (Editing by James Macharia/Ruth Pitchford)

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