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Maize surplus knocking prices

Johannesburg, June 10, 2010

South African farmers may cut investment in maize production if the country fails to secure export markets for a surplus of grain that is depressing prices, an industry official said.

South Africa, the continent's largest producer of maize, this year expects to harvest the largest crop since the record 14.42 million tonnes crop reaped in the 1981/82 season, which is seen affecting maize prices in Africa's biggest economy.

Kobus Laubscher, chief executive officer of farmers' group Grain SA, said the lower prices and higher input costs would hurt farmers' ability to service debts and re-invest.

"The current price is about 1,050 rand ($135.4) per tonne and it's falling, but the cost of production can be as high as 1,200-1,500 rand per tonne, that gives you an idea of the shortfall farmers are facing," Laubscher told Reuters.   

"If we do not prevent the further decline in producer prices, it might impact on our future capacity to produce enough because farmers will put capital in other production possibilities."    

The government's Crop Estimates Committee last month raised its forecast for its largest maize crop in nearly three decades to 13.317 million tonnes but said heavy rains had prevented a still higher estimate.

South Africa consumes 8-9 million tonnes of the staple each year. Traders have said forecasts that it will export 2.5-4 million tonnes of maize may be revised due to low demand in Southern Africa after some countries said their 2009/10 season output will be high as well.

Most southern African countries, including Malawi and Zambia, are expected to record bumper maize harvests this year and say they plan to export the surplus grain, limiting the scope of export markets for South Africa.

The government said in April it had secured foreign markets to sell the surplus maize to safeguard the maize prices for local farmers.

"We are in continuance talks with government to explore export markets ... but the international markets are also under pressure because of high supply and low demand, we will have to compete with other countries," Laubscher said.

Grain SA said on Tuesday it planned to apply for exemption to the country's competition authority to allow farmers to reserve the surplus grain for export. The current legislation does not allow for the establishment of an export pool for the grain.

"We are convinced that the export pool could be seen as a possible remedy to stabilise the market and to bring relief on the price side," Laubscher said. -Reuters




Tags: Maize | South Africa | surplus |

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