The next few weeks will be critical in determining what will happen to maize prices around the world as farmers in the US go into their planting season.

Cold and wet weather in parts of the US boosted soil moisture but delayed pre-planting fieldwork. The US agriculture department’s latest progress report said only 34% of maize planting had taken place across 18 maize-producing states by Sunday, compared with the 61% in 2016.

Because the US is a dominant producer, the size of its harvest affects world prices. US farmers harvested a bumper crop in 2015 and prices fell.

In SA, maize prices have fallen from record highs in expectation of a bumper crop. Favourable weather allowed farmers to raise production after a severe drought caused by the 2015 El Niño weather pattern.

SA’s crop estimates committee said the commercial crop would be 84% bigger than the 2016 crop. The harvest, at 14.5-million tonnes, would be the second-largest since 1981.

During the height of the drought, the JSE’s agricultural commodities market reached new peaks as traders sought hedging strategies. The value of futures traded on the JSE in 2015 was close to R731bn. At the end of 2016, it was R940.7bn.

Futures trader Andrew Fletcher said SA generally traded grains between import and export parity.

With the drought, not enough was produced locally, so the country imported just more than 3-million tonnes.

In May 2015, the spot price of white maize was R2,760 a tonne, but shot up to R5,175 in January 2016. The spot price for yellow maize rose from R2,390 a tonne to R4,130.

JSE commodities manager Raphael Karuaihe said what happened to the maize spot price was basic economics: a supply shortage led to higher demand and higher prices.

Fletcher said spot and futures prices for grain in the local market had already discounted the bumper crop. On Wednesday, the spot price for white maize was R1,895 a tonne.

Traders are now focusing on the US planting season.

Fletcher said if world prices rose it could have a spillover effect on local prices. "The US is a big player in global maize production. If anything goes wrong there, it could have an big effect on world prices."

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