BUSINESS DAY TV: Some relief, at last, for stretched consumers
Jannie de Villiers is CEO of Grain SA.
BUSINESS DAY TV: Industry group Grain SA sees 2017 recording a maize surplus after last year’s drought-induced deficit and its survey shows farmers have planted 2.4-million hectares this season. That’s an 18% increase over 2016.
Grain SA’s CEO Jannie de Villiers joins us now in the News Leader studio to take a look at the turnaround we’re seeing and some of the broader implications.
Jannie ... so how encouraged are you by this 2.4-million hectares this season because you project a surplus coming into the market, but some might say isn’t it way too premature to be calling a surplus given that things rely on one very erratic factor, that being the weather?
JANNIE DE VILLIERS: I don’t think we can call it a surplus yet. If we look at the current circumstances, before Christmas we saw all these dust storms and we had a lot of wind damage on the little maize plants and we were very worried, but in the first week of January we saw some good rains in the west. Although our eastern parts look very good ... they received rains on time and they’ve planted on time, they were only about two weeks late, but the west ... it’s still very early days to call it a surplus. If we look at the 2.4-million hectares, the farmers are going to plant that and if we’ve got 2.4-million hectares and we look at the forecast at the moment, it seems like we might be able to get into a surplus situation.
BDTV: Domestic consumption sits at what, 10.5-million tonnes right now. If things go according to plan and all things being equal how much of a potential surplus could we be looking at?
JDV: It’s very difficult ... if the maize plants are only a few inches high it’s very difficult to estimate what the crops are going to be, but we will probably be over 10.5-million (tonnes). Say in a normal year you can get to 11-million tonnes, if it’s a very good year depending on the rainfalls in February and March, we could probably get higher than that. So that will give us a good surplus, and for the farmers who didn’t have a good crop last year, that is very good news. And for the country as a whole it’s also positive news.
BDTV: Good news for those who have managed to stay in business. Let’s take a look at the extent to which the industry landscape has shifted because the drought has pushed some commercial farmers out of business or forced them to sell their farms, and that takes a lot of potential production out of the system as well.
JDV: I don’t think we’ve lost too many hectares. What we’ve heard is that there are quite a few farms on the market but we’ve also heard that people are renting out their farms and there were some neighbours coming in to help those farmers where they couldn’t get production loans. There are quite a few farmers in the North West province we’ve heard of that didn’t get any production loans for this season. So there were some exceptional circumstances, but in general I don’t think we lost a lot of hectares because of that situation.
The other thing that also comes with a surplus is obviously lower prices for the farmers, and to get out of this problem of having three difficult years in a row and especially the North West province, this season is going to help if things continue this way. But there are farmers who are very optimistic about the current circumstances, things look excellent. The late plantings in the North West province might also run into a little bit of frost problems late April, early May as the plants won’t be physiologically ripe and they might get damaged by frost.
BDTV: Let’s take a look at your forecasts that are out there as far as prices are concerned, because while you’ve got supply continuing on this path, demand is also starting to shift. Demand for white maize is expected to flatten but you’ve got demand for yellow maize, primarily used for animal feed expected to tick higher.
JDV: Yes, the white maize is the bottom of our food basket and I don’t think we see growth there. But the yellow maize, and you’ve just discussed the issue about the chicken industry having a battle at the moment, but people are moving away from white maize and moving into value-added products in the dairy, poultry and red meat industry and those guys need a lot more grains to produce those things. So for the feed industry we are very positive that the growth will continue. But there are a lot of circumstances we have to look at. Even if there is a surplus of white maize we can utilise that for animal feed as well so it’s not a big issue.
BDTV: What’s your outlook on the pricing front?
JDV: Yes, if we look internationally, there is plenty of stock available and the prices will probably move sideways as it is at the moment, unless there is some natural drought somewhere in one of the big exporting countries. So our prices will probably move from current levels more to the export parity levels.
BDTV: Okay, to what extent do you see this coming to bear on food price inflation we’ve seen in SA and overall that translating to CPI (consumer price index)?
JDV: The education that the consumers received last year, that if there is a drought they’re going to see high food prices so yes, hopefully we will see a decrease. When you look at the food basket it’s about 16%-17% of the total inflation but in the food basket itself it is about 73% grain and grain-based products, so it will have a huge impact on food inflation. We will see decreases and it depends what’s going on in the rest of the value chain, but from the primary sector there will definitely be some relief coming through.
BDTV: Let’s talk on a regional basis here, because regional food security has come under pressure. To what extent does SA start to feed into that export potential?
JDV: What has happened is there are quite a few South Africans who went to Zambia and that country got their act together. They have started to produce surpluses ... I’m not talking about last year’s drought. But in general terms, Zambia started producing surpluses and they export to places like Zimbabwe and Malawi. Those were traditionally South African markets.
So what has happened is that the South African market has gone deep sea. We went to the East, to Taiwan, Japan and Korea. Those countries bought a lot of our maize in the past and we assume that they will come back to SA to buy again because our maize is naturally dried, it’s harder, it gets a better yield in the processing side of things so we are not exporting as much into Africa any longer, we are going deep sea and this is where we’ve developed our markets for the moment because Africa must look after itself....