Maize futures set a fresh record high in South Africa to become one of the strongest performers among commodities over 2015 – although in a region where high prices have raised concerns over food security.
Futures in white maize, a food staple in southern Africa, soared 3.6% to settle at 4,661 rand in Johannesburg for January delivery, a fresh all-time closing high for a spot contract.
The increase took the gain in prices over 2015, on a spot contract basis, to 120% – in the main since mid-November, the start of the ideal period for sowings, which have been severely hampered by drought.
And, with even the sub-optimal planting window now closing, and many crops still not seeded, a poor harvest looks a certainty even if better rains are now received.
The better-traded March contract also ended at 4,661 rand a tonne, a gained of 2.6% on the day.
‘Significant dryness continues’
In fact, the forecast remains bleak, with weather service MDA saying that “significant dryness continues in about two-thirds of the corn belt”, which in South Africa is centred around north western areas such as Guateng and northern Free State.
“No notable improvements are expected through the next 10 days” in the worst-affected areas of the Corn Belt, the central and south-western areas, MDA added.
“Moisture will also decline again in northern areas.”
The drought has been blamed on El Nino, which has a history of causing dryness in southern Africa.
The rise in prices also contrasts with a dismal performance by futures of most commodities over 2015, during which the CRB index has tumbled 24%.
Prices have been undermined broadly by factors including weakened Chinese demand, ample supplies and a stronger dollar, which undermines the affordability of dollar-denominated assets such as many raw materials.
In the agricultural commodities complex, futures in cotton, sugar and palm oil are showing price rises for 2015, but by nowhere near the extent of Johannesburg-traded maize.
South Africa’s plight has raised alarm bells over food security in the region, with the country typically an exporter to neighbouring countries, and responsible for more than 40% of output in the Southern African Development Community, according to industry group Grain SA.
The United Nations Food and Agriculture Organization last week warmed that the number of people in southern Africa deemed “vulnerable” in food security terms had soared to 6.3m, from 3.2m in 2014.
White vs yellow
The issue of food security is highlighted by the outperformance of white maize, the food staple, compared with that of yellow maize, a livestock feed.
Yellow maize has also gained strongly this year in Johannesburg, but by a more modest 82% to close on Thursday at 3,897 rand a tonne, with gains limited by the greater ability to import alternative supplies from corn exporters such as Brazil or the US.
White maize is a more limited export commodity, with Mexico being one of the few notable suppliers.
The premium of March white maize futures to the yellow maize contract has soared to 984 rand a tonne as of Thursday, from 188 rand at the end of last month.
The weakness of the rand, down by more than one-third this year against the dollar, has also contributed to the rally in futures, lifting the value in local terms of assets whose prices are linked to the dollar.
(Source – http://www.agrimoney.com/news/south-africa-maize-futures-take-2015-gains-to-120percent–9144.html)