South Africa is traditionally a net exporter of maize. However the ongoing drought has led to some significant changes – South Africa is now a net importer of maize for the first time since the 2007/08 season. In fact, South Africa’s total maize imports for the 2015/16 marketing year, ended 30 April 2016, reached the highest level since the 1991/92 marketing year, reported at 1.96 million tons[1]. Of this total, 95% is yellow maize and 5% is white maize. Nonetheless, this came as no surprise as 2014/15 maize production was down by 30% from the previous season, at 9.9 million tons. Given the annual average consumption of 10.5 million tons, imports were required to offset the domestic shortfall of at least 600 000 tons[2].

In anticipation of logistical bottlenecks in the subsequent 2016/17 season, market players imported 1.96 million tons instead of the 1.8 million initially anticipated. They key suppliers of yellow maize were Argentina, Brazil, Paraguay and Ukraine. White maize imports came from Mexico, Zambia and the United States (figure 1 and 2).

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White maize – the 2015/16 total white maize imports were 96 932 tons (figure 1). Of this total, 53% came from Mexico, followed by the US at 25% and Zambia with a share of 22%.  South Africa did not have immediate need of white maize imports as the country had large opening stocks of over 1.2 million tons at the start of the season. This followed a bumper crop in the 2014/15 season, where South Africa’s white maize production reached 7.7 million tons. With the current imports of 96 932 tons already factored in, South Africa could have a carry-over stock of close to a million tons, which will form opening stocks in the 2016/17 marketing year (Grain SA, 2016).

Yellow maize – the 2015/16 total yellow maize imports reached 1.86 million tons (figure 2). Of this total, 60% came from Argentina, 27% from Brazil, 11% from Paraguay and 1% from Ukraine. South Africa had relatively lower opening stocks of 791 000 tons of yellow maize at the start of the season. This was due to higher export volumes to the world market in 2014/15 marketing season, reaching 1.4 million tons. At the start of the 2015/16 marketing season, yellow maize opening stocks were estimated at 791 000 tons. With total yellow imports of 1.86 million tons this year, the country could have opening stocks of roughly just under 900 000 tons in the 2016/17 marketing season (Grain SA, 2016).

Import trend – the imports were fairly spread out throughout the season and there were no reports of logistical challenges at the ports/harbours. It is interesting to note that the record levels of imports for the season were recorded in February and March 2016 (highlighted in figure 3). To some extent, this concurs with the view that buyers are spreading out their purchases in anticipation of possible logistical challenges in 2016/17 season.

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OUTLOOK

Given that South Africa’s 2015/16 total maize production estimate is at 7.05 million tons, we could possibly see total maize imports reaching levels as high as 3.8 million tons. Industry estimates generally vary between 3.6 and 3.8 million tons (Grain SA, 2016; SASDE, 2016).

To be specific, white maize import estimates vary between 1.1 and 1.2 million tons. At the same time, yellow maize import estimates vary between 2.4 and 2.7 million tons. These imports will be spread throughout the year until 30 April 2017.

Roughly 1.2 million tons of maize was imported in a period of four months. South African ports were quite active and managed to handle this volume without any reports of logistical bottlenecks. Against this background, if we assume that maize imports continue at the current pace for the rest of the season, the country will be able to import 4.8 million tons of maize. This is a million tons higher than our expected imports of 3.8 million tons.  In this sense, we expect that there will not be logistical challenges, or at worst, minimal, in the event that our assumption does not hold[1].

Costs of imports – Working with an average seasonal maize import parity price of R3 400 per ton[2], we estimate that the 2015/16 maize imports to be valued at approximately R6.6 billion. On the current import parity price of R3 580 per ton, 3.8 million tons of maize imports could cost South Africa approximately R13.3 billion.

CONCLUDING REMARKS

Should South Africa prepare itself for worse times?  – No. The country can weather the storm of turbulent times ahead for two reasons. Firstly, on the basis of recorded data in the first four months of 2016, expected imports are going to be below the ports’ grain handling capacity. Secondly, historical maize import trends show that 2016/17 season is below the 1991/92 record seasonal imports of 4 million tons, the worst over 5 and a half decades. Despite the 2016/17 marketing season being expected to be the second worst season in recorded history, it will nonetheless not cause future significant price shifts as the market has already priced in weather related risks and the production declines.  We, however, expect food prices to remain at higher levels, at least until mid-2017, assuming that there will be favourable weather conditions in the 2016/17 production year for crops and livestock. Much of the future market responses will then unfold as the season progresses.

[1] We take into consideration on-going wheat imports, which were recorded at 678 953 tons over the considered period. This represents 34% of the annual wheat requirement.
[2] Average import parity price is captured between the period 1st May 2015 to 30th April 2016