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High corn prices unsustainable, Senwes says

Need for prices to normalise through production.

South African farmers need to boost output of white corn to help lower the price of the staple to more sustainable levels after a drought, according to agribusiness Senwes.

While prices of the grain, also known as maize, may stay high for now even if it rains, they’re likely to fall later, group chief executive Francois Strydom said in an interview. Prices reached a record in January.

“It’s not good for the farmer,” he said in an interview at the company’s office in Klerksdorp, South Africa. “In the short term, he likes it, but long term the consumer will move away from his product. It’s just too expensive. We cannot sustain the prices at this level, we need to normalise the prices through production.” 

The price of South African white corn has more than doubled since the start of 2015 as drought caused by the global El Nino weather pattern led to the least rainfall in the country since 1904. The rand also fell, raising local-currency prices for imports.

South Africa may need to import 3.8 million metric tons of yellow and white corn this year to bolster domestic supplies, according to Grain SA, the biggest growers’ lobby. The country imported 1.96 million tons in the marketing year ended April 29, the Pretoria-based South African Grain Information Service said May 4. That made the nation a net importer for the first time since 2008.

White corn rose for a fourth day in Johannesburg, adding 0.9% to R5 083 ($322) a ton by midday in Johannesburg, the highest since March 2.

© 2016 Bloomberg

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