An Overview of the Maize Surplus Situation

1. An Overview of the Maize Surplus Situation Department of Agriculture, Forestry and Fisheries Prepared by Billy Morokolo Director: marketing

2. Genesis of the maize surplus Continuous good production outcomes over the past 3 years have led to the accumulation of carry-over maize stocks in the economy leading to the surplus, In addition to favourable weather conditions, the varieties of maize planted produced higher yields per hectare than before, Globally, maize carry-over stocks are also at the highest level leading to depressed world prices for maize as reflected at the Chicago Board on Trade (CBOT), The surplus production has consequently led to an erosion of local producer prices to import parity position,

3. Genesis of the maize surplus……………. Favourable weather conditions in Southern Africa have further boosted production particularly in Zambia and Malawi where record harvests were achieved, South Africa used to be a traditional exporter of maize to Southern Africa and improved production in that part of the continent has unfortunately displaced our exports into that part of the continent, In addition, the African market is reluctant to buy our maize due to its genetic modification nature, Normal exports have therefore been incapable of achieving market balance, The ensuing lower prices have resulted in some farmers not been able to produce maize profitably,

4. Progress to date The department in collaboration explored alternative markets for the surplus maize into China, Egypt and Tunisia, The targeted unfortunately not did commit to taking our maize, DAFF, in collaboration with the NAMC, worked with the industry to assess the feasibility of establishing an export pool for the surplus maize as a measure to stabilize prices, Collective view from the team investigating the viability of an export pool was that it would benefit producers in the short term and not long term as anticipated,

5. Progress to date……….. Once a pool is established, prices would go up and encourage increased production, thus stimulating a cyclical trend, Once local prices increase closer to export parity in response to the established pool, our maize will become less competitive in the export markets, That the pool will create an artificially higher price above the free market price, That the industry needs to develop a long term strategy rather than dealing with challenges in an ad hoc manner,

6. Recommendations by the team: 1. Local market development and value adding Noting that more yellow maize is demanded than white maize, the team recommended an aggressive development of yellow maize and change historical perception of farmers against yellow maize. Explore localized markets and bio-fuels and animal feed, particularly as a strategy to produce more chickens locally and reduce imports, Support increased production of wheat, soya bean and sunflower

7. Recommendations by the team:2. Export market development African countries use white maize (WM) and we’ve exported when there were regional shortages (“demand-pull”). Now all Africa countries have good crops due to improved productivity and the WM demand is down. Deep sea exports to Korea, Japan, Taiwan etc demand yellow maize (YM) and we should match what they want (“supply-push”). Understanding the deep-sea export market is necessary and to be able to move large quantities and a consistent supply. A long-term positioning as a net exporter of YM is now essential. An export agency or trade desk must be considered.

8. General recommendations That the current surplus maize situation will create an avenue to open debate on the use of maize for biofuel, That South Africa should focus on rebalancing the production of yellow versus white maize, That a strategic approach need to be considered to have a long term view about the industry value chain, That the surplus maize could be used as feedstock to expand the maize based downstream industries, END