Export snags leave South Africa wallowing in corn

Rail hiccups, the rejection of an export pool, and currency movements look set to leave South Africa with an "oversupply" of corn, even while much of the world clamours for the grain.

Even allowing for yield losses to heavy rains, which prompted the United Nations food agency to warn of flood risks two weeks ago, South Africa looks set for a corn crop of 12.0m tonnes this year, a fourth successive bumper crop, US Department of Agriculture attaches in Johannesburg said.

With carryover stocks of some 5m tonnes – enough to last the country nearly six months – South Africa would appear to leave considerable scope for exports at a time when high global demand has sent Chicago corn futures to a two-year high.

The rest of world has, on average, enough corn to last it seven weeks.

"With one of the largest corn crops ever produced in the country, South Africa has approximately 4m tonnes of corn available for export in the 2010-11 marketing year," the attaches said.

Export disappointment

However, the attaches said that even the USDA's current estimate of exports of 2.5m tonnes for 2010-11 looked too high.

"With South Africa's current rail infrastructure constraints, the relative strength of the rand, and the rejection of a grain export pool to export surplus corn… South Africa will export only about 1.7m tonnes of corn in 2010-11," the attaches said, saying the country faced "overproduction" of the grain and "oversupply".

The result will be of corn inventories staying high – and depressed prices which have allowed South Africans low-priced white corn meal at a time when bread bills have been raised by strong global wheat costs.

South Africa, which imported little wheat in the 1970s, will buy in a record 1.6m tonnes in 2010-11, reflecting a long-term switch away from the grain over the last 20 years to more profitable crops.

Farmers squeezed

Farmers claim that the inability to realise export opportunities is damaging their ability to offset higher costs of inputs such as fuel and fertilizer, which have risen worldwide.

However, antitrust officials last month rejected a proposal by growers' association Grain SA for a pool to sell surplus corn, saying it would have inflated the price of food corn and kept costs of products such as animal feed "artificially high".

Export hopes are being further damaged by limitations on the country's rail operations, which are prioritising coal for transport on a network reduced by underinvestment.

And the growth of a large proportion of white corn, a staple in Africa, has also proven a setback, with many of the markets that South Africa typically sells too enjoying bumper harvests themselves.

South Africa's corn exports topped 4.2m tonnes in 1993, in line with Argentina's, and well above those of Brazil, which had yet to grow into a force in world corn trade.

(Source: http://www.agrimoney.com/news/export-snags-leave-south-africa-wallowing-in-corn--2840.html)