Markets

South Africa set to plant another big corn crop

Peter McMeekin - Grain Brokers Australia, November 14, 2023

Planting summer crops in South Africa’s Mpumalanga province this month. Photo: Wandile Sihlobo

SOUTH Africa appears set for another bumper corn crop in 2023-24, with the planted area expected to be similar to last year and the South African Weather Service (SAWS) confident of a wetter-than-usual summer in the north-eastern provinces of the country where most of the corn is grown.

The African nation is the continent’s biggest producer of corn and, based on the current 2023-24 production projection, will be the eighth-largest producer globally, a position it also held in the 2022-23 season when it produced its second-biggest crop on record.

The latest seasonal outlook from SAWS, which looks five months ahead, still projects a wet summer for the northeast of the country and a dry one for the central and western regions. However, the optimistic outlook is clouded by the El Niño weather phenomenon, which typically brings drier conditions to South Africa, particularly over eastern parts of the country.

According to SAWS, much of the summer grainbelt extending into the northern reaches of Free State and parts of North West province, the largest and second-largest corn production provinces, respectively, are seen as relatively wet in the early summer months, with conditions becoming progressively drier in the New Year. The eastern sections of the grainbelt in the province of Mpumalanga are expected to remain wet until March next year. These three provinces typically account for around 90 percent of South Africa’s corn area.

South Africa’s Crop Estimates Committee (CEC) released its first planting intentions estimate on October 26, with farmers expected to plant 4.47 million hectares (Mha) of summer grains and oilseeds, a 2-percent increase on last season’s area. Of this, 2.64Mha is earmarked for commercial corn production, also up 2pc on the previous year, and 4pc higher than the 10-year average of 2.53Mha.

Mix of white and yellow

The commercial corn area comprises 1.58Mha of white corn and 1.05Mha of yellow corn. An additional 300,000 hectares of corn, mainly the white variety, is planted by subsistence farmers and used on farm for human and livestock consumption. The other two major summer crops are soybeans and sunflower seed, with planted areas of 1.07 and 600,000ha respectively.

Applying the average commercial yield for the past three seasons of 5.1t/ha for white corn and 7.1t/ha for yellow corn delivers a production estimate of 15.2Mt for next year’s harvest. Add the subsistence production of around 600,000t, and the average yield falls back to 5.52t/ha for total output of 15.8Mt, 7.6pc lower than the 17.1Mt harvested earlier this year. The CEC is currently using a national average yield of 5.8t/ha, marginally lower than the record of 5.9t/ha in the 2017 harvest. In last week’s global supply-and-demand update, the USDA pegged South African corn production at 16.8Mt.

Technology change

While some will say that using the average yield of the past three seasons could be optimistic, considering they were the second, third and fourth largest crops on record, South African production appears to have gone to a new level. Corn yields have almost doubled in the past 20 years by adopting new production technologies, such as genetically engineered seed and more efficient and effective farming practices, including precision and conservation farming. With the added help of favourable weather conditions, South Africa’s five largest corn crops have been grown in the past seven years.

The USDA is calling domestic consumption 13.6Mt in 2023-24, 4.6pc higher season-on-season, with the food, seed and industrial use pegged at 6.1Mt and the stockfeed sector expected to consume 7.5Mt in 2023-24. This is despite the worst Highly Pathogenic Avian Influenza outbreak since 2017, with seven of the country’s nine provinces affected. Around 5 million layer hens, 20pc of the population, and 2.5M broiler breeders, 30pc of the population, have reportedly been culled since May in a concerted effort to control the outbreak.

Emerging consistent exporter

Based on the current production estimate, South Africa should maintain its status as a net exporter of corn next year, consolidating its position as a minor but consistent global supplier. The USDA has South African corn exports pencilled in at 3.4Mt in the 2023-24 trade year (Oct-Sep), down from 3.7Mt in 2022-23.

The top three destinations last season purchased only yellow corn, and they were Taiwan, which imported 720,000t, followed by Japan with 610,000t and Vietnam with 350,000t. Mexico, Italy and Botswana were next on the list, purchasing 340,000t, 270,000t and 240,000t of white corn respectively. China received its first bulk cargo of South African corn earlier this year, with 108,000t yellow corn departing South African ports between March 25 and April 14.

With 2.1Mt already exported in the current marketing year, Taiwan remains the primary destination, with 460,000t of yellow corn shipments dispatched to the end of October. South Korea has jumped into second spot with 440,000t, followed by Japan with 420,000t and Vietnam with 180,000t of imports, all yellow corn. Botswana is next on the list and the primary white corn buyer with 130,000t. China’s purchases in the current marketing year total one panamax cargo of 56,000t, which sailed from its South African loadport last month.

Domestic prices drop

Domestic corn prices have declined by more than 20pc over the last year, much in line with the fall of global corn values. However, export competitiveness was supported by a depreciation in the value of the South African rand. Local corn is currently trading close to export parity values, indicating a solid exportable surplus in the local market. Prices are expected to maintain a strong correlation with export parity levels ahead of next year’s harvest but will undoubtedly be sensitive to any downward revisions to the local production outlook as the season progresses, changes in global values, and South Africa’s volatile exchange rate.

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