Johannesburg - Maize prices in South Africa, the continent’s biggest grower of the grain, are unlikely to rise significantly more from their current record unless the rand continues to lose value, a Bloomberg survey showed.
White maize, used to make a South African staple food, this week exceeded R5 000 ($298) a metric ton for the first time as the driest weather in more than a century prevents planting and scorches crops. While the grain has more than doubled since the start of year, its price will peak at R5 200 by the middle of 2016, according to the median forecast of 11 traders and analysts who took part in the survey. It was conducted from January 13 to January 15.
Local maize prices have surged as the worst drought since records started in 1904 hurts this year’s harvest. While the nation traditionally supplies its neighbours with white maize, used to make a porridge, it will be a net importer of the grain for the first time since 2008 as record temperatures result in growers sowing the smallest area since 2011.
While the yellow variety is trading at parity with imports, white maize carries a premium of as much as 500 rand a ton due to the scarcity of supplies of this type, Thys Grobbelaar, a trader at Klerksdorp-based Senwes in the North West province, said by phone. White maize is mainly grown in Southern Africa, Mexico and the US while yellow maize is more widely grown.
Further increases will prompt some consumers to change eating habits in a country where more than one in four is unemployed, Giancarlo Filomeno, a director at CJS Securities in Johannesburg, said by phone.
“White maize is already way too expensive and shows how panicky the market has become,” Grobbelaar said, using the local term for maize. “Millers will do everything they can to secure stock. That’s why it is trading above import parity.”
Rising prices due to supply shortages have been exacerbated by the weakening rand, which has lost 31 percent against the dollar since the start of last year, the worst performer after Brazil’s real among 16 major currencies tracked by Bloomberg.
Yellow maize may rise to R3 900 a ton by the end of June, according to the survey. That’s 6.1 percent higher than Wednesday’s close of R3 675 on the South African Futures Exchange in Johannesburg.
Further rand weakness may push prices above forecasts, Filomeno said. At 16.78 per dollar at 2:48 p.m. in Johannesburg, the South African currency is trading about 6 percent weaker than the median forecast by 49 analysts for the middle of the year in a Bloomberg survey.
“The rand is all over the place,” Filomeno said. “Basically you’re in uncharted territory and there’s a hell of a lot of volatility.”