Corn Flows: South Africa – Asia Route Becomes More Lucrative
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South Africa’s total Corn production in MY 2022/23 is estimated at 16.2 MMT at an average yield of 5.6 MT/ha, marginally larger than the 16.1 MMT produced in MY 2021/22. However, follow-up rains in March and the absence of early frost can push the current anticipated average Corn yields even higher. This is expected to be the third consecutive year with Corn production above 16.0 MMT, mainly due to favorable weather conditions and new production technologies, such as genetically engineered seed, and more efficient and effective farming practices, including precision and conservation farming.
During the past ten years, South Africa maintained an average marginal growth rate of about two percent per annum in the consumption of Corn. This trend is mainly driven by increased demand through population growth and expansion in the local broiler industry to serve the local market. Yellow Corn is the primary ingredient for animal feed, especially in the broiler industry. Chicken meat has grown to be the most essential protein source in the diet of the majority of South Africans over the past 20 years.
However, for MY 2023/24, Corn demand for animal feed is expected to flatten. South Africa’s economic growth outlook over the medium term remains lackluster due to prevailing policy uncertainty and structural constraints. The deterioration of infrastructure, including roads, rail, water, and, most notably, the electricity supply (also read Load Shedding the Achilles Heel of the South African Agricultural Sector) will hinder significant investments to increase the capacity of the broiler and feed manufacturing industries. As a result, a significant upsurge in the animal feed demand for Corn in South Africa is unlikely in the near future.
On the other hand, post foresees a three percent growth in the human consumption of Corn in MY 2023/24. White Corn, in the form of a meal, is the staple food for many South African households as it is a relatively inexpensive source of carbohydrates. Consumers are facing high levels of food inflation driven by an upsurged in the cost of production and are growing consumption of affordable grains.
South Africa’s local Corn prices are trading in correlation with export parity levels, an indication of the availability of surplus Corn and a positive outlook for the current season. As a result, local white Corn, and yellow prices dropped by 24 percent and 20 percent, respectively, from the historically high levels recorded on October 31, 2022, of R5,471/MT ($297/MT) for white Corn and R5,251/MT ($285/MT) for yellow Corn due to the decline in global Corn prices.
Nevertheless, local white Corn and yellow prices are trading marginally higher than a year ago, mainly supported by an almost 20 percent depreciation in the local currency. Local Corn prices will continue to move with export parity levels shortly and will be impacted by the development of the local Corn crop, the trend in global Corn prices, planting progress of the United States Corn crop, and South Africa’s volatile exchange rate.
Corn Exports of South Africa
South Africa should maintain its status as a net exporter of Corn in MY 2023/24, and MY 2022/23. Post estimates South Africa could export around 2.3 MMT of Corn in MY 2023/24 and 2.5 MMT of Corn in MY 2022/23 on bumper commercial Corn crops. The top six markets are Japan, Taiwan, Vietnam, Mexico, Italy, and Botswana. These countries represent 75 percent of South Africa’s Corn exports. Exports to Asia countries consist exclusively of yellow Corn, while Corn exports to Mexico, Italy, and Botswana are mainly white Corn.
Other sources: USDA
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