ANALYSIS: What does South Africa's late-planted corn teach the US?

Better-than-expected yields comprehensively rewrote some of the gloom-laden forecasts that analysts had set out for 2019/20, as the country’s corn crop recovered from a poor planting experience to see production estimates revised upwards, and upwards again.

Sound familiar?

This isn’t the US Midwest, however, this is South Africa.

On the face of things there are parallels between the two – atypical weather through November and December 2018 forced farmers to plant outside corn’s optimal planting window, driving domestic prices higher and firing South American exports into the country in a rare arbitrage.

The weather is different – drought in South Africa versus relentless rain in the US – but South Africa is one of the few that uses genetically modified corn seed, posing the question: Does this experience tell us anything about what’s in store for the US?

Initially, analysts in the country were calling for a corn crop of under 10 million mt – a watershed line for South Africa as lower production and relatively low stock levels tipped outlooks from self-sufficiency into short supply.

In turn, this kicked open flows first from Argentina and later from Brazil.

“Back in December, South Africa was looking at less than 10 million mt and that’s what people were blogging about and expecting, but now the country is on course for something north of 11 million mt,” Wandile Sihlobo, chief economist of the country’s agricultural business chamber said.

South Africa’s forecasts were part of a wider regional problem, with all of southern Africa facing a serious threat to its corn production as drought and then Cyclone Idai wrought havoc.

In late February, the country’s influential Crop Estimate Committee delivered its verdict, calling South Africa’s corn harvest at 10.5 million mt, split 50-50 between white corn and yellow.

Month by month the figure has clawed its way higher still, with the latest update, the seventh, taking production over 11 million mt – half a million mt more than first expected, and over 1 million mt above early predictions.

The key has been the choice of seeds, with South Africa’s farmers anticipating the truncated growing period with a switch to short growing varieties – a move fully expected from US farmers.

“The real story is also the type of seeds used, and how much more resilient they can be with the associated weather conditions. Given the delays in planting, you really need shorter growing varieties,” Sihlobo said.

The evidence lies in the countries around South Africa, he argues, citing data from the International Grains Council that suggests South Africa’s production is likely to fall 12% year-on-year, versus Zambia (down 16%), Kenya (20%) and Zimbabwe (down 53%).

“We need to be investing and improving a lot on the seed. Shorter growing varieties would help countries across southern Africa,” Sihlobo said.

But the shorter varieties come at a cost to production, and while the CEC’s forecast calls for 5.57 million mt of white corn – for human consumption – and 5.44 million mt of animal grade yellow corn, traders are warning that they anticipate some of the white corn being sold as animal feed.

“A lot of lower grades on the white maize side are not fit for human consumption,” one South Africa-based trading source said, with perhaps as much as 10% of the crop being downgraded.

“If the problem persists, with the current crop only at 75% harvested, there could be more,” the source said.

While so much of the concern has been around the size of the US corn crop, fears around the quality have largely remained in the background, but what South Africa’s experience means for the US remains elusive, with weather carrying multiple variables that could yet make or break the crop.

“It is a very tough question – I think we will have to wait until the harvest starts,” the trade source said.