Drought, uncertainty tip South Africa corn forecasts towards export cut

Drought in South Africa is likely to cut acreage and reduce yields as farmers delay planting the corn crop, with the country's potential export volumes likely to be slashed, Grains SA said in their Perspective report.

“There are currently many uncertainties in the market regarding how many of the different crops are actually planted,” the report says, with some dry regions yet to start planting and a reduction in yields anticipated in the areas that have been planted.

According to the report, exportable corn surpluses will dwindle on any fall in area or yield, with the current acreage and yield forecasts of 2.4 million hectares and 4.8 mt per ha, likely to see an export surplus of 4.56 million mt.

However, it makes it clear that “plantings should be significantly less than the intention and the average yield across the country should be significantly lower than the average,” leaving the 4.56 million mt looking ambitious.

Running a series of scenarios, Grains SA concludes that yields of 3.3 mt/ha would severely limit scope for exports producing a slim 864,265 mt surplus, but any contraction in area would exacerbate that effect.

At a 20% reduction in area and a yield of 3.3 mt/ha, South Africa could see a deficit in corn of around 766,199 mt.

However, for yellow corn – typically grown for animal feed and for export markets – the impact could be even more dramatic, as the Perspective report anticipates an average yield of 5.4 mt/ha and an area of 1.06 million ha providing an export surplus of 1.1 million mt.

But if yields should contract to 3.9 mt/ha, just below South Africa’s typical yield of 4 mt/ha according to the USDA, the export surplus quickly gives way to a 494,021 mt deficit, which falls to a 1.3 million mt shortage when combined with a 20% reduction on area.

South Africa is in the top ten of world corn exporters and has actively courted Asia’s corn buyers with its exports. Some 60% of its exports between April and November 2017 headed to Asia, according to the UN's FAO, with total exports expected to top 2.4 million mt. 

While Japan was chief amongst the destinations, South Korea’s Kocopia also secured 60,000 mt of corn from the country via a buy tender in early December, with trading sources at the time commenting on a significant programme of exports targetting Asia. 

The USDA’s most recent WASDE report expects South Africa’s corn crop to come in at 12.5 million mt with exports standing at 1.7 million mt, versus 2.5 million mt in the 2016/17 bumper harvest.

The last time South Africa suffered significant drought in the 2015/16 marketing year its production fell to around 8.2 million mt, and it was forced to import some 2.4 million mt, according to the USDA.