While it remains a challenge to get a clear picture of the scale of damage in maize fields in Mozambique and Zimbabwe after Cyclone Idai, we suspect that these countries will collectively have to import over a million tonnes of maize in the 2019/20 marketing year in order to fulfil the domestic needs.
In the case of Zimbabwe, the 2019/20 maize imports could reach at least 900 000 tonnes in order to meet the annual needs of roughly 2.0 million tonnes a year. Meanwhile, Mozambique will most likely double the typical maize import volume of about 100 000 tonnes a year in the 2019/20 marketing year. The key question then is from where will these countries receive these additional supplies?
• Over the recent past, South Africa, Zambia, and Mexico were consistently the key suppliers of maize to Zimbabwe, and Mozambique. But this year conditions could change somewhat as South Africa, and Zambia has tight supplies due to expectations of a poor harvest. If we assume that South Africa’s expected production of 10.6 million tonnes materialises, then the country could have about 1.1 million tonnes of maize for export markets. A large share of this will most likely be destined to the BNLS countries (Botswana, Namibia, Lesotho, and Eswatini), thus leaving a small volume for Zimbabwe and Mozambique.
• From a Zambian perspective, the International Grains Council forecasts the country’s 2018/19 maize harvest at 2.4 million tonnes, down by 33% year-on-year (the 2018/19 production season corresponds with the 2019/20 marketing year). This, however, will not make Zambia a net importer of maize, especially if we account for its carry-over stocks of about 785 000 tonnes which will boost supplies in the 2019/20 marketing year, according to data from the United States Department of Agriculture. Given that Zambia’s maize consumption is roughly 2.4 million tonnes, the aforementioned volumes therefore should be sufficient for the domestic market. The volume for export markets will largely depend on government decisions about the volume of maize to be kept on Zambia’s strategic grain reserves.
• The main message is that maize supplies will be tight in Southern Africa in the 2019/20 marketing year, and this could present upward pressures on prices. In South Africa’s case, there is a likelihood that the estimated 10.6 million tonnes harvested in 2018/19 could be revised down in the coming months due to dryness in the western parts of the country. This could have implications on maize prices, and subsequently food price inflation in the coming months.
Large global grains supplies could help ease pressures in Southern Africa, although commodity prices might not decline notably owing to strong global demand
• While the tight maize supplies in Southern Africa could result in an uptick in prices in the coming months, as previously indicated, there will not be a disaster. There are large supplies in the global market which the region can draw from, although it is largely yellow maize. As set out in our note on 11 March 2019, the United States Department of Agriculture (USDA) forecasts the 2018/19 global maize production at 1.1 billion tonnes, up by 2% from the previous season. The countries that would most likely be suppliers of maize to Southern Africa in the coming months are Argentina, Mexico, Ukraine, Russia and the United States. Most of these countries have been amongst the top 10 maize suppliers in the recent past to Zimbabwe, and Mozambique.
• Also, worth noting is that although we forecast South Africa’s maize exports at 1.1 million tonnes in the 2019/20 marketing year which starts on 01 May 2019, the country could import about 250 000 tonnes of maize to be utilised in the coastal provinces of Western Cape, and KwaZulu-Natal in the coming months. Therefore, the benefit of large global supplies will not only be for Mozambique, and Zimbabwe but also South Africa.
• Aside from maize, rice plays an important role in Southern Africa’s food basket. In fact, the sub-Saharan region accounts for roughly 38% of global rice imports a year. Mozambique and South Africa are amongst the regions’ largest rice importers. Hence, it is important to keep an eye on developments in the global rice market. To this end, the USDA placed its 2018/19 global rice production at 501 million tonnes, up by a percentage point from the 2017/18 production season’s harvest. In addition, the stocks could increase by 5% year-on-year to 157 million tonnes. This means that global rice prices could somewhat be under pressure or sideways in the near term, which will ultimately benefit the Southern Africa region.
• We should point out that while production of the aforementioned commodities is expected to increase in the 2018/19 season, prices might not decline notably, which would have been a benefit for Southern Africa, due to expectations of a rise in global consumption of grains and oilseeds, amongst other factors. This is already evident in the FAO Cereal Price Index which averaged 169 points in February 2019, up by 4% from the corresponding period in 2018 . Be that as it may, we suspect that there won’t be a significant uptick in overall global food prices, as slowing meat and dairy products prices could overshadow the increases in grains, and sugar products prices.
Aside from summer grains challenges, reports from the SA Weather Service reaffirmed the positive weather outlook for winter crops in 2019/20 production season
• A few weeks back we signalled a possibility of favourable weather conditions over the south-western parts of South Africa, which would ultimately benefit winter crops. On 28 March 2019, the local weather bureau reaffirmed its view that between April and July 2019, the south-western parts of South Africa could receive above-normal rainfall. This bodes well with the 2019/20 winter crop production season as South African farmers will start preparing soils for winter crops plantings in the Western Cape towards the end of this month. Meanwhile, other winter crop growing areas such as the Northern Cape, Limpopo and Free State, amongst others, will commence with plantings around midyear.
• In terms of farmers’ planting decisions, we maintain our generally positive view that there will be good activity in all major winter crops areas, as weather conditions have been favourable over the past few weeks (Figure 3). Parts of the Western Cape received fairly good rainfall over the past couple of weeks, which means that soil moisture is not as depleted as at the start of the 2018/19 production season when the country was shaking off the 2017 drought.
• The Crop Estimates Committee will release the farmers’ intentions-to-plant data on 25 April 2019, and this will give us a better sense of the possible harvest this year. At this point, our view is that wheat plantings could, at least, be about 530 000 hectares, which would be 5% higher than the 2018/19 plantings. In the 2018/19 production season, barley plantings of 119 000 hectares were the highest in 19 years. In the 2019/20 production season, the area is likely to remain fairly stable, or decline marginally if wheat plantings increase more than what we are currently anticipating.
• Canola is also another crop that we believe could show about 4% year-on-year improvement in plantings to roughly 80 000 hectares if weather conditions remain favourable as the current forecasts suggest. Aside from the weather, prices will also be an important factor for farmers to consider as some crops tend to compete for land use. Wheat prices have been fairly favourable from a producer perspective since the start of the year, mainly supported by the weaker domestic currency against the US dollar, as well as higher Chicago wheat prices, which are underpinned by tight global supplies. The 2018/19 global wheat production could reach 735 million tonnes, down by 4% year-on-year. This will subsequently lead to a 3% annual decline in the 2018/19 global wheat stocks to 264 million tonnes. Thus, providing support to the global wheat market.
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