GRAIN SA URGES FARMERS TO CUT PRODUCTION: STATEMENT

     (The following press release from Grain SA was received by e-mail. The  sender verified the statement.)  Grain SA announces production guidelines  “The current supply and  demand situation in the  grain industry could  be  described as extraordinary and is creating a lot of uncertainty,” says Mr.  Neels Ferreira, Chairman of Grain SA.   The market for summer grains is not in equilibrium and grain prices are at  very low levels. The sustainability of grain production is therefore under  considerable pressure.   Grain SA’s  proposal for  a  surplus reduction  scheme aimed  at  reducing  excessive stocks of maize was rejected by the Competition Commission,  and  government policy is not doing anything to increase the demand for grain.  The supply and  demand projections  for maize,  soybeans, groundnuts,  and  sorghum indicate  substantial increases  in cary-over  stocks, even  after  provision for exports have been made.  In addition, everything  seems to  indicate that the  production costs  of  grains and oilseeds this coming season may be considerably higher than the  export parity  price for  next year.  Given such  a negative  trading-base  situation, it  would  be  better  to  buy  grain  at  current  prices  and  drastically scale down planting during the coming season. This could  lead  to a drastic rise  in prices (closer to  import parity) during the  coming  season. These prices might even be  high enough to allow the servicing  of  the fixed costs on areas not planted with an accompanying positive  margin  above total production cost.   In order  to  further explain  this  situation,  Grain SA  is  once  again  organising a series of  information meetings in  the production areas.  At  these  meetings,  production  guidelines  for  the  coming  summer   grain  production season will be given. All producers are invited to attend these   meetings to  empower  themselves with  the  information required  to  make informed decisions.  “The  production  guidelines  are  based  on  expected  profitability  and individual  producers  may   use  the  information   to  make   production decisions,” says Mr Ferreira.    
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