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Tiger to Pass On Surging S. African Grain Costs to Customers

Tiger Brands Ltd. (TBS), the biggest South African food company, will pass on part of the rising local cost of grain to customers as drought risks leaving a corn shortage.

“Whilst we continuously look for ways to reduce and manage costs to the consumer, we will not be in a position to absorb all the increased white maize costs and therefore some costs will be passed to the consumer,” Alex Mathole, a spokesman for the Johannesburg-based company, said in an e-mailed response to questions, referring to the grain known as corn in the U.S.

White corn rose to a record 2,999 rand ($279) a metric ton on the South African Futures Exchange in Johannesburg on Jan. 6 after climbing 19 percent since the beginning of December as a lack of rain resulted in the smallest harvest last year since 2007. Drought also affected the current season’s planting. White corn rose 0.1 percent to 2,916 rand today in Johannesburg.

Cornmeal made from the grain is a staple food in South Africa, where inflation was 5.3 percent in November. The yellow variety, used to feed animals bred for meat such as beef and chicken, also rose to a record this month as drought affected farmers in the North West province. The region’s share of output in the country fell to 21 percent last season from 31 percent.

Tiger Brands, whose products include Jungle Oats, Ace Maize Meal and Albany Bread, is among food producers also pressured by a weaker rand adding to import costs. The local currency is down 22 percent against the dollar since the beginning of last year.

That won’t stop Tiger considering importing corn in the event of a supply shortage, Mathole said. “Our first preference is to support local farmers but when faced with a shortage in supply, we will have to consider importing maize,” he said.

Tiger Brands rose 1.4 percent to 261.81 rand as of 2:41 p.m. in Johannesburg, valuing the company at 50 billion rand.

To contact the reporter on this story: Kevin Crowley in Johannesburg at kcrowley1@bloomberg.net

To contact the editor responsible for this story: John Viljoen at jviljoen@bloomberg.net

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