South Africa Looks to Middle East, Asia as New Corn Markets

Updated on

South Africa is seeking new markets for its grains even after the continent’s biggest corn producer started importing the yellow variety following the nation’s worst drought since 1992 and as transport constraints hamper delivery.

Local farmers want to increase sales to Middle Eastern nations, such as Saudi Arabia, and to Asian countries including Vietnam, Jannie de Villiers, chief executive officer of Grain SA, the country’s largest cereal and oilseed farmers’ lobby, said in an interview at Bloomberg’s offices in Johannesburg.

“Every one of them is importing round about 4 million tons from the world market and South Africa has a bigger scope to actually get into that,” Wandile Sihlobo, an economist at Grain SA, said during the same interview.

Growers in South Africa, which has exported an average of 1.9 million metric tons a year for past seven years, are looking for new buyers even though this season’s crop may shrink 32 percent because of the drought in key harvest areas. Last year’s intake was 14.3 million tons, the largest in 33 years.

South Africa has had success in finding new destinations for its corn, signing a supply agreement with China in December, De Villiers said. In 2010, farmers had a record surplus and new markets sourced then included South Korea, Italy and Mexico.

The price of white corn, which is used to make staple food in South Africa, has climbed 21 percent this year, while the yellow type, mainly fed to animals, has risen 9.3 percent.

Logistics Requirements

“We want to maintain our food security and have a surplus of maize,” De Villiers said, using the local term for corn. “Our infrastructure is not, hopefully, going to limit us.”

While Transnet SOC Ltd., South Africa’s state-owned logistics utility, is in the third year of a seven-year, 312 billion-rand ($25.7 billion) plan to increase rail and port capacity, upgrades in service to the agricultural industry are only scheduled for 2024, De Villiers said.

About 20 percent of grains are transported by train compared with 85 percent in the 1980s, he said.

“Transport isn’t functioning on rail,” he said. “The railway is a great asset to the country but it’s sad we’re not utilizing it.”

Harbor Infrastructure

Transnet’s three agricultural bulk harbors are capable of handling a combined 4.03 million tons of produce annually, but silos at the East London port in the Eastern Cape province, with 760,000 tons of annual capacity, aren’t functioning optimally, limiting the amount the country can import and export, De Villiers said.

South Africa wants to raise annual output of corn in the Eastern Cape ninefold to 1 million tons by 2018 as coal mining renders land unsuitable for farming in the northeastern province of Mpumalanga, the government’s Bureau for Food and Agricultural Policy said in a report.

Transnet is prioritizing improvements for mined commodities such as coal and manganese and will look at bettering grain transport in future, Chief Executive Officer Brian Molefe said in a March 19 interview in Pretoria, the capital.

“The problem with grain is that once we deploy locomotives, they’re seasonal and sometimes there’s a lot of volatility, but we are working on it,” Molefe said.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE