South African White Corn Drops on Bet Gains on Dryness Overdone

White corn in South Africa, the continent’s biggest producer of the grain used to make a staple food in the sub-Saharan region, fell for a second day on speculation a 37 percent gain this year through Tuesday was overdone.

White corn for delivery in July fell 2.8 percent to 2,776 rand ($238) a metric ton by midday on the South African Futures Exchange, declining by the 80-rand limit, the biggest drop for a most-active contract since Jan. 14. Its 14-day relative strength index, which measures how rapidly prices rose or declined in the specified period, has been above 70, the level some investors consider a signal that prices are about to drop, since Feb. 5.

“White corn ran too fast and too far,” Ernst Janovsky, Johannesburg-based head of agribusiness at Absa Group Ltd., said by mobile phone on Thursday.

Prices have rallied this year because of concern that hot, dry weather in the main growing provinces of North West and Free State may limit this year’s harvest. Grain SA, a farmers’ body, said last week the damage to the crop was irreversible.

These regions need more than 20 millimeters (0.8 inch) of rain in the next five days if crops are to recover from the damage caused by the dry conditions, said Jannie de Villiers, chief executive officer of Grain SA.

“At the moment, it looks like we will only have a 10 percent chance” of having enough corn produced locally, and that depends on rains, he said.

Overnight Rains

The town of Klerksdorp in the North West province, the region producing 21 percent of the country’s corn, received 11 millimeters of rain overnight, according to the South African Weather Service website. Kroonstad in the Free State, which produces 43 percent of the grain, received 1 millimeter of rain last night, it said.

Yellow corn for delivery in July gained 0.6 percent to 2,387 rand a ton, snapping the biggest two-day drop in more than a month. This variety is mainly fed to animals locally.

Soybeans for May delivery declined 2 percent to 4,907 rand a ton, the lowest in 21 months, while sunflower seeds for March fell 0.2 percent to 4,990 rand a ton, the lowest since Jan. 29.

Overnight rains weren’t sufficient “to make a decent difference,” Andrew Fletcher, an independent trader in Kroonstad, said by phone on Thursday. “Expect to see a lot of volatility in the market under the current levels and in the current situation.”

More heat and dryness in the next two weeks may determine food prices in the coming year, Grain SA said on Feb. 12. The nation’s 2014 harvest was its biggest since 1981 after yields rose to the highest on record, the Crop Estimates Liaison Committee said last week.

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