Introduction:
Harvest time is approaching and the focus of producers is shifting from the production of grain to the marketing thereof. The reality of low prices against the background of more than adequate stock levels, emphasises the importance of the right marketing decisions. Since there is a significant period between the writing and publication of this type of article, is becomes almost impossible to present an appropriate scenario analysis which can assist producers with the facilitation of a marketing decision. It is therefore merely attempted to provide a macro-economic overview of the most important price drivers.
Exchange rate:
Changes in the R/$ exchange rate have a significant impact on local grain prices. The rand is strengthening over the longer term - there are no indications at present that this trend is changing. Significant strengthening is not expected - stability around the R12/$ level can be expected.
International markets:
The international market is in a time of finalisation of crops in the Southern Hemisphere, while the crops in the Northern Hemisphere are being planted. The most important role players are production in South America in the south and the USA in the north.
South America:
Brazil experienced a good production season, with crops close to the record crops of last year. The large crops in Brazil are, however, played down partially by a significantly smaller crop in Argentine.
Argentine and Brazil are the strongest competition for our domestic maize in the export market. Local prices will therefore be compared with South American prices in order to ensure profitable exports.
USA:
The USA is entering a period during which producers will have to make a choice between planting maize or soybeans. With maize plantings being less profitable than soybean plantings at present, expectations are that USA maize prices will remain higher relative to soybean prices. In addition the USA is not kicking off the planting season on a good note - large areas in the production area are classified as drought areas and rain will have to be received for planting to commence.
Local conditions:
The most important characteristic of the local market is the surplus stock carried over from the 2017/18 season. This will probably result in prices trading close to export parity levels. Any price support will probably come from a weaker exchange rate or increasing international prices since both these factors have a material influence on parity prices.
