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Hefty stocks stymie Johannesburg corn rally, despite South Africa drought worries

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A rally in Johannesburg corn prices, prompted by fears over a fresh drought, went into reverse, weighed by the extent of inventories left over from the last harvest, besides hopes of rain relief ahead.


Johannesburg futures in yellow maize, used predominantly for feed, for March shed 1.6% to 2,012 rand a tonne on Tuesday, extending losses in the last session.


The March futures contract in white maize, a food staple, dropped 2.2% 1,981.60 rand a tonne.


The falls came despite the increased world attention on renewed South African drought, after industry group Grain SA on Monday cautioned that a lack of rainfall had planted only 70% of maize in North West province, and 75% of area in the north of Free State.


These provinces between them account for some two-thirds of South Africa’s overall maize area.


‘In bad shape’


“Producers in the western parts of the country could not generally plant their intended hectares due to drought conditions," Grain SA said.


The ideal planting window has already closed, as of the end of last month, with crop sown afterwards running the risk of frost damage later in the growing season.


At AgBiz, head of agribusiness research. Wandile Sihlobo noted that the pattern of dry conditions boded particularly ill for white maize, the main type grown in the drought-affected areas.


“The western regions, which largely produce white maize, are in bad shape,” he said.


“The eastern regions, which predominately produce yellow maize, are in fairly good shape, although currently experiencing heat stress due to the heatwave.”


‘Large stocks’


However, with South Africa still blessed with large maize inventories, after a bumper harvest last year, prices have been unable to sustain headway, with higher values seen by many investors as a selling opportunity.


“We have large stocks of corn, about 10m tonnes, almost double what we had last year,” Mr Sihlobo told Agrimoney.


“Because we have sufficient stocks to last in the short to medium term, weather factors are not having such an effect on the price situation.”


Inventories of white maize are particularly ample, with large harvests in other parts of southern Africa choking off South Africa’s export opportunities.


Rain in the forecast


Furthermore, there is time yet for corn production prospects to see some recovery, with official meteorologists forecasting rains more typical in the country during La Nina episodes.


“In the near term, the weather forecasts promise improvements, with chances of showers of between 16mm-60mm across the South African maize belt within the next eight days,” Mr Sihlobo said.


“If this materialises, crop conditions could improve.”


The uncertainty over how badlySouth African corn sowings have been hampered by drought has placed particular importance on official plantings data due on January 30, besides yield forecasts expected next month, he added.


Discount narrows


Despite the price falls this week, Johannesburg maize futures remain higher for 2018, with prices of yellow maize for March up 2.3%.


Prices of white maize for March have outperformed despite Tuesday’s decline, remaining up 4.3% for the year so far, halving their discount to their feed peer.

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