Lower commodity prices, higher production costs likely to lead to production shortfall

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31 Oct 2008

Southern African countries could be headed for a food crisis, given higher production costs, declining agricultural commodity prices and the possibility that the international financial crisis may persist. A decline in agricultural commodity prices, coupled with higher costs, will result in a fall in maize production, as farmers will produce less owing to the difficulties of securing profits, says agriculture and biofuels consultant Fanie Brink, who adds that there is much pressure on South Africa to produce enough maize in the next season to mitigate the risk of a “humanitarian catastrophe” in neighbouring countries.
“The world’s food reserves are at the lowest levels in many years and food stocks are available for only 50 days. The steep increases in food prices over the last year have also forced many countries to place a ban on the export of food to other countries,” says Brink.
He adds that maize producers do not have a choice but to scale down the production of maize from 2,8-million hectares this season to 2-million hectares during the coming season because they will not be able to financially survive another surplus maize crop at lower export parity prices any longer.
For South Africa and other African countries, this will signify the danger of becoming a permanent importer of basic staple food such as maize, particularly if government keeps on believing that a subsistence level of farming and emerging farmers can produce enough food for the country and its neighbours.
According to Department of Agriculture statistics, a total crop of 12,02-million tons of maize is expected this season, the third-largest maize crop produced in the history of the country. However, while production has increased, Brink says this has led to the “devastating” consequences of a maize surplus and unprofitable producer prices in a good production season.
Brink suggests the expedient introduction of a floor price in the market so that maize farmers in South Africa will be willing to plant the same 2,8-million hectares or a larger hectar- age this season than in the previous season, and requests the United Nations and the World Bank to buy any possible surplus maize at the floor price next year for other countries in Southern Africa, which are unable to plant enough maize for themselves during this coming season.
“Government and consumers will also have to realise that the price of maize could increase by about R1 200/t, or even more, if the country has to import maize next year, especially if the exchange rate depreciates any further. The main question is whether government can accept the fact that the downscaling of food production in the country will have to be turned around in order to be in a position to guarantee food security in South Africa and to ensure that the country does not become a permanent impor- ter of basic staple foods,” comments Brink.

Source: Engineering News