The recent continent-wide maize surplus harvest could be good news, despite the shrinking African market. It’s time to look to other promising importers.
Following a surplus harvest in early 2017, South Africa will struggle to sell maize to its African neighbours as increased rainfall in Malawi and Zambia has boosted crops, trimming South Africa’s market share in the region.
“The existing African markets are too small to make a significant difference in the surplus,” says Grain SA economist, Luan van der Walt. “We need to explore more opportunities for deep-sea exports, especially to eastern countries, including Japan, Korea and Taiwan.”
It’s time to look further ashore for other export markets.
Related: Most maize imported in 7 years
South Africa’s maize exports are growing faster than the world’s annual average growth, and that these exports are concentrated among a few countries, according to research. These two features underline the need to expand South Africa’s export presence beyond its traditional markets.
The alleviation of current price pressure depends on decreasing SA’s current exportable surplus. Here’s how to avoid a considerable carry-over supply to the next season:
Venture into the East
Japan and South Korea are the leading import markets, both contributing to more than 20% of the world’s value of maize imports. It’s for this reason that SA hopes to send its surplus to Asia. “Most of those countries in the East don’t have a lot of land, their animal feed industry mostly imports all the raw materials,” says Grain SA chief executive Jannie de Villiers.
SA’s geographical advantage over rivals like Argentina has encouraged industry producer Grain SA to target the East, including Taiwan and the Middle East. “Asian markets are attractive because of their proximity to South African ports and the reduced delivery times compared with the European Union, United States and South America,” adds Piet Faure, soft commodities analyst at CJS Securities.
Challenges that benefit you
With SA’s eyes set on Asia, it’s going to be a long-standing relationship if you start off correctly. Because the continent uses a bulk of its maize as animal feed, its demand for the grain is expected to increase in the next few years, as more animal protein is incorporated into the Asian diet.
“The growing demand in the region cannot be met despite the increase in domestic production and yield of maize in the last 15 years,” reports the International Potash Institute. Despite Asia’s annual maize production of 175 million metric tons, it continues to be the biggest importer of maize, putting SA’s position as eighth biggest global exporter in good stead.
Related: Maize season slump could affect food security gains
Seek success in China
“We have met with some Chinese buyers. They are already in South Africa looking at opportunities to buy South African maize,” adds De Villiers, confirming South African farmers’ vigorous courting of Asian buyers, focusing on China. Having a permanent export market such as China encourages local producers to continue producing surpluses, ensuring food security in SA, and avoiding an unprofitable drop in maize prices.
“It is not a question of moving away from the traditional markets, but securing more alternative markets,” explains Faure.
Here’s why SA maize is heading to Eastern markets:
- Booming demand in the East
- Relatively low shipping costs
- Easier access to ports
- Asia isn’t as wary of genetically modified crops.