By Wandile Sihlobo
Those closely following the South African maize market probably noticed a major price jump on 22 April.
The yellow maize spot price closed at R6 000 per ton, up by R800 from Thursday last week. The white maize spot price closed at R6 050 per ton, up by R771 from Thursday last week.
Such daily price jumps would ordinarily worry people and lead to concerns about whether we will continue seeing such increases and the subsequent impact on food inflation. But I think we should not be as concerned.
My reading of the price drivers is that, amongst other things, we had traders who needed to close their positions as this is the last day of the current contract months.
Now, as there are minimal physical stocks in the market because of the late season, we are seeing what seems to be an artificial demand as traders scramble to close their positions. And I must stress that the closing of positions is normal behaviour in the futures markets.
I say this because if one looks at the May 2025, July 2025, September 2025 and December 2025 contract month prices for white and yellow maize, they are down from the levels we saw on Thursday last week. The significant increase in prices is mainly in the nearest contract month prices.
The stocks in the market are tight – we are coming from a drought season where we had a poor harvest.
In addition, the 2024-25 season is late by roughly a month from the usual planting time. Moreover, continuous rains also mean the harvest may be delayed further. These are all the issues that are adding to tight stocks.
But we believe all this is temporary. When the harvest finally starts, we will likely have a decent supply and some easing on prices. The crop looks promising, and the season ahead is relatively good. For example, the Crop Estimates Committee forecasts South Africa’s 2024-25 maize harvest at 14,6 million tons, up 13% year-on-year. Thus, we see the other contract month prices under pressure; an anticipated better harvest will reach the market in the coming months.
Of course, the daily price increases are not necessarily material for food inflation. So, there is no need to worry about this issue.
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