23.11.2010

Navigating the maize

SA FARMERS are sitting on a maize surplus of 4 million tonnes, which they are desperate to export. But the answer doesn’t lie in finding markets outside of SA.

Government should step in and buy the maize at international prices and keep it for when there’s next a shortage.

Of course, government stabilising the maize price hasn’t been policy for some years now, as government believes in a “free market” in agriculture.

SA FARMERS are sitting on a maize surplus of 4 million tonnes, which they are desperate to export. But the answer doesn’t lie in finding markets outside of SA.

Government should step in and buy the maize at international prices and keep it for when there’s next a shortage.

Of course, government stabilising the maize price hasn’t been policy for some years now, as government believes in a “free market” in agriculture.

But SA must be almost the only country in the world to support a free market in agriculture. In the world’s richest countries, agriculture is heavily subsidised, making it difficult for SA to compete.

The SA grain industry has applied to the Competition Commission for an exemption that will enable it to set up a pool to export the maize, worth a little more than R6bn.

Grain SA, the body representing most of SA’s maize, wheat and soya producers, has asked the commission for an opinion on co-operating on exports, but was informed that setting up a pool would be anti-competitive.

In its original justification, Grain SA said “normal free market export activities, conducted under the free market regime whereby producers operate as individuals and are responsible for the marketing and trading of their own produce, cannot remove the surplus sufficiently to allow producers a large enough scope for production in order to operate profitably in the coming seasons.

“The current competition laws prohibit class action which disadvantages producers and agribusiness from coming together to achieve scale and drive down costs in order to compete in the global maize market environment.”

So far, the Competition Commission has dragged its heels in coming back to the farmers.

Grain SA chairperson Neels Ferreira says farmers won’t plant maize in the coming season, and this will have ripple effects in the economy as farmers turn to different crops or land lies fallow.

Ferreira has called for interventions from the departments of trade and industry as well as agriculture, forestry and fisheries, saying farmers want an urgent solution.

He said government also needed to reopen the debate on the ban on using maize for biofuel, imposed in 2008 when world maize stocks were dwindling and there was fear of compromising food security.

Agricultural Business Chamber CEO John Purchase has also said government needs to reopen the debate on the ban on using maize for biofuel.

I think using maize for biofuel would be very foolish indeed. What seems to have got lost in this issue is that you can’t count on surpluses. That’s why, when they happen on the scale they did this year, government should buy the maize for food security reasons.

Have the memories of 2007 and the first half of 2008 proved to be so short-lived?

Blame game

Mozambique and 30 poor countries endured food price riots during 2007/08 as the prices of maize, wheat, rice and other staples soared.

Countries played the blame game – the rich world claiming that growing Chinese middle class was eating better and taking up more of the world’s food resources, and China pointing out that the US still consumed more calories per capita than any country in the world.

Biofuels programmes suffered as people realised that food security was being compromised. Now it’s ridiculous that South Africans should call for those biofuels programmes to be resurrected.

SA may have a maize surplus now, but who’s to say what the situation will be down the line? If government bought the maize for food security purposes now, it would be able to exert downward pressure on food prices and inflation if a shortage should ensue in future.

Part of the farmers’ problem in selling the maize has been the strong rand, which has pushed maize prices down in rand terms. This hasn’t been fully compensated for by lower fuel and other input costs.

Recently, a delegation headed by Agriculture Minister Tina Joemat-Pettersson went to China to try to hawk the surplus there. For reasons that aren’t entirely clear, the Chinese turned down the SA offer.

Apparently the Chinese don’t want the maize in its primary form.  Another outlet – SA’s neighbouring countries – seems closed because of regional worries about genetically modified crops.

Countries like Zimbabwe, Mozambique and Malawi, which suffer chronic food shortages, refuse to accept SA maize because of worries about importing genetically modified organisms.

New food price crisis

Already, there are international reports of a new food price crisis brewing. A Bloomberg report said world food imports would exceed $1 trillion this year, close to the record reached in the 2008 food crisis, as commodity prices surge.

If the Competition Commission gave its permission, no doubt the maize surplus will be snapped up at some point. But then government will have missed a golden opportunity to return to a policy it should never have ditched.

Food price volatility hits all South Africans, and more stable food prices brought about by an activist government is a highly desirable situation for farmers and consumers alike.

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