Voluntary Report - public distribution

**Date:** 02/02/2004

**GAIN Report Number:** SF4003

SF4003

**South Africa, Republic of**

**Grain and Feed**

**Monthly update**

**2004**

**Approved by:**

![](media/image1.wmf)Scott Reynolds

U.S. Embassy, South Africa

**Prepared by:**

Herman Germishuis

**Report Highlights:**

This report highlights the drought damage to the current, 2003 corn and
wheat crops. The 2003 corn crop is now estimated at 6.6 million tons,
more than thirty percent down on the 9.7 million ton 2002 crop. The
smaller crop will lead to imports of more than one million tons, mainly
yellow corn during MY 2004/05. The 2003 wheat crop is estimated at 1.4
million tons compared to 2.4 million tons in 2002. This will lead to
imports of about 1.2 million tons in 2004 compared to 870,000 tons in
2003. This includes imports for re-export to the region. About 60% of
the wheat imports may be sourced from the U.S. if market conditions do
not change significantly.

Includes PSD Changes: No

Includes Trade Matrix: No

Unscheduled Report

Pretoria \[SF1\]

\[SF\]

**CORN**

+----------+-------------+--------+-------+--------+--------+--------+
| Country  | South       |        |       |        |        |        |
|          | Africa      |        |       |        |        |        |
+----------+-------------+--------+-------+--------+--------+--------+
| C        | Corn        |        |       |        |        |        |
| ommodity |             |        |       |        |        |        |
+----------+-------------+--------+-------+--------+--------+--------+
| '000     | 2001        | R      | 2002  | Es     | 2003   | Fo     |
| hectare  |             | evised |       | timate |        | recast |
|          |             |        |       |        |        |        |
| '000     |             |        |       |        |        |        |
| metric   |             |        |       |        |        |        |
| ton      |             |        |       |        |        |        |
+----------+-------------+--------+-------+--------+--------+--------+
|          | USDA        | Post   | USDA  | Post   | USDA   | Post   |
|          | Official    | Es     | Off   | Es     | Of     | Es     |
|          | \[Old\]     | timate | icial | timate | ficial | timate |
|          |             | \      | \[    | \      | \      | \      |
|          |             | [New\] | Old\] | [New\] | [Old\] | [New\] |
+----------+-------------+--------+-------+--------+--------+--------+
| Market   |             | 0      |       | 0      |        | 0      |
| Year     |             | 5/2002 |       | 5/2003 |        | 5/2004 |
| Begin    |             |        |       |        |        |        |
+----------+-------------+--------+-------+--------+--------+--------+
| Area     | 3533        | 3533   | 3575  | 3650   | 3300   | 2950   |
| H        |             |        |       |        |        |        |
| arvested |             |        |       |        |        |        |
+----------+-------------+--------+-------+--------+--------+--------+
| B        | 490         | 490    | 1943  | 1945   | 1693   | 1995   |
| eginning |             |        |       |        |        |        |
| Stocks   |             |        |       |        |        |        |
+----------+-------------+--------+-------+--------+--------+--------+
| Pr       | 10050       | 10050  | 9200  | 9675   | 8000   | 6600   |
| oduction |             |        |       |        |        |        |
+----------+-------------+--------+-------+--------+--------+--------+
| TOTAL    | 923         | 925    | 250   | 200    | 250    | 1100   |
| Mkt. Yr. |             |        |       |        |        |        |
| Imports  |             |        |       |        |        |        |
+----------+-------------+--------+-------+--------+--------+--------+
| Oct-Sep  | 726         | 726    | 800   | 540    | 200    | 175    |
| Imports  |             |        |       |        |        |        |
+----------+-------------+--------+-------+--------+--------+--------+
| Oct-Sep  | 403         | 300    | 0     | 25     | 0      | 0      |
| Import   |             |        |       |        |        |        |
| U.S.     |             |        |       |        |        |        |
+----------+-------------+--------+-------+--------+--------+--------+
| TOTAL    | 11463       | 11465  | 11393 | 11820  | 10843  | 9695   |
| SUPPLY   |             |        |       |        |        |        |
+----------+-------------+--------+-------+--------+--------+--------+
| TOTAL    | 1074        | 1070   | 1000  | 1200   | 1000   | 1000   |
| Mkt. Yr. |             |        |       |        |        |        |
| Exports  |             |        |       |        |        |        |
+----------+-------------+--------+-------+--------+--------+--------+
| Oct-Sep  | 1182        | 1182   | 900   | 1000   | 1000   | 1000   |
| Exports  |             |        |       |        |        |        |
+----------+-------------+--------+-------+--------+--------+--------+
| Feed     | 3846        | 4050   | 4100  | 4100   | 4100   | 4125   |
| Dom.     |             |        |       |        |        |        |
| Con      |             |        |       |        |        |        |
| sumption |             |        |       |        |        |        |
+----------+-------------+--------+-------+--------+--------+--------+
| TOTAL    | 8446        | 8450   | 8700  | 8625   | 8700   | 8600   |
| Dom.     |             |        |       |        |        |        |
| Con      |             |        |       |        |        |        |
| sumption |             |        |       |        |        |        |
+----------+-------------+--------+-------+--------+--------+--------+
| Ending   | 1943        | 1945   | 1693  | 1995   | 1143   | 95     |
| Stocks   |             |        |       |        |        |        |
+----------+-------------+--------+-------+--------+--------+--------+
| TOTAL    | 11463       | 11465  | 11393 | 11820  | 10843  | 9695   |
| DIST     |             |        |       |        |        |        |
| RIBUTION |             |        |       |        |        |        |
+----------+-------------+--------+-------+--------+--------+--------+

**Production**

The National Crop Estimates Committee released its preliminary
commercial area planted estimate for summer crops for the 2003/04 season
on January 20, 2004. The area planted to corn is estimated at 2.6
million hectares, nearly 20% down on the 3.2 million hectares planted in
2002. This is the lowest area planted since 1939. Farmer's initial
intention was to cut back the area by 12% for economic reasons; the
additional 8% cutback was due to the November/December drought. The
ratio of white to yellow corn plantings is 65:35. The area planted to
white corn is 1.67 million hectares, down 25.4% from the previous
season's 2.23 million hectares, while the yellow corn plantings are
estimated at 892,000 hectares, down 6.4% from 952,500 hectares last
year.

The preliminary area estimate for summer grain crops follow:

  ----------------- ----------------- ----------------- -----------------
  Area planted '000 2002/2003         2003/2004         \% Change
  ha.                                                   

  White corn        2232              1666              -25.4%

  Yellow            953               892               -6.4%

  Total commercial  3185              2558              -19.7%

  Free State wheat  432               325               -24.8%

  Sorghum           95                108               +13.7%

  Peanuts           50                63                +26%

  Sunflower         606               521               -14%

  Soybeans          100               121               +21%

  Total             4468              3696              -17.3%

                                                        
  ----------------- ----------------- ----------------- -----------------

The table implies that 772,000 hectares, or 17.3% of the available land,
was not planted this year. It is unlikely that the area planted
increased much after the mid January estimate as the summer solstice was
on December 21 and one would prefer not to plant much after mid summer.
Later plantings were probably for fodder. In the eastern areas the first
frost could be expected by April 15 limiting the length of the growing
season.

Forecasting production is even more difficult as weather conditions are,
and have been, very poor. Soil moisture was low after a long, dry,
winter and early spring rains also disappointed.

November and December rainfall was under normal while good rains only
arrived in mid January. Temperatures have been above normal to date.
Unfortunately South Africa's summer grain growing areas are not
homogenous but have different soils and microclimate areas. Rainfall has
also been very patchy. To forecast the 2003 crop we have to look at what
happened over the past five seasons. The following table contains the
average for the past five seasons after commercial crop estimates were
adjusted based on deliveries.

  ----------------- ----------------- ----------------- -----------------
  5 year average    Area '000 ha.     Yield Mt./ha.     Production '000
                                                        mt.

  White             1900              2.9               5500

  Yellow            1100              3.2               3500

  Total             3000              3.0               9000
  ----------------- ----------------- ----------------- -----------------

  ----------------- ----------------- ----------------- -----------------
  2003 Forecast     Area '000 ha.     Yield Mt./ha.     Production '000
                                                        mt.

  White             1666              2.4               4000

  Yellow            892               2.7               2400

  Total             2558              2.5               6400
  ----------------- ----------------- ----------------- -----------------

The 2003 area planted could have produced a 7.685 million ton crop at
normal yields, which means that the area cutback is the reason for a
1.315 million ton or 14.6% drop in expected production. The lower yield
expected caused another 1.285 million ton or 14.3% reduction in the
expected crop for a total decrease of 2.6 million ton or 29% on the five
year average.

The following table contains a crop forecast including small-scale
production:

+----------+-------+---------+--------+---------+--------+---------+
| # CORN   | # F   | # M     | # FA   | # M     | #      | # M     |
|          | AS 01 | Y 02/03 | S 02 R | Y 03/04 | FAS 03 | Y 04/05 |
|          |       |         | evised |         |        |         |
|          |       |         |        |         | Fo     |         |
|          |       |         |        |         | recast |         |
+----------+-------+---------+--------+---------+--------+---------+
| # l      | #     | # Pro   | # Area | # Pro   | # Area | # Pro   |
|          |  Area | duction |        | duction |        | duction |
|          |       |         | '000   |         | '000   |         |
|          | # '00 | '000    | ha.    | '000    | ha.    | '000    |
|          | 0 ha. | mt.     |        | mt.     |        | mt.     |
+----------+-------+---------+--------+---------+--------+---------+
| # Co     | #     | # 9732  | # 3185 | # 9390  | # 2558 | # 6400  |
| mmercial |  3017 |         |        |         |        |         |
+----------+-------+---------+--------+---------+--------+---------+
| Small    | # 517 | # 317   | # 466  | # 286   | # 392  | # 200   |
| scale    |       |         |        |         |        |         |
+----------+-------+---------+--------+---------+--------+---------+
| #        | #     | # 10050 | # 3650 | # 9675  | 2950   | # 6600  |
|  Total\* |  3535 |         |        |         |        |         |
+----------+-------+---------+--------+---------+--------+---------+

\* Rounded off

# Consumption

Commercial deliveries, that is corn delivered to the silos according to
SAGIS, forms the basis of the commercial PS&D. Corn produced and
consumed outside the formal trading environment is not well documented.
To correlate the commercial PS&D with a specific crop we use the March
to February deliveries and not the formal May to April marketing year.
The reason is that the quantity of early deliveries has been increasing.
Early deliveries only amounted to 120,000 tons in March and April 2001
but jumped to 740,000 tons in 2002 and 760,000 in 2003. The March and
April deliveries are then deducted from the May 1 carry over and added
to the new season's deliveries. Adding the early deliveries to the carry
in stocks skews the PS&D analysis, as the crop has to be decreased by
the same amount, which could be confusing.

The most recent commercial PS&D's are summarized below:

  ----------------- ----------------- ----------------- -----------------
  FAS 2001          My 2002/03 final                    

  '000 Metric tons  White corn        Yellow corn       Total corn

  B/stocks\*        325               340               665

  Deliveries\*      5360              3725              9085

  Imports           275               650               925

  Commercial supply 5960              4715              10675

  Exports, whole    745               325               1070
  grain                                                 

  Dom.              3950              3710              7660
  disappearance                                         

  Ending stocks     1265              680               1945
  ----------------- ----------------- ----------------- -----------------

\* Corrected to March/February

  ----------------- ----------------- ----------------- -----------------
  FAS 2002 est.     My 2003/04                          

  '000 Metric tons  White             Yellow            Total corn

  Beginning stocks  1265              680               1945

  Delivery est.     6250              2750              9000

  Imports           0                 200\*\*           200

  Total Supply      7515              3630              11145

  Exports           1100              100               1200

  Dom.              4500\*            3450              7950
  Disappearance                                         

  Ending stocks     1915              80                1995
  ----------------- ----------------- ----------------- -----------------

\* Including about 400,000 tons of white corn used for feed.

\*\* Up to the end of January 2004 about 50,000 tons of yellow corn was
imported. Imports of about 50,000 tons a month has apparently been
booked up to the end of August.

  ------------------- ----------------- ----------------- -----------------
  FAS 2003 forecast   My 2004/05                          

  '000 Metric tons    White             Yellow            Total

  B/Stocks            1915              80                1995

  Crop est.           4000              2400              6400

  Deliveries          3900              2000              5900

  Imports             0                 1100              1100

  Total supply        5815              3180              8995

  Exports             950\*\*\*         50                1000

  Dom.Disappearance   4450\*\*          3450              7900

  Ending stocks       415               -320\*\*\*\*      95
  ------------------- ----------------- ----------------- -----------------

\*\* Including about 400,000 tons of white corn used for feed.

\*\*\* Customs Union or BLNS sales about 450,000 to 500,000 tons per
annum under normal conditions.

\*\*\*\* Negative stock situation to be covered by early deliveries from
the next crop.

Doubts about the prospects for the 2003 crop is clearly illustrated in
the following table where white corn prices increased by 54% and yellow
corn prices by 47.4% over the past three months.

  -------------- -------------- -------------- -------------- --------------
  Futures prices March 2004     May 2004       July 2004      September 2004

  White corn/mt.                                              

  10/31/2003     R939 =         R964 =         R980 =         N/a
                 \$135.50       \$139.10       \$141.40       

  11/28/2003     R931 =         R956 =         R968 =         N/a
                 \$141.50       \$145.30       \$147.10       

  12/30/2003     R1155 =        R1174 =        R1190 =        R1219 =\$184.7
                 \$175.0        \$177.9        \$180.3        

  01/29/04       R1442 =        R1467 =        R1500 =        R1518 =
                 \$209.9        \$213.5        \$218.3        \$221.0

  Yellow                                                      
  corn/mt.                                                    

  10/31          R961 =\$138.7  R988 = \$142.6 R974 =\$140.5  N/a

  11/28          R987 =\$150.0  R965 = \$146.7 R956 =\$145.3  N/a

  12/30          R1175 =\$178.0 R1162 =\$176.0 R1135 =        R1135 =\$172.0
                                               \$172.0        

  01/29          R1418 =        R1370 =        R1346 =        R1371 =\$199.6
                 \$206.4        \$199.4        \$195.9        

  Wheat/mt.                                                   

  10/31          R1696 =\$244.7 R1732 =\$249.9 R1760 =\$254.0 N/a

  11/28          R1623 =\$246.7 R1651 =\$250.9 R1655 =\$251.5 N/a

  12/30          R1598 =\$242.1 R1633 =\$247.4 R1649 =\$249.8 N/a

  01/29          R1740 =\$253.3 R1760 =\$256.2 R1782 =\$259.4 N/a
  -------------- -------------- -------------- -------------- --------------

The price variations, to a certain extend, also reflect the very strong
South African Rand. The yellow corn price, quite justifiably, is moving
toward import parity. This is currently about R1195/mt. for corn from
Argentina and R1223/ton for US corn, at the coast. The R135/ton
transport cost between the coast and Randfontein, where local prices are
set, are not included.

**Trade:**

Exports:

Since May South Africa has exported 781,000 tons of white and 95,000
tons of yellow corn, for a total of 876,000 tons, or about 110,000 tons
per month. Exports to Customs Union Partners, the so-called BLNS
countries amounted to about 40,000 tons per month and this is likely to
continue in future except if South African prices increase much more.
Some other regional sales are also foreseen for 2004 pushing the 2004/05
seasonal total to about one million tons.

Imports:

A severe shortage of yellow corn is developing in Southern Africa. Since
May 2003 South Africa has imported about 49,000 tons of yellow corn but
this pace is expected to jump to about 50,000 per month over the next
few months for a My 2003/04 total of about 200,000 tons. The crunch is
coming in the new, MY 2004/05 season, when yellow corn import needs
could jump to about 1.1 million tons, or nearly 100,000 tons per month.
Coupled to the anticipated monthly need of 100,000 tons of wheat, (see
Wheat section) and the corn and

Wheat exports, pressure on the transport sector is increasing.

# WHEAT

+--------------------+------+------+------+------+------+---------+
| **PSD Table**      |      |      |      |      |      |         |
+--------------------+------+------+------+------+------+---------+
| **Country**        | *    | #    |      |      |      |         |
|                    | *Sou | #### |      |      |      |         |
|                    | th** | # Af |      |      |      |         |
|                    |      | rica |      |      |      |         |
+--------------------+------+------+------+------+------+---------+
| **Commodity**      | *    |      |      |      |      |         |
|                    | *Whe |      |      |      |      |         |
|                    | at** |      |      |      |      |         |
+--------------------+------+------+------+------+------+---------+
|                    | 2001 | Rev  | 2002 | Esti | 2003 | F       |
|                    |      | ised |      | mate |      | orecast |
+--------------------+------+------+------+------+------+---------+
|                    | \[O  | \[N  | \[O  | \[N  | \[O  | \[New\] |
|                    | ld\] | ew\] | ld\] | ew\] | ld\] |         |
+--------------------+------+------+------+------+------+---------+
| **Market Year      |      | 10/  |      | 10/  |      | 10/2003 |
| Begin**            |      | 2001 |      | 2002 |      |         |
+--------------------+------+------+------+------+------+---------+
| Area Harvested     | 959  | 959  | 941  | 941  | 748  | 748     |
+--------------------+------+------+------+------+------+---------+
| Beginning Stocks   | 487  | 571  | 587  | 588  | 898  | 897     |
+--------------------+------+------+------+------+------+---------+
| Production         | 2490 | 2415 | 2320 | 2387 | 1475 | 1428    |
+--------------------+------+------+------+------+------+---------+
| TOTAL Mkt. Yr.     | 561  | 563  | 871  | 870  | 1200 | 1200    |
| Imports            |      |      |      |      |      |         |
+--------------------+------+------+------+------+------+---------+
| Jul-Jun Imports    | 561  | 561  | 1024 | 1018 | 1200 | 1200    |
+--------------------+------+------+------+------+------+---------+
| Jul-Jun Import     | 18   | 18   | 63   | 63   | 0    | 600     |
| U.S.               |      |      |      |      |      |         |
+--------------------+------+------+------+------+------+---------+
| TOTAL SUPPLY       | 3538 | 3549 | 3778 | 3845 | 3573 | 3525    |
+--------------------+------+------+------+------+------+---------+
| TOTAL Mkt. Yr.     | 379  | 320  | 310  | 310  | 200  | 320     |
| Exports            |      |      |      |      |      |         |
+--------------------+------+------+------+------+------+---------+
| Jul-Jun Exports    | 379  | 379  | 331  | 328  | 200  | 320     |
+--------------------+------+------+------+------+------+---------+
| Feed Dom.          | 10   | 10   | 10   | 10   | 10   | 10      |
| Consumption        |      |      |      |      |      |         |
+--------------------+------+------+------+------+------+---------+
| TOTAL Dom.         | 2572 | 2641 | 2570 | 2638 | 2650 | 2650    |
| Consumption        |      |      |      |      |      |         |
+--------------------+------+------+------+------+------+---------+
| Ending Stocks      | 587  | 588  | 898  | 897  | 723  | 555     |
+--------------------+------+------+------+------+------+---------+
| TOTAL DISTRIBUTION | 3538 | 3549 | 3778 | 3845 | 3573 | 3525    |
+--------------------+------+------+------+------+------+---------+

**Production**

According to the sixth production estimate, the 2003 wheat crop is
estimated at 1.428 million tons, compared to the 2.32 million tons
produced in 2002. The main reason for the decline is a 20.5% decline in
area planted, due to dry conditions at planting from May 2003,
especially in the Free State. The November/December 2003 drought further
damaged the crop.

Although South Africa has developed as a net importer of wheat, the 2004
demand will be especially high. Since the beginning of October up to
January 23 about 373,000 tons were imported at about 93,000 tons per
month. To move the anticipated local and regional import demand of about
1,200,000 tons the rate will have to be pushed up to more than 100,000
tons per month. Currently the U.S. share of the trade is about 66% and
this could continue through the season leading to U.S. sales reaching
600,000 to 800,000 tons.