Voluntary Report - public distribution

**Date:** 7/2/2004

**GAIN Report Number:** SF4026

SF4026

**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:**

South Africa\'s 2003 (MY2004/05) corn crop is now estimated at 8.1
million tons compared to the 9.7 million tons produced in the previous
season. The decrease is mainly due to a decrease in the area planted.
The local industry operates in a free market. In the marketing year
ended April 30, 2004, about 464,000 tons of corn were imported and 1.1
million tons exported. Wheat imports continue unabated with the US
supplying 485,000 tons of the 843,000 tons imported since October 2003.

Includes PSD Changes: Yes

Includes Trade Matrix: No

Unscheduled Report

Pretoria \[SF1\]

\[SF\]

**SUMMARY**

South Africa's 2003 corn crop (2003 indicating the year of planting) is
currently officially estimated at 8.1 million tons, 1.125 million tons
more than the initial estimate made in February. The 16% increase is
indicative of the much more favorable conditions and widespread rainfall
over the second half of the season. Harvesting is in progress and
indications are that the estimate has stabilized. South African supplies
will be adequate for local needs but with the free market imports of
especially yellow corn and exports of mainly white will continue.

At this stage it is expected that wheat plantings will increase to
886,000 hectares this year after only 748,000 hectares were planted in
2003. This could lead to a crop in excess of 2 million tons compared to
the 1.5 million tons produced last year. At this stage there is some
concern about late rains in the Western Cape. A high level of imports is
expected to continue.

[www.sagis.org.za]{.underline}

[www.grainsa.co.za]{.underline}

[www.safex.co.za]{.underline}

[www.fews.net]{.underline}

[www.wfp.org]{.underline}

[www.grains.org](http://www.grains.org/)

[www.pecad.fas.usda.gov]{.underline}

**CORN**

+-------------------+-------+-------+-------+-------+-------+-------+
| **PSD Table**     |       |       |       |       |       |       |
+-------------------+-------+-------+-------+-------+-------+-------+
| **Country**       | South | ###   |       |       |       |       |
|                   |       | ### A |       |       |       |       |
|                   |       | frica |       |       |       |       |
+-------------------+-------+-------+-------+-------+-------+-------+
| **Commodity**     | **C   |       |       |       |       |       |
|                   | orn** |       |       |       |       |       |
+-------------------+-------+-------+-------+-------+-------+-------+
| 1000 Hectares     | 2002  | Re    | 2003  | Est   | 2004  | For   |
|                   |       | vised |       | imate |       | ecast |
+-------------------+-------+-------+-------+-------+-------+-------+
| 1000 metric tons  | USDA  | Post  | USDA  | Post  | USDA  | Post  |
|                   | \[    | \[    | \[    | \[    | \[    | \[    |
|                   | Old\] | New\] | Old\] | New\] | Old\] | New\] |
+-------------------+-------+-------+-------+-------+-------+-------+
| **Market Year     |       | 05    |       | 05    |       | 05    |
| Begin**           |       | /2003 |       | /2004 |       | /2005 |
+-------------------+-------+-------+-------+-------+-------+-------+
| Area Harvested    | 3650  | 3650  | 3000  | 3005  | 3500  | 3300  |
+-------------------+-------+-------+-------+-------+-------+-------+
| Beginning Stocks  | 1943  | 1945  | 2443  | 2420  | 1243  | 1520  |
+-------------------+-------+-------+-------+-------+-------+-------+
| Production        | 9675  | 9675  | 7800  | 8140  | 9300  | 9000  |
+-------------------+-------+-------+-------+-------+-------+-------+
| TOTAL Mkt. Yr.    | 441   | 465   | 700   | 500   | 500   | 300   |
| Imports           |       |       |       |       |       |       |
+-------------------+-------+-------+-------+-------+-------+-------+
| Oct-Sep Imports   | 617   | 617   | 700   | 450   | 500   | 275   |
+-------------------+-------+-------+-------+-------+-------+-------+
| Oct-Sep Import    | 21    | 21    | 0     | 0     | 0     | 0     |
| U.S.              |       |       |       |       |       |       |
+-------------------+-------+-------+-------+-------+-------+-------+
| TOTAL SUPPLY      | 12059 | 12085 | 10943 | 11060 | 11043 | 10820 |
+-------------------+-------+-------+-------+-------+-------+-------+
| TOTAL Mkt. Yr.    | 1096  | 1125  | 1000  | 1000  | 1000  | 1000  |
| Exports           |       |       |       |       |       |       |
+-------------------+-------+-------+-------+-------+-------+-------+
| Oct-Sep Exports   | 1141  | 1141  | 1000  | 850   | 1000  | 950   |
+-------------------+-------+-------+-------+-------+-------+-------+
| Feed Dom.         | 4000  | 4000  | 4100  | 4000  | 4100  | 4050  |
| Consumption       |       |       |       |       |       |       |
+-------------------+-------+-------+-------+-------+-------+-------+
| TOTAL Dom.        | 8520  | 8540  | 8700  | 8540  | 8700  | 8600  |
| Consumption       |       |       |       |       |       |       |
+-------------------+-------+-------+-------+-------+-------+-------+
| Ending Stocks     | 2443  | 2420  | 1243  | 1520  | 1343  | 1220  |
+-------------------+-------+-------+-------+-------+-------+-------+
| TOTAL             | 12059 | 12085 | 10943 | 11060 | 11043 | 10820 |
| DISTRIBUTION      |       |       |       |       |       |       |
+-------------------+-------+-------+-------+-------+-------+-------+

# Production

The fifth official estimate of South Africa's 2003 corn crop was
released on June 21, 2004 (2003 referring to the year of planting). The
total crop is estimated at about 8.1 million tons, 16% less than the 9.7
million 2002 crop, mainly due to a decline in area planted. In spite of
a late start to the rainy season, and a December/January dry spell, the
expected average yield increased by 2.3% compared to the previous
season. Since the first estimate was made on February 19, prospects
improved considerably and the fifth estimate shows an increase of
1,125,000 tons, or 16% from the initial estimate. The fifth estimate
follows:

  ------------ ---------- ---------- ------------ ---------- ---------- ------------
  Crop         FAS 2002   MY ¾                    FAS 2003   MY 04/05   

  Corn         Area       Yield      Production   Area       Yield      Production

  Commercial   '000 ha.   Mt./ha.    '000 mt.     '000 ha.   Mt./ha     '000 mt.

  White        2232       2.85       6366         1728       2.79       4821

  Yellow       953        3.17       3026         918        3.37       3091

  Total        3185       2.95       9391         2646       2.99       7912

  Developing                                                            

  White        368        0.60       221          282        0.61       171

  Yellow       98         0.66       65           79         0.72       57

  Total        466        0.61       286          361        0.63       228

  Total corn                                                            

  White        2600       2.53       6587         2010       2.48       4992

  Yellow       1418       2.18       3091         997        3.16       3148

  Total        3651       2.65       9678         3007       2.71       8140
  ------------ ---------- ---------- ------------ ---------- ---------- ------------

The most significant feature of the latest estimate is that the average
yield of the commercial crop, in spite of the difficult growing
conditions, decreased by only 1.4% compared to the

previous season. The yield of the yellow corn crop is actually expected
to surpass the yield attained in 2002. The main reason for the smaller
crop was the 540,000-hectare, 17.7%, decrease in the area planted in
response to market and weather factors. It can be argued that the
cutback in area planted mainly consisted of low potential soils
resulting in a proportional increase in the area of high potential soil
planted. This facilitated the increase in yield. Farmers were probably
also able to optimize input use as a result of the smaller area. Also,
the role of irrigation cannot be ignored. In the Northern Cape, where
only irrigated production is possible, 45,500 hectares were planted this
year and this is expected to produce 455,000 tons at 10 tons per
hectare. Although the area planted under irrigation declined in 2003 due
to the dry start to the season, and some water sources ran dry during
the season, it is estimated that about 120,000 hectares were planted
under full or supplemental irrigation, probably producing 1.2 million
tons of the total. As harvesting continues the crop size is not expected
to increase much further.

**Consumption**

Commercial deliveries, that is corn delivered to the silos according to
the South African Grain Information Service (SAGIS), forms the basis of
the commercial supply and distribution.

To correlate the commercial S&D with a specific crop we use the March to
February deliveries and not the formal May to April marketing year. The
March and April deliveries are then deducted from the May 1 carry over
and added to the new season's deliveries. Imports for re-exports, and
the relevant stocks, are incorporated in the figures.

The latest commercial PS&D's are summarized below:

  ----------------- ----------------- ----------------- -----------------
  FAS 2002 final    My 2003/04                          

  '000 Metric tons  White             Yellow            Total corn

  Beginning stocks  1265              680               1945

  Estimate          6365              3025              9390

  Delivery,         6200              2770              8970
  March/Feb                                             

  Retentions        165               255               420

  Imports           60                405               465

  Total Supply      7525              3855              11380

  Export            1015              110               1125

  Dom.              4480\*            3355              7835
  Disappearance                                         

  Ending stocks     2030              390               2420
  ----------------- ----------------- ----------------- -----------------

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

  '000 Metric tons  White             Yellow            Total

  B/Stocks          2030              390               2420

  5th Crop est.     4821              3091              7912

  Farm retentions   161               251               412

  Deliveries        4660              2840              7500

  Imports           30                470               500

  Total supply      6720              3700              10420

  Exports           900               100               1000

  Dom.              4500\*            3400              7900
  Disappearance                                         

  Ending stocks     1320              200               1520
  ----------------- ----------------- ----------------- -----------------

\* Including 500,000 tons of white corn used for feed.

# Trade

For a thorough summary of trade in whole corn during the May 03/April 04
marketing year, please refer to our report SF 4023 dated 06/02/2004. It
contained imports for re-export, including 27,000 tons of white corn
from the US, and exports from corn imported earlier. Total whole grain
imports during the May 2003/April 2004 marketing year amounted to about
465,000 tons of which 440,000 tons were destined for South Africa. Total
exports amounted to 1.125 million tons of which 1.095 million tons were
of South African origin. The Customs Union partners bought 450,000 tons
followed by Zimbabwe with about 415,000 tons of which about 400,000 tons
were white corn. Product exports amounted to about 90,000 tons. During
the first two months of the current season, imports amounted to 84,000
tons, mainly from Argentina. Exports amounted to 78,100 tons with the
Customs Union taking 36,600 tons and Zimbabwe

35,875 tons. The current rate of sales are slow as neighboring states
are also harvesting and thus have local supplies. The rate should pick
up later in the season as supplies run out. It is still not clear if
Zimbabwe will be big in the market this year as foreign exchange is
apparently in short supply.

# Prices

Although the crop and consumption estimates have settled, implying a
major white corn surplus and a yellow corn shortage, prices on SAFEX are
still fluctuating. The main determinant in the market seems to be the
exchange rate as the supply and distribution situation is clear and the
regional export market potential the only other unknown. The market does
not seem to be perturbed by the 2.4 million tons of unutilized old crop
stocks lying in the silos at the end of April 2004 with the new crop
deliveries picking up. It is interesting that the Government is
considering the idea of a strategic grain reserve while the

market has held carry over stocks of around 2 million tons over the past
few seasons.

The following table contains the details:

  -------------- -------------- -------------- -------------- --------------
  Futures prices May 2004       July 2004      September 2004 December 2004

  White corn/mt.                                              

  12/30/03       R1174 =        R1190 =        R1219 =        
                 \$177.9        \$180.3        \$184.7        

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

  02/27/04       R1194 =        R1225 =        R1245 =        R1285 =
                 \$179.3        \$183.9        \$186.9        \$192.9

  03/26/04       R1077 =        R1103 =        R1134 =        R1168 =
                 \$165.4        \$169.4        \$174.2        \$179.4

  04/30/04       R1121 =        R1150 =        R1166 =        R1202 =
                 \$163.6        \$167.9        \$170.2        \$175.5

  05/26/04                      R1069 =        R1091 =        R1130 =
                                \$160.7        \$164.1        \$169.9

  06/30/04                      R925 = \$148.5 R955 = \$153.3 R993 = \$159.4

  Yellow                                                      
  corn/mt.                                                    

  12/30/03       R1162 =        R1135 =        R1135 =        
                 \$176.0        \$172.0        \$172.0        

  01/29/04       R1370 =        R1346 =        R1371 =        
                 \$199.4        \$195.9        \$199.6        

  02/27/04       R1255 =        R1217 =        R1243 =        R1285 =
                 \$188.4        \$182.7        \$186.6        \$192.9

  03/26/04       R1160 =        R1134 =        R1150 =        R1175 =
                 \$178.2        \$174.2        \$176.7        \$180.5

  04/30/04       R1165 =        R1160 =        R1178 =        R1196 =
                 \$170.1        \$169.3        \$172.0        \$174.6

  05/26/04                      R1080 =        R1103 =        R1123 =
                                \$162.4        \$165.9        \$168.9

  06/30/04                      R934 = \$149.9 R960 = \$154.1 R993 = \$159.4

  Wheat/mt.                                                   

  12/30/03       R1633 =        R1649 =        N/a            
                 \$247.4        \$249.8                       

  01/29/04       R1760 =        R1782 =        N/a            
                 \$256.2        \$259.4                       

  02/27/04       R1765 =        R1773 =        N/a            R1740 =
                 \$265.0        \$266.2                       \$261.3

  03/26/04       R1730 =        R1739 =        N/a            R1652 =
                 \$265.7        \$267.1                       \$253.8

  04/30/04       R1766 =        R1770 =        R1765 =        R1630 =
                 \$257.8        \$258.4        \$257.7        \$238.0

  05/26/04                                     R1680 =        R1602 =
                                               \$252.6        \$240.9

  06/30/04                                     R1424 =        R1375 =
                                               \$228.6        \$220.7
  -------------- -------------- -------------- -------------- --------------

At the end of January 2004 white corn contracts for July were selling
for R1500 or \$218/ton. This dropped to R925 or \$148.5/ ton at the end
of June. One of the reasons for the decline is the much bigger crop
expected, as it was still dry in some areas during January.
International grain prices also decreased in the meantime while the
Dollar weakened and the Rand strengthened. At he end of January the
exchange rate was R7.20 to the dollar and at the end of June it was
R6.23.

Grain SA, the representative of the grain industry, is lobbying for
import tariffs to be re-instituted on grains and increased on oilseeds
as domestic production is becoming unprofitable. A formal application
has not been launched. The process is slow, as the tariff formula will
have to be revised and is unlikely to be achieved in the short term.

# WHEAT

+-------------------+-------+-------+-------+-------+-------+-------+
| **Country**       | **So  | ###   |       |       |       |       |
|                   | uth** | ### A |       |       |       |       |
|                   |       | frica |       |       |       |       |
+-------------------+-------+-------+-------+-------+-------+-------+
| **Commodity**     | **Wh  |       |       |       |       |       |
|                   | eat** |       |       |       |       |       |
+-------------------+-------+-------+-------+-------+-------+-------+
| 1000 Hectares     | 2002  | Re    | 2003  | Est   | 2004  | For   |
|                   |       | vised |       | imate |       | ecast |
+-------------------+-------+-------+-------+-------+-------+-------+
| 1000 Metric tons  | USDA  | Post  | USDA  | Post  | USDA  | Post  |
|                   | \[    | \[    | \[    | \[    | \[    | \[    |
|                   | Old\] | New\] | Old\] | New\] | Old\] | New\] |
+-------------------+-------+-------+-------+-------+-------+-------+
| **Market Year     |       | 10    |       | 10    |       | 10    |
| Begin**           |       | /2002 |       | /2003 |       | /2004 |
+-------------------+-------+-------+-------+-------+-------+-------+
| Area Harvested    | 941   | 941   | 748   | 748   | 850   | 886   |
+-------------------+-------+-------+-------+-------+-------+-------+
| Beginning Stocks  | 587   | 588   | 898   | 897   | 576   | 535   |
+-------------------+-------+-------+-------+-------+-------+-------+
| Production        | 2320  | 2387  | 1428  | 1540  | 2125  | 2100  |
+-------------------+-------+-------+-------+-------+-------+-------+
| TOTAL Mkt. Yr.    | 871   | 870   | 1200  | 1200  | 900   | 900   |
| Imports           |       |       |       |       |       |       |
+-------------------+-------+-------+-------+-------+-------+-------+
| Jul-Jun Imports   | 1024  | 1018  | 1200  | 1200  | 900   | 850   |
+-------------------+-------+-------+-------+-------+-------+-------+
| Jul-Jun Import    | 63    | 63    | 0     | 600   | 0     | 500   |
| U.S.              |       |       |       |       |       |       |
+-------------------+-------+-------+-------+-------+-------+-------+
| TOTAL SUPPLY      | 3778  | 3845  | 3526  | 3637  | 3601  | 3535  |
+-------------------+-------+-------+-------+-------+-------+-------+
| TOTAL Mkt. Yr.    | 310   | 310   | 300   | 350   | 300   | 325   |
| Exports           |       |       |       |       |       |       |
+-------------------+-------+-------+-------+-------+-------+-------+
| Jul-Jun Exports   | 331   | 328   | 300   | 320   | 300   | 300   |
+-------------------+-------+-------+-------+-------+-------+-------+
| Feed Dom.         | 10    | 12    | 10    | 30    | 10    | 30    |
| Consumption       |       |       |       |       |       |       |
+-------------------+-------+-------+-------+-------+-------+-------+
| TOTAL Dom.        | 2570  | 2638  | 2650  | 2752  | 2660  | 2765  |
| Consumption       |       |       |       |       |       |       |
+-------------------+-------+-------+-------+-------+-------+-------+
| Ending Stocks     | 898   | 897   | 576   | 535   | 641   | 445   |
+-------------------+-------+-------+-------+-------+-------+-------+
| TOTAL             | 3778  | 3845  | 3526  | 3637  | 3601  | 3535  |
| DISTRIBUTION      |       |       |       |       |       |       |
+-------------------+-------+-------+-------+-------+-------+-------+

# Production

Farmers have started planting the 2004 winter wheat crop and early
indications are that the area to be planted could reach 886,000 hectare,
more than 18% larger than in 2003 but about 6% less than in 2002. Soil
moisture in the Free State is favorable and the winter rainfall in the
Cape, although late, has started. The problem is that price expectations
are poor which may be the limiting factor. The first meaningful
estimates will only be available next month.

Deliveries from the 2003 crop amount to about 1.5 million to date,
surpassing the earlier estimates again. Consumption is also showing
growth to about 2.75 million tons which means that imports continue. The
following tables summarize the trade situation to date:

  ----------------- ----------------- ----------------- -----------------
  Wheat imports     October 4, 2003   June 26, 2004     
                    to                                  

  Metric tons       For South Africa  Transshipments    Total

  From the US       364,365           120,222           484,587

  Canada            0                 13,767            13,767

  Germany           12,199            3,873             16,072

  United Kingdom    22,420            0                 22,420

  Australia         184,248           0                 184,248

  Argentina         89,835            32,025            121,860

  TOTAL             673,067           169,887           842,954
  ----------------- ----------------- ----------------- -----------------

To date, at 485,000 tons, the US is holding 57.5% of the market followed
by Australia at 22% and Argentina at 14.5%. Exports and transshipments
continue as usual.

  ----------------------------------- -----------------------------------
  Wheat exports, October 4, 2003 to   June 26,2004, Metric tons

  Botswana                            77,728

  Lesotho                             66,654

  Namibia                             9,164

  Swaziland                           25,071

  Total Customs union                 178,617

  Zimbabwe                            52,987

  Zambia                              24,184

  TOTAL                               255,788
  ----------------------------------- -----------------------------------

While South Africa is currently well supplied with grain, imports
continue unabated and the import parity calculations may explain the
situation.

Indicative Import Parity Prices: June 25, 2004

  -------------------- ----------------- ----------------- -----------------
  July 2004            US HRW #2 wheat   Argentina Corn    US #3Y Corn

  FOB Gulf value       142.27            115.00            120.35
  \$/ton                                                   

  Freight(20-30,000)   44.00             41.00             44.00
  \$                                                       

  Insurance \$/ton     0.43              0.35              0.36

  CIF \$/ton           186.70            156.35            164.71

  Rand/ton @ 6.28      1172.05           981.52            1034.00

  Financing cost R/ton 11.08             9.28              9.77

  Discharging cost R/t 103.51            104.51            104.51

  Import tariff        Free              Free              Free

  FOR Durban R/ton     1286.64           1095.31           1148.28

  SAFEX Randfontein    1408.00           934.00            934.00
  -------------------- ----------------- ----------------- -----------------

US Dollar prices for grains declined by about \$8/ton over the last
month while the quoted freight rates decreased by about \$6/ton. As a
result the average CIF price for the three grains declined by about
\$14.50/ton. The exchange rate strengthened from R6.50 to R6.23 to the
Dollar during the month. As a result of all these factors, the FOR
Durban price for wheat decreased by R130/ton in a month, for corn from
Argentina R88/ton and corn from the US by R144/ton.

The SAFEX corn futures prices ex Randfontein are lower than the coastal
landed prices, but higher for wheat and, while the Randfontein - Durban
freight rate is at least R145/ton, there is obviously scope to import
grain especially into the coastal areas.