Voluntary Report - public distribution

**Date:** 12/1/2006

**GAIN Report Number:** SF6049

SF6049

**South Africa, Republic of**

Grain and Feed

**Monthly Update**

2006

**Approved by:**

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

#### U.S. Embassy

**Prepared by:**

Herman Germishuis

**Report Highlights:**

In 2005 South African corn farmers voluntarily cut back production,
successfully reducing a stock surplus. Coupled to international price
increases, this led to better prospects for the 2006 crop. The 2006 area
planted is expected to increase by more than a million hectare to 3.2
million hectare and the crop is expected to revert to 10.5 million tons
after 6.9 million tons were produced in 2005.

Includes PSD Changes: Yes

Includes Trade Matrix: No

Unscheduled Report

Pretoria \[SF1\]

\[SF\]

###### Summary {#summary-1}

In an effort to balance corn supply and demand South African farmers cut
the area planted to corn from 3.2 million hectares (ha.) in 2004 to 2
million ha. in 2005. As a result the total crop declined from 11.7
million tons to 6.9 million tons.

Farmers are still planting the 2006 crop in some areas, we estimate that
farmers will plant about 3.2 million ha. giving a potential 10.5 million
ton crop. Weather conditions will, however, play a major role in
determining the size of the crop, as rainfall to date has been erratic.

Bio Fuels, including ethanol from corn is a big issue but it is unlikely
that additional areas were planted for this purpose in 2006. It could,
however, become a major additional outlet in the future.

The wheat situation is unchanged, with a small decrease in the 2006 area
planted but a 2.2 million ton crop expected. High import levels are
expected to continue.

Note the volatile exchange rate.

US\$1 = Rand 6.55 (05/30/06)

US\$1 = Rand 7.25 (06/28/06)

US\$1 = Rand 7.00 (07/27/06)

US\$1 = Rand 7.15 (08/28/06)

US\$1 = Rand 7.65 (09/29/06)

US\$1 = Rand 7.50 (10/30/06)

US\$1 = Rand 7.22 (11/28/06)

[**www.sagis.org.za**](http://www.sagis.org.za/)

[**www.grainsa.co.za**](http://www.grainsa.co.za/)

[**www.safex.co.za**](http://www.safex.co.za/)

[**www.fews.net**](http://www.fews.net/)

[**www.wfp.org**](http://www.wfp.org/)

###### CORN

<table>
<colgroup>
<col style="width: 24%" />
<col style="width: 8%" />
<col style="width: 8%" />
<col style="width: 8%" />
<col style="width: 7%" />
<col style="width: 8%" />
<col style="width: 8%" />
<col style="width: 7%" />
<col style="width: 8%" />
<col style="width: 8%" />
</colgroup>
<tbody>
<tr class="odd">
<td><strong>PSD Table</strong></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td><strong>Country</strong></td>
<td colspan="2"><strong>South Africa</strong></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td><strong>Commodity</strong></td>
<td><strong>Corn</strong></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td colspan="2"></td>
<td></td>
</tr>
<tr class="even">
<td>1000 HA, 1000 MT</td>
<td>2004</td>
<td>Revised</td>
<td></td>
<td>2005</td>
<td>Estimate</td>
<td></td>
<td>2006</td>
<td>Forecast</td>
<td></td>
</tr>
<tr class="odd">
<td></td>
<td>USDA<br />
Official</td>
<td>Post<br />
Estimate</td>
<td>Post<br />
Estimate<br />
New</td>
<td>USDA<br />
Official</td>
<td>Post<br />
Estimate</td>
<td>Post<br />
Estimate<br />
New</td>
<td>USDA<br />
Official</td>
<td>Post<br />
Estimate</td>
<td>Post<br />
Estimate<br />
New</td>
</tr>
<tr class="even">
<td><h2 id="market-year-begin">Market Year Begin</h2></td>
<td></td>
<td>05/2005</td>
<td>05/2005</td>
<td></td>
<td>05/2006</td>
<td>05/2006</td>
<td></td>
<td>05/2007</td>
<td>05/2007</td>
</tr>
<tr class="odd">
<td>Area Harvested</td>
<td>3223</td>
<td>3223</td>
<td>3223</td>
<td>2100</td>
<td>2032</td>
<td>2032</td>
<td>3000</td>
<td>3050</td>
<td>3180</td>
</tr>
<tr class="even">
<td>Beginning Stocks</td>
<td>2956</td>
<td>2956</td>
<td>2956</td>
<td>3190</td>
<td>3170</td>
<td>3170</td>
<td>1190</td>
<td>720</td>
<td>1410</td>
</tr>
<tr class="odd">
<td>Production</td>
<td>11716</td>
<td>11716</td>
<td>11716</td>
<td>7000</td>
<td>6597</td>
<td>6935</td>
<td>9500</td>
<td>10100</td>
<td>10500</td>
</tr>
<tr class="even">
<td>MY Imports</td>
<td>361</td>
<td>360</td>
<td>361</td>
<td>850</td>
<td>850</td>
<td>1000</td>
<td>400</td>
<td>400</td>
<td>500</td>
</tr>
<tr class="odd">
<td>TY Imports</td>
<td>131</td>
<td>131</td>
<td>131</td>
<td>896</td>
<td>850</td>
<td>896</td>
<td>700</td>
<td>700</td>
<td>700</td>
</tr>
<tr class="even">
<td>TY Imp. from U.S.</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
</tr>
<tr class="odd">
<td>Total Supply</td>
<td>15033</td>
<td>15032</td>
<td>15033</td>
<td>11040</td>
<td>10617</td>
<td>11105</td>
<td>11090</td>
<td>11220</td>
<td>12410</td>
</tr>
<tr class="even">
<td>MY Exports</td>
<td>2143</td>
<td>2143</td>
<td>2143</td>
<td>750</td>
<td>750</td>
<td>750</td>
<td>900</td>
<td>900</td>
<td>750</td>
</tr>
<tr class="odd">
<td>TY Exports</td>
<td>1517</td>
<td>1517</td>
<td>1517</td>
<td>1406</td>
<td>1200</td>
<td>1406</td>
<td>500</td>
<td>500</td>
<td>500</td>
</tr>
<tr class="even">
<td>Feed Consumption</td>
<td>5000</td>
<td>5000</td>
<td>5000</td>
<td>4400</td>
<td>4447</td>
<td>4415</td>
<td>4600</td>
<td>4600</td>
<td>4500</td>
</tr>
<tr class="odd">
<td>FSI Consumption</td>
<td>4700</td>
<td>4719</td>
<td>4720</td>
<td>4700</td>
<td>4700</td>
<td>4530</td>
<td>4700</td>
<td>4700</td>
<td>4450</td>
</tr>
<tr class="even">
<td>Total Consumption</td>
<td>9700</td>
<td>9719</td>
<td>9720</td>
<td>9100</td>
<td>9147</td>
<td>8945</td>
<td>9300</td>
<td>9300</td>
<td>8950</td>
</tr>
<tr class="odd">
<td>Ending Stocks</td>
<td>3190</td>
<td>3170</td>
<td>3170</td>
<td>1190</td>
<td>720</td>
<td>1410</td>
<td>890</td>
<td>1020</td>
<td>2710</td>
</tr>
</tbody>
</table>

###### Production

The total 2005 crop, including small-scale production, is now estimated
at 6.9 million metric tons from 2 million hectares, compared to the 11.7
million ton from 3.2 million hectares in 2004. This estimate was
recently increased from 6.6 million tons based on deliveries and farm
retentions. The 2005 yield compares well to the 2004 yield but as a
result of inclement weather the grading of the crop suffered, for
deliveries up to late November only 65% reached first grade. This is
crucial for white corn as lower grades are not suitable for milling and
are used for feed. As a result the SAFEX exchange re-introduced the WOPT
(white, optional) contract last traded in 2003. This is basically a
lower grade contract.

In an effort to balance corn supply and demand South African commercial
farmers cut the area planted to corn from 2.8 million hectares (ha.) in
2004 to 1.6 million ha. in 2005. As a result the commercial crop
declined from 11.5 million tons to 6.6 million tons.

###### 

We also forecast the crop planted in 2006. The commercial area planted
is likely to exceed 2.7 million hectares, 1.1 million hectares more than
in 2005. In the eastern production areas some fields were planted after
the optimum planting dates have passed while rainfall to date has been
erratic. The yield is expected to decline due to the late plantings and
the inclement weather. The increase in area planted can produce a 10
million plus ton crop causing an oversupply again. This is for a
'normal' season and does not include additional plantings for bio fuel
production, which is not expected to be on stream by 2007. Building of
the first major ethanol plant has started, while a government policy
paper is expected this month.

The following table contains the production estimates.

<table style="width:100%;">
<colgroup>
<col style="width: 9%" />
<col style="width: 9%" />
<col style="width: 10%" />
<col style="width: 9%" />
<col style="width: 10%" />
<col style="width: 10%" />
<col style="width: 10%" />
<col style="width: 10%" />
<col style="width: 10%" />
<col style="width: 10%" />
</colgroup>
<tbody>
<tr class="odd">
<td>CORN</td>
<td><p>2004 area</p>
<p>000ha</p></td>
<td><p>Yield</p>
<p>MT/ha</p></td>
<td><p>Prod.</p>
<p>’000 MT</p></td>
<td><p>2005 area</p>
<p>000ha</p></td>
<td><p>Yield</p>
<p>MT/ha</p></td>
<td><p>Prod.</p>
<p>’000 MT</p></td>
<td><p>2006</p>
<p>Area</p>
<p>000ha</p></td>
<td><p>Yield</p>
<p>MT/ha</p></td>
<td><p>Prod.</p>
<p>‘000</p>
<p>MT</p></td>
</tr>
<tr class="even">
<td>Commercial</td>
<td></td>
<td>Final</td>
<td></td>
<td></td>
<td>Est.</td>
<td></td>
<td></td>
<td>Fore.</td>
<td></td>
</tr>
<tr class="odd">
<td>White</td>
<td>1,700</td>
<td>3.8</td>
<td>6,540</td>
<td>1,033</td>
<td>4.1</td>
<td>4,187</td>
<td>1,767</td>
<td>3.6</td>
<td>6,350</td>
</tr>
<tr class="even">
<td>Yellow</td>
<td>1,110</td>
<td>4.4</td>
<td>4,910</td>
<td>567</td>
<td>4.3</td>
<td>2,431</td>
<td>1,001</td>
<td>3.9</td>
<td>3,900</td>
</tr>
<tr class="odd">
<td>Total</td>
<td>2,810</td>
<td>4.1</td>
<td>11450</td>
<td>1,600</td>
<td>4.1</td>
<td>6,618</td>
<td>2,768</td>
<td>3.7</td>
<td>10250</td>
</tr>
<tr class="even">
<td>Small scale</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td>White</td>
<td>325</td>
<td>0.6</td>
<td>203</td>
<td>346</td>
<td>0.7</td>
<td>238</td>
<td>323</td>
<td>0.6</td>
<td>200</td>
</tr>
<tr class="even">
<td>Yellow</td>
<td>89</td>
<td>0.7</td>
<td>63</td>
<td>86</td>
<td>0.9</td>
<td>79</td>
<td>89</td>
<td>0.6</td>
<td>50</td>
</tr>
<tr class="odd">
<td>Total</td>
<td>414</td>
<td>0.6</td>
<td>266</td>
<td>432</td>
<td>0.7</td>
<td>317</td>
<td>412</td>
<td>0.6</td>
<td>250</td>
</tr>
<tr class="even">
<td>Total</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td>White</td>
<td>2,025</td>
<td>3.3</td>
<td>6,743</td>
<td>1,379</td>
<td>3.2</td>
<td>4,425</td>
<td>2,090</td>
<td>3.1</td>
<td>6,550</td>
</tr>
<tr class="even">
<td>Yellow</td>
<td>1,199</td>
<td>4.1</td>
<td>4,973</td>
<td>653</td>
<td>3.8</td>
<td>2,510</td>
<td>1,090</td>
<td>3.6</td>
<td>3,950</td>
</tr>
<tr class="odd">
<td>TOTAL</td>
<td>3,224</td>
<td>3.6</td>
<td>11716</td>
<td>2,032</td>
<td>3.4</td>
<td>6,935</td>
<td>3,180</td>
<td>3.3</td>
<td>10500</td>
</tr>
</tbody>
</table>

###### Consumption

The 2006/07 commercial supply and distribution scenario based on the
latest official crop estimate and a 2007/08 forecast is shown in the
following table.

+-----------+--------+----------+-------+---------+---------+---------+
| MY        | FAS    | MY       | Est   | FAS     | MY      | F       |
|           | 2005   | 2006/07  | imate | 2006    | 2007/08 | orecast |
| May/April |        |          |       |         |         |         |
+-----------+--------+----------+-------+---------+---------+---------+
| 1,000 MT  | White  | Yellow   | Total | White   | Yellow  | Total   |
+-----------+--------+----------+-------+---------+---------+---------+
| B/stocks  | 2300   | 870      | 3170  | 1245    | 165     | 1410    |
+-----------+--------+----------+-------+---------+---------+---------+
| P         | 4187   | 2431     | 6618  | 6350    | 3900    | 10250   |
| roduction |        |          |       |         |         |         |
+-----------+--------+----------+-------+---------+---------+---------+
| R         | 142    | 336      | 478   | 150     | 350     | 500     |
| etentions |        |          |       |         |         |         |
+-----------+--------+----------+-------+---------+---------+---------+
| D         | 4045   | 2095     | 6140  | 6200    | 3550    | 9750    |
| eliveries |        |          |       |         |         |         |
+-----------+--------+----------+-------+---------+---------+---------+
| Imports   | 0      | 1000     | 1000  | 0       | 500\*\* | 500     |
+-----------+--------+----------+-------+---------+---------+---------+
| Supply    | 6345   | 3965     | 1     | 7445    | 4215    | 11660   |
|           |        |          | 0,310 |         |         |         |
+-----------+--------+----------+-------+---------+---------+---------+
| Exports   | 650    | 100      | 750   | 650     | 100     | 750     |
+-----------+--------+----------+-------+---------+---------+---------+
| Co        | 4450\* | 3700     | 8150  | 4450\*  | 3750    | 8200    |
| nsumption |        |          |       |         |         |         |
+-----------+--------+----------+-------+---------+---------+---------+
| E/stocks  | 1245   | 165      | 1410  | 2345    | 365     | 2710    |
+-----------+--------+----------+-------+---------+---------+---------+

> \* Implying an additional amount of white corn used for feed.
>
> \*\* Imports cut back due to higher international prices.

FAS 2005 deliveries from May 1, 2006 to November 24 amounted to about
5.94 million tons, 3.9 white and 2.0 yellow, but total deliveries are
expected to reach 6.14 million tons by the end of April 2007. To date
more than a million tons of grade 2 white corn was delivered plus about
500,000 tons of under grade corn. The following table contains the
details:

  ----------------------- ----------------------- -----------------------
  Deliveries              '000 MT                 \%

  May 1-Nov. 24                                   

  WM1                     2,343                   64.6%

  WM2                     1,002                   27.6%

  WM3+WM0                 283                     7.8%

  Unknown                 315                     

  Total white             3,943                   

  YM1                     1,528                   87.8%

  YM2                     200                     11.5%

  YM3+YM0                 12                      0.7%

  Unknown                 255                     

  Total Yellow            1,995                   

  Total corn              5,938                   65% first grade
  ----------------------- ----------------------- -----------------------

From May to October 2006 only a 142,000 tons of white corn has been used
for feed and industrial use, compared to 435,000 tons during the same
period in 2005. This is an indication of the scarcity of white corn with
the market holding on to even under grade supplies. White corn for
import complying with South Africa's GMO requirements is not readily
available. In 2004/05, 733,000 tons were used for feed and industrial
use, compared to 543,000 tons in 2005/06. Eventually the lower grade
white corn should find its way to the feed mills when the outcome of the
new 2006 crop is more certain. At the moment the December price for
under grade white corn at \$188/mt. is lower than the yellow corn price
at \$215/ton (inland). Interestingly the import cost for Argentine
yellow is \$236/ton F.O.R. Cape Town harbor and \$232/ton in Durban,
making imported corn more viable at the coast but expensive inland.

High local price levels are suppressing domestic and regional demand.

# Trade

Yellow corn supplies are tight but the shortfall is being met by imports
from Argentina. In MY 2005/06, 360,000 tons were imported and unloaded
in the ports of Cape Town, Port Elizabeth, East London and Durban. From
May 2006 to November 24 about 636,000 tons have already been imported,
while total exports only reached 329,000 tons, nearly half the quantity
imported.

Southern African Customs Union (Botswana, Lesotho, Namibia and
Swaziland) sales are the prime export market for the South African
industry averaging about 400,000 tons, 340,000 tons white and 60,000
tons yellow per season. Mozambique and Zimbabwe are the other high
potential markets. Exports to Zimbabwe to date only averaged about
14,000 per month tons as the country experiences severe foreign exchange
constraints.

Trade data from May 2006 to November 24, 2006 follow.

+------------+----------+----------+----------+----------+-----------+
| # EXPORTS  | 10/      | 11/      | 11/      | 11/      | Pr        |
|            | 28-11/03 | 04-11/10 | 11-11/17 | 18-11/24 | ogressive |
| Metric     |          |          |          |          |           |
| tons       |          |          |          |          | Total     |
|            |          |          |          |          | since May |
| November   |          |          |          |          | 1         |
| 06         |          |          |          |          |           |
+------------+----------+----------+----------+----------+-----------+
| #          |          |          |          |          |           |
| White corn |          |          |          |          |           |
+------------+----------+----------+----------+----------+-----------+
| Angola     |          |          |          |          | 3,742     |
+------------+----------+----------+----------+----------+-----------+
| Botswana   | 3392     | 3691     | 2136     | 3921     | 58,965    |
+------------+----------+----------+----------+----------+-----------+
| DRC        |          |          |          |          | 280       |
+------------+----------+----------+----------+----------+-----------+
| Kenya      |          |          |          |          | 2,792     |
+------------+----------+----------+----------+----------+-----------+
| Lesotho    | 1973     | 864      | 2131     | 2673     | 52,754    |
+------------+----------+----------+----------+----------+-----------+
| Malawi     |          |          |          |          | 159       |
+------------+----------+----------+----------+----------+-----------+
| Mozambique | 440      | 2040     | 1892     | 1616     | 24,046    |
+------------+----------+----------+----------+----------+-----------+
| Namibia    | 2853     | 1448     | 2027     | 2158     | 15,060    |
+------------+----------+----------+----------+----------+-----------+
| Swaziland  |          |          |          | 357      | 5,853     |
+------------+----------+----------+----------+----------+-----------+
| Tanzania   |          |          |          |          | 9,289     |
+------------+----------+----------+----------+----------+-----------+
| Zambia     |          |          |          |          | 35        |
+------------+----------+----------+----------+----------+-----------+
| Zimbabwe   | 1690     | 2660     | 1429     | 281      | 101,040   |
+------------+----------+----------+----------+----------+-----------+
| # Total    | 10,348   | 10,703   | 9,615    | 10,906   | 274,015   |
+------------+----------+----------+----------+----------+-----------+
|            |          |          |          |          |           |
+------------+----------+----------+----------+----------+-----------+
| # Yellow   |          |          |          |          |           |
+------------+----------+----------+----------+----------+-----------+
| Botswana   |          |          |          |          | 12,297    |
+------------+----------+----------+----------+----------+-----------+
| Lesotho    |          |          | 105      | 83       | 2,288     |
+------------+----------+----------+----------+----------+-----------+
| Mozambique |          |          |          |          | 880       |
+------------+----------+----------+----------+----------+-----------+
| Namibia    | 432      | 422      | 233      | 122      | 11,300    |
+------------+----------+----------+----------+----------+-----------+
| Swaziland  | 841      | 1024     | 895      | 1858     | 27,980    |
+------------+----------+----------+----------+----------+-----------+
| Zimbabwe   |          |          |          |          | 264       |
+------------+----------+----------+----------+----------+-----------+
| # Total    | 1,273    | 1,446    | 1,233    | 2,063    | 55,009    |
+------------+----------+----------+----------+----------+-----------+
| **Total    | 11,621   | 12,149   | 10,848   | 12,969   | 329,024   |
| corn**     |          |          |          |          |           |
+------------+----------+----------+----------+----------+-----------+
|            |          |          |          |          |           |
+------------+----------+----------+----------+----------+-----------+
| # IMPORTS  |          |          |          |          |           |
+------------+----------+----------+----------+----------+-----------+
| **Yellow** | 12,175   | 36,191   | 6,371    | 12,542   | 636,147   |
+------------+----------+----------+----------+----------+-----------+

###### Prices 

Low prices were the main reason for the 2005 cutback in area planted and
production. Farmers claimed that \$100/ton was below their cost of
production and decided to cut back production. This had a major positive
effect on prices and prices have since increased even further with the
December 06 white corn price jumping from \$170/ton at the end of
September to \$197/ton at the end of November, while yellow prices
jumped from \$167/ton to \$216/ton. Price prospects for the new 2006
crop are positive due to increased international demand and low stock
levels. Increasing international ethanol production is also bolstering
demand.

Current SAFEX futures prices are:

  ------------ --------------- --------------- --------------- ---------------
  Rand/MT      US\$/MT                                         

  White corn   September 06    December 06     March 07        August 06

  07/27/06     R1341=\$191.6   R1377=\$196.7   R1385=\$197.9   R1325=\$189.3

  08/28/06     R1248=\$174.5   R1290=\$180.4   R1291=\$180.6   October 06

  09/26/06     July 07         R1301=\$170.0   R1310=\$171.2   R1270=\$166.0

  10/30/06     R1191=\$159.2   R1287=\$171.6   R1314=\$175.2   May 07

  11/28/06     R1309=\$181.3   R1421=\$196.8   R1467=\$203.2   R1330=\$184.2

                                                               

  WOPT         September 06    December 06                     

  07/27/06     R1213=\$173.3   R1255=\$179.3   March 07        

  08/28/06     R1140=\$159.4   R1180=\$165.0   R1225=\$171.3   October 06

  09/26/06     November 06     R1200=\$156.9   R1245=\$162.7   R1170=\$152.9

  10/30/06     R1170=\$156.0   R1194=\$159.2   R1230=\$164.0   

  11/28/06                     R1356=\$187.8   R1385=\$191.8   

                                                               

  Yellow corn  September 06    December 06     March 07        July 06

  07/27/06     R1226=\$175.1   R1238=\$176.9   R1255=\$179.3   R1207=\$172.4

  08/28/06     R1192=\$166.7   R1204=\$168.4   R1213=\$169.7   October 06

  09/26/06     July 07         R1275=\$166.7   R1282=\$167.6   R1260=\$164.7

  10/30/06     R1292=\$172.3   R1285=\$171.3   R1302=\$173.6   May 07

  11/28/06     R1270=\$175.9   R1557=\$215.7   R1518=\$210.3   R1300=\$180.1
  ------------ --------------- --------------- --------------- ---------------

There has recently been criticism of the high votality on the SAFEX
futures market with some daily movements at the limit. The crop
estimates are blamed but as estimates are only released once a month
this argument is not valid to explain the major short-term movements.
Local corn prices are the result of international prices and the
Dollar/Rand exchange rate, setting maximum (import parity) and minimum
(export parity), prices. The final price is determined by the local
supply and demand situation. Fortunately the industry is well served by
the independent SA Grain Information Service, (see www.sagis.org.za)
which publishes reliable figures on the commercial crop actually
delivered into the silos, making analysis easier.

The pricing mechanism works well for yellow corn which is in short
supply and for which adequate supplies are freely available on the world
market. Shortfalls are imported for use at the coast where inland
transport costs makes the local crop less competitive. Local demand
amounts to about 3.5 million tons per annum. The price is interesting,
the December 06 price jumped from \$171/ton at the end of October to
\$215/ton at the end of November while the March 07 price is \$210/ton.
After the harvest starting in May the price reverts to \$180/ton. The
higher international prices will thus have a positive effect on the
local producer price.

White corn, however, depends on its own Southern African market and
market factors, as international trade and availability is limited.
Milling for human consumption is the main outlet at about 3.5 million
tons per annum while the total commercial domestic use is about 4.5
million tons. Any surpluses will thus have a negative effect on price
while a shortage will really push up prices. High transport costs limits
exports to regional sales, unfortunately regional demand is variable and
curtailed by financial constraints. Farmers, however, show a tendency to
over produce white corn and under produce yellow. These crops are not
fully complimentary as they are produced for different markets and
claiming that the total demand for corn is 8 million tons does not give
a true reflection of the situation. The March 2007 white corn price is
still over \$200/ton but this drops to \$184/ton in May after the
harvest.

**WHEAT**

<table>
<colgroup>
<col style="width: 21%" />
<col style="width: 7%" />
<col style="width: 9%" />
<col style="width: 9%" />
<col style="width: 7%" />
<col style="width: 9%" />
<col style="width: 9%" />
<col style="width: 7%" />
<col style="width: 9%" />
<col style="width: 9%" />
</colgroup>
<tbody>
<tr class="odd">
<td><strong>PSD Table</strong></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td><strong>Country</strong></td>
<td colspan="2"><strong>South Africa</strong></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td><strong>Commodity</strong></td>
<td colspan="2"><strong>Wheat</strong></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td colspan="2"></td>
<td></td>
</tr>
<tr class="even">
<td>1000 HA, 1000 MT</td>
<td>2004</td>
<td>Revised</td>
<td></td>
<td>2005</td>
<td>Estimate</td>
<td></td>
<td>2006</td>
<td>Forecast</td>
<td></td>
</tr>
<tr class="odd">
<td></td>
<td>USDA<br />
Official</td>
<td>Post<br />
Estimate</td>
<td>Post<br />
Estimate<br />
New</td>
<td>USDA<br />
Official</td>
<td>Post<br />
Estimate</td>
<td>Post<br />
Estimate<br />
New</td>
<td>USDA<br />
Official</td>
<td>Post<br />
Estimate</td>
<td>Post<br />
Estimate<br />
New</td>
</tr>
<tr class="even">
<td><h2 id="market-year-begin-1">Market Year Begin</h2></td>
<td></td>
<td>10/2004</td>
<td>10/2004</td>
<td></td>
<td>10/2005</td>
<td>10/2005</td>
<td></td>
<td>10/2006</td>
<td>10/2006</td>
</tr>
<tr class="odd">
<td>Area Harvested</td>
<td>830</td>
<td>830</td>
<td>830</td>
<td>800</td>
<td>805</td>
<td>805</td>
<td>770</td>
<td>771</td>
<td>765</td>
</tr>
<tr class="even">
<td>Beginning Stocks</td>
<td>598</td>
<td>598</td>
<td>598</td>
<td>574</td>
<td>595</td>
<td>594</td>
<td>583</td>
<td>590</td>
<td>592</td>
</tr>
<tr class="odd">
<td>Production</td>
<td>1680</td>
<td>1680</td>
<td>1680</td>
<td>1886</td>
<td>1905</td>
<td>1905</td>
<td>2190</td>
<td>2195</td>
<td>2169</td>
</tr>
<tr class="even">
<td>MY Imports</td>
<td>1396</td>
<td>1395</td>
<td>1396</td>
<td>1211</td>
<td>1211</td>
<td>1211</td>
<td>1000</td>
<td>1000</td>
<td>1000</td>
</tr>
<tr class="odd">
<td>TY Imports</td>
<td>1407</td>
<td>1407</td>
<td>1407</td>
<td>1242</td>
<td>1242</td>
<td>1242</td>
<td>1000</td>
<td>1000</td>
<td>1000</td>
</tr>
<tr class="even">
<td>TY Imp. from U.S.</td>
<td>264</td>
<td>264</td>
<td>264</td>
<td>157</td>
<td>157</td>
<td>157</td>
<td>0</td>
<td>0</td>
<td>0</td>
</tr>
<tr class="odd">
<td>Total Supply</td>
<td>3674</td>
<td>3673</td>
<td>3674</td>
<td>3671</td>
<td>3711</td>
<td>3710</td>
<td>3773</td>
<td>3785</td>
<td>3761</td>
</tr>
<tr class="even">
<td>MY Exports</td>
<td>324</td>
<td>326</td>
<td>324</td>
<td>281</td>
<td>280</td>
<td>278</td>
<td>350</td>
<td>300</td>
<td>300</td>
</tr>
<tr class="odd">
<td>TY Exports</td>
<td>338</td>
<td>338</td>
<td>338</td>
<td>296</td>
<td>296</td>
<td>296</td>
<td>350</td>
<td>300</td>
<td>300</td>
</tr>
<tr class="even">
<td>Feed Consumption</td>
<td>10</td>
<td>5</td>
<td>10</td>
<td>10</td>
<td>10</td>
<td>25</td>
<td>10</td>
<td>10</td>
<td>10</td>
</tr>
<tr class="odd">
<td>FSI Consumption</td>
<td>2766</td>
<td>2747</td>
<td>2746</td>
<td>2797</td>
<td>2831</td>
<td>2815</td>
<td>2840</td>
<td>2840</td>
<td>2840</td>
</tr>
<tr class="even">
<td>Total Consumption</td>
<td>2776</td>
<td>2752</td>
<td>2756</td>
<td>2807</td>
<td>2841</td>
<td>2840</td>
<td>2850</td>
<td>2850</td>
<td>2850</td>
</tr>
<tr class="odd">
<td>Ending Stocks</td>
<td>574</td>
<td>595</td>
<td>594</td>
<td>583</td>
<td>590</td>
<td>592</td>
<td>573</td>
<td>635</td>
<td>611</td>
</tr>
</tbody>
</table>

# Production

According to figures released by the Crop Estimates Committee the 2006
wheat crop is estimated at 2.17 million tons, approximately 264,000 tons
or 14% higher than the previous season, and 170,000 tons higher than the
5-year average of 2 million tons. The main producing area is the Free
State, with 846,000 tons or 39% of the total, against the 580,000 tons
of the previous season. Next is the Western Cape with 684,000 tons
versus the 645,000 tons the previous season.

The expected yield for the Free State is 2.35 tons per hectare compared
with the 1.53 tons per hectare the previous season and for the Western
Cape 2.4 tons per hectare as against the 2.1 tons per hectare the
previous season.

The following table contains the production details by province:

  --------------- -------------- -------------- -------------- --------------
  HA. MT.         Area 2005      Production     Area 2006      Production
                                                               est.

  Western Cape    302,000        645,000        285,000        684,000

  Northern Cape   48,500         306,000        42,000         252,000

  Free State      380,000        580,000        360,000        846,000

  Eastern Cape    4,000          14,500         2,500          8,750

  Kwazulu-Natal   9,000          41,500         6,800          30,600

  Mpumalanga      18,000         92,000         15,000         84,000

  Limpopo         11,000         50,000         22,000         99,000

  Gauteng         2,500          14,000         2,000          10,800

  North West      30,000         162,000        29,500         153,400

  TOTAL           805,000        1,905,000      764,800        2,168,550
  --------------- -------------- -------------- -------------- --------------

South Africa is a net importer of wheat and with an expected production
of 2.2 million tons, South Africa would still have to import between
750,000 and a million tons of wheat to meet domestic consumption needs.
Prices are, however, expected to increase in line with the world trend.

# Consumption 

Milling for flour increased by 1.7% from 2.73 million tons in 2004/05 to
2.78 million tons in 2005/06. Consumption growth is slow and does not
even keep pace with the increase in population.

**Trade**

In the October/September 2005/06 marketing year South Africa exported
93,000 tons of South African wheat and 18,000 tons of flour (wheat
equivalent) plus 167,000 tons of imported wheat for a total of 278,000
tons.

In the October/September 2004/05 season South African exports amounted
to 158,000 tons including 135,000 tons of wheat and 23,000 tons of flour
while imported wheat exported amounted 168,000 for a total of 326,000
tons.

In 2005/06 imports for own use reached 1.06 million tons compared to
1.23 million tons in 2004/05. Imports for re-export amounted to 146,000
tons compared to 168,000 tons in 2004/05. Imports and exports for the
October 2005 to September 2006 season, showing small discrepancies as it
is calculated on a weekly basis, follow:

  ------------ ----------- ------------ ----------- ----------- -----------
  Whole grain  MT          Imports      For Africa  For South   Total
  Exports to:              from:                    Africa      

  Botswana     78,422      USA          25,982      88,651      114,633

  Lesotho      71,071      Australia    0           59,927      59,927

  Namibia      20,442      Argentina    32,265      398,902     431,167

  Swaziland    34,046      Germany      78,092      355,168     433,260

  Zambia       53,118      Ukraine      0           85,979      85,979

  Zimbabwe     2,484       Brazil       6,301       0           6,301

                           Canada       10,097      59,372      69,469

                           France       0           9,920       9,920

  Total        259,583     Total        152,737     1,057,919   1,210,656
  ------------ ----------- ------------ ----------- ----------- -----------

# Prices

Current SAFEX futures market prices are:

  ------------- --------------- --------------- --------------- ---------------
  Rand/MT \$/MT March 07        May 07          September 07    December 06

  11/28/2006    R1822=\$252.4   R1857=\$257.2   R1930=\$267.3   R1767=\$244.7

  10/30/2006    R1900=\$253.3   R1922=\$256.3   R1990=\$265.3   R1847=\$246.3

  09/27/2006    R1780=\$232.7   R1740=\$227.5                   R1770=\$231.4

  08/28/2006    R1677=\$234.5   R1620=\$226.6                   R1641=\$229.5

  07/27/2006    R1586=\$226.6                                   R1538=\$219.7

  06/28/2006    R1520=\$209.7                                   R1551=\$213.9
  ------------- --------------- --------------- --------------- ---------------