By Fin24, News24. Photo by iStock
Johannesburg - South African prices for yellow maize, used mostly for animal feed, scaled their highest peaks in 2015 on Monday as drought concerns mounted, fuelling food price pressures in the SA economy.
Another poor maize harvest would have serious implications for SA as it would pressure food prices and inflation and so could influence the timing of rate hikes by the central bank, which is in a tightening cycle.
The December contract for yellow maize rose 2.7% on the day to R3 040 rand a tonne, its highest in 2015 and bringing its gains so far in the year to around 41%.
It is closing in on the record prices of more than R3 400 rand it reached in March of last year. White maize prices increased 2.6% on the day to R3 184 a tonne, near its 2015 peaks of more than R3 400 a tonne hit in July.
"There is a bit of a panic in our market today, everyone is talking about drought. But even if the rains are late we think they will come," said one maize trader.
The South African Weather Service said last week that an El Nino weather system, which was already forecast to bring drought conditions for much of the southern hemisphere's summer, now looks like it will extend into autumn next year.
Dry conditions last year cut South Africa's staple maize crop by a third and the prospect of another drought pushed prices in July for white maize - the staple crop for the region - to near record highs.
South African maize farmers intend to plant 2.55 million hectares of the staple grain in the 2016 season, its lowest level since 2011 due to drought, the country's Crop Estimates Committee (CEC) said last week.
With rising prices, poor households would feel the most pain, which could have political implications for the ANC in local elections due next year.