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Corporate interest before national interest?

July 2011

Jannie de Villiers, CEO

Since as far back as 2009, Grain SA has been endeavouring to persuade the role players in the grain value chain that it is in the best interest of the country and food security that the quantity of grain exported is made public. True, SAGIS on a monthly and even weekly basis, supplies the industry with the historical information of grain exported, but nobody knows just how much grain and oilseeds have already been sold to foreign buyers collectively which have not yet left the borders of the country.

With the bountiful maize crops and an increase in the production of soybeans these past two seasons, Grain SA and other role players were hard at work finding new markets for our surplus stocks. Production in our traditional African markets improved to such a degree that most of the current South African exports are focused on deep sea exports and not African countries. Most of these “new” clients for South African maize are not small buyers. South Korea, Mexico, Italy and Japan do not buy only one or two boat loads annually.

In view of the fact that we have for a considerable time already been trading maize below export parity, I would not in the least be surprised if some of these countries have not already tied up large quantities of South African maize. “Tied up”, in this context, means “purchased”, but still within South African borders. On a monthly basis these stocks are blithely added to our stocks that are published by SAGIS, leaving everyone thinking that we have sufficient stocks of grain and that food security is not compromised. Moreover, we are marketing our grain even more aggressively to attract buyers to South Africa to buy our “large surpluses”.

One of the first lectures I received when entering the grain industry in 1985 was the story of the “great grain robbery”. The story goes that over a long weekend during the Cold War years, the Russians in a very quiet manner, purchased large quantities of USA corn from various traders and when the Americans rubbed the sleep from their eyes on the Monday morning, almost the entire USA crop had been sold and were in Russian hands. Needless to say that prices increased astronomically overnight. This forced the USA to pass legislation to have traders report all exports of grains to the US Department of Agriculture regardless of whether the grain had left the borders of the country or not.

Must South Africa first experience its own “grain robbery” before everyone realises that it is better and in everybody’s best interests to pass this information on to the market? If we export more than 2,1 million tonnes of maize, the price should increase by plus minus R1 000 per ton towards import parity. It would be disastrous for consumers, but actually also for producers, because for the past nine months we have almost given away maize to the Koreans, Mexicans, Japanese and Europeans.

However, it can also be a saving grace, because it will stimulate the market to increase production in the coming season. Hopefully, if we publish the export intentions for all, we might be able to realise better prices in the coming season. I do wonder whether consumers in South Africa know how lucky they are that the rand is strong while maize is fetching record prices in the rest of the world with us supplying it to them at below export parity. However, given what has been reported herein, there are huge repercussions and risks involved for them.

After two years of crying “wolf, wolf“ by Grain SA, it seems that blood will first have to flow before the sheep herders (in this case government) will rise to carrying out their  shepherding duties. Come on now Department of Agriculture, Forestry and Fisheries! Accept your responsibilities by informing the market on a monthly basis of the “slots” already reserved in the export harbours for future exports. It is in everyone’s best interest.

Publication: July 2011

Section: Editorial