Marketing of maize: Planning ahead is crucial
MANAGEMENT AND DEVELOPMENT
SPECIALIST AND EDUCATOR
Whereas in the past the selling of maize was a lot easier when the farmer would grow the maize, deliver it to the local co-op and get money for his crop at a regulated market price, nowadays marketing needs to be carefully planned ahead of time to maximise opportunities in your environment.
A proper grain marketing plan requires the producer to calculate his price target – the price that makes the effort and risk worthwhile. This means covering costs and also earning profits otherwise the exercise is not worth the effort. Different marketing strategies must be identified to achieve the target prices. This could take several different forms or be aimed at one buyer, but it should be flexible regularly reviewed.
WHERE CAN I MARKET MY MAIZE?
When considering where to market maize we need to think about the uses of maize, like who uses it, how and where it is used. Apart from household use, maize can be marketed in a number of ways. In South Africa the leading grain buyers are co-operatives like NWK, Senwes, Suidwes, TWK, Afgri and GWK. There are also many private buyers who you could market your maize to like maize milling companies, feed companies, feedlots, piggeries, chicken farms and small scale hawkers. You may also have successfully marketed your maize yourself by selling green mealies or by building relationships with reliable traders. All possible markets need to be investigated.
There are a number of options to consider when deciding where to sell your maize:
Locality: Because of high transport costs we need to find where the closest market would be. You may receive less rand per ton but by eliminating transport costs you could still make a good profit. Marketing opportunities for maize produced by farmers living close to big centres or major roads are less complicated than for those living in remote regions like the foothills of the Drakensberg. Many small scale farmers are growing stronger because of improved knowledge and using modern technologies in farming. Unfortunately they are still facing challenges at harvest because there are no silos to store their crop so they have to load the grain directly onto trailers and cope with poor roads to the markets. Their marketing channel holds many challenges and may compromise their ability to compete for top prices in the market.
Time of the year: Maize is almost always readily available in South Africa, even if the harvest is not good. This means traders seldom have to go far to find the maize they need. Farmers have to compete for the best prices and those who live in remote areas may have problems selling their crops. Anticipate the challenges and make plans ahead of time.
Price: The market place for our grain is dominated by a central role-player known as the South African Futures Exchange (Safex) which serves as a buying and selling platform. A certain expertise is necessary to use this futures exchange effectively; as a result many farmers rely on agents’ advice or to do the trading on their behalf. Commercial maize farmers should make an effort to understand how Safex operates.
Location differential: It is important for farmers to know what the location differential is. The location differential is essentially the transport cost in moving your grain from your farm to the central point for grain trading at Randfontein in Gauteng, so Safex subtracts that cost off your payment. If a local business buys grain from Randfontein he would pay location differential too. Sellers must understand this is a point for negotiation and the location differential fee could be a shared cost. Being informed empowers the negotiation process.
Product: Remember even before we plant a maize crop we need to identify which products are in demand in your area. Perhaps there is a feed company in your area which would be a buyer of yellow maize. Or maybe there is a maize milling operation in your area which would buy white maize. These are crucial factors to consider.
Size of the harvest: When a bumper harvest is realised, traders can pick and choose so prices are likely to be depressed. This influences on-farm profitability levels. Overproduction depresses prices and can make the process of growing maize unprofitable. This is why it is no good planting more maize than you can use if a market has not been identified.
EXPORT MARKET OPPORTUNITIES
Many stakeholders question why we want to sell into the export market. South Africa annually produces more maize than our internal consumption, even in drought years, so we need a steady flow of maize out the country. This export market serves to balance out those years of overproduction which cause our maize prices to decline. Stable grain prices empower farmers to plan better and to make more secure decisions about how much maize they will plant each new season.
YOUR OWN ROAD MAP
Don’t wait until the grain is in your hands before you plan how you will sell your maize. Having a marketing plan means you will have a road map developed. It outlines your objectives. It empowers you to make better marketing decisions and you have clearly identified how much risk you are able to tolerate.
The grain you produce is your livelihood. It is crucial for you to make the effort to market it as well as you can. Use all the available resources to find the best buyer which will translate into the best profit margins. Don’t instinctively sell your maize to the easiest and most convenient outlet. With a bit of marketing strategy you will increase your potential income and possibly forge new business relationships which will be beneficial into the future.
Publication: May 2022