A bumper crop should have been good news for South African maize farmers, but market forces are saying otherwise.
It’s been a rough few years for the country’s agriculture producers. A hot, dry El Niño climate pattern that swept across southern Africa made 2015 the driest year on record in South Africa. 2016 offered little respite until late spring, when the heavens opened and crops were able to recover.
That was supposed to make this year especially successful for corn farmers, who produced the biggest crop on record in South Africa’s history, according to the country’s agriculture department (pdf). At an estimated 15 million tons, the crop is 101% bigger than last year’s harvest (which was the smallest in almost 10 years). That translates to about 5,000 tons more than South Africa needs each year.
But instead of celebrating, most farmers will now look to recover from the damage wrought by the last few years. The record drought and fears of food shortages pushed the price of maize to more than 5000 rand ($392) per ton last year. Whatever profit that was generated by that high price was likely quickly wiped out, as many already indebted farmers relied on new debt to get seeds into field.
At the same time, the South African rand reached record new lows against the dollar at the end of 2015, forcing farmers to pay hiked up prices on imported machinery, fertilizers, and agrochemicals.
Farmers have little power to influence the maize prices set at the Johannesburg Stock Exchange—they’re “a price taker, not maker” explains Wandile Sihlobo, head agri-economist at South Africa’s Agricultural Business Chamber. This year, due to the bumper crop, the price has been set at 1,800 rand ($140) per ton. That means farmers who spent about 8,000 rand ($626) per hectare on their input costs may make about 10,000 rand ($783) thanks to the bumper crop. That will mostly go towards transportation, post-production costs, and debt repayment, says Sihlobo, leaving little over to regroup.
South Africa’s farmers seem to be increasingly caught between mercurial markets and volatile weather in the age of climate change. Increasing automation and the country’s recent slide into recession likely won’t help.