1. An Overview of the Maize Surplus Situation Department of Agriculture, Forestry and Fisheries Prepared by Billy Morokolo Director: marketing

2. Genesis of the maize surplus  Continuous good production outcomes over the past 3 years have led to the accumulation of carry-over maize stocks in the economy leading to the surplus,  In addition to favourable weather conditions, the varieties of maize planted produced higher yields per hectare than before,  Globally, maize carry-over stocks are also at the highest level leading to depressed world prices for maize as reflected at the Chicago Board on Trade (CBOT),  The surplus production has consequently led to an erosion of local producer prices to import parity position, 2

3. Genesis of the maize surplus…………….  Favourable weather conditions in Southern Africa have further boosted production particularly in Zambia and Malawi where record harvests were achieved,  South Africa used to be a traditional exporter of maize to Southern Africa and improved production in that part of the continent has unfortunately displaced our exports into that part of the continent,  In addition, the African market is reluctant to buy our maize due to its genetic modification nature,  Normal exports have therefore been incapable of achieving market balance,  The ensuing lower prices have resulted in some farmers not been able to produce maize profitably, 3

4. Progress to date  The department in collaboration explored alternative markets for the surplus maize into China, Egypt and Tunisia,  The targeted unfortunately not did commit to taking our maize,  DAFF, in collaboration with the NAMC, worked with the industry to assess the feasibility of establishing an export pool for the surplus maize as a measure to stabilize prices,  Collective view from the team investigating the viability of an export pool was that it would benefit producers in the short term and not long term as anticipated, 4

5. Progress to date………..  Once a pool is established, prices would go up and encourage increased production, thus stimulating a cyclical trend,  Once local prices increase closer to export parity in response to the established pool, our maize will become less competitive in the export markets,  That the pool will create an artificially higher price above the free market price,  That the industry needs to develop a long term strategy rather than dealing with challenges in an ad hoc manner, 5

6. Recommendations by the team: 1. Local market development and value adding  Noting that more yellow maize is demanded than white maize, the team recommended an aggressive development of yellow maize and change historical perception of farmers against yellow maize.  Explore localized markets and bio-fuels and animal feed, particularly as a strategy to produce more chickens locally and reduce imports,  Support increased production of wheat, soya bean and sunflower 6

7. Recommendations by the team:2. Export market development  African countries use white maize (WM) and we’ve exported when there were regional shortages (“demand-pull”). Now all Africa countries have good crops due to improved productivity and the WM demand is down.  Deep sea exports to Korea, Japan, Taiwan etc demand yellow maize (YM) and we should match what they want (“supply- push”). Understanding the deep-sea export market is necessary and to be able to move large quantities and a consistent supply. A long-term positioning as a net exporter of YM is now essential.  An export agency or trade desk must be considered. 7

8. General recommendations  That the current surplus maize situation will create an avenue to open debate on the use of maize for biofuel,  That South Africa should focus on rebalancing the production of yellow versus white maize,  That a strategic approach need to be considered to have a long term view about the industry value chain,  That the surplus maize could be used as feedstock to expand the maize based downstream industries, END 8