Maize prices could reach unprecedented heights

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Windhoek

Another drought is likely to increase the prices of maize meal and other staple products in the country to previously unknown heights. Even though Namibia would be able to source grains from open markets to complement the expected low harvest of about 45 000 tonnes, the prices are set to be high, because of high exchange rates and this could have a negative effect on retail prices for consumers.

“The Namibian dollar devalued against the US dollar from N$11.50 in January 2015 to current levels of N$12.75 to the US dollar. This alone would already have had a big effect on basic food prices, as they are all U.S. dollar-based traded internationally,” says the CEO of Namib Mills, Feedmaster and the Namibia Poultry Industry, Ian Collard, in an interview with New Era.

“Availability, albeit from far abroad, will not be a problem. Logistics, milling and distribution can be handled by the local milling industry, as they have the necessary skills and capacity to handle these volumes, as this was already done during the drought of 2013,” he notes.

“Origin of white maize can be from South Africa, Zambia (with a surplus of 640 000 tonnes earmarked for exports) and North America. The total maize harvest of the world is very near to 970 million tonnes of which 70 million tonnes are white maize,” he said.

The milling industry does have the capabilities and capacity to facilitate the milling and supply of milled cereals to people in dire straits. This will only mean more of the same for the milling industry. The negative effect mainly will be the access to basic food for people affected by the drought.

In a normal year most subsistence farmers would produce their own food, mainly in the form of mahangu. In a dry year this is not possible, which leads to the problem that such farmers are deprived of access to their mahangu due to the lack of rain. They furthermore do not have funds to substitute their food, mostly maize meal, as they do not have the funds to purchase substitute products.

Although the total deficit of some 210 000 tonnes of cereals for this harvesting year, compared to the consumption of Namibia seems quite high, Namibia is running a deficit on cereals every year, as we are net importers of maize and wheat and to a lesser extent also mahangu.

“The drought only means, that we as a country will have to import more of these products in order to supply in the needs of the population. We will still be net importers of these cereals for quite some time,” he said.

“We have to take into consideration that the whole region was negatively affected by this year’s drought, also South Africa. This had driven up prices of white maize previously trading on export-parity levels to import-parity levels. This difference equates to about N$1000 per tonne of maize more expensive than prior to the drought.”

“This happened during the months of January and February 2015 when price increases of up to 17 percent were announced, after a drought became apparent. Although South Africa experienced a drought this year, they still harvested nearly 11 million tonnes of maize (white and yellow), of which at least 6.5 million will be white maize.

“The lower harvest resulted in the movement from export to import-parity prices. Availability of the volumes needed by Namibia was however never at risk, as we only need about 2 percent of their white maize harvest in order to satisfy our needs,” Collard explained.

He says supply of wheat is currently not an issue, as Russia and the former Soviet Union states are coming on stream with wheat production. “This led to recent price reductions of wheat flour in Namibia. We, however, must warn against possible price increases again on wheat flour based solely on exchange rate fluctuations, should it remain this weak or even deteriorate further.”

“Namibia only produces a small percentage of its wheat requirements, mainly due to the fact that it is a winter crop and Namibia only receives rain in the summer, thus it can only be produced under irrigation. This limits the volumes substantially.”
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