Maize near record highs as markets wait for crucial rains

December 14, 2015 9:58 AM

The December white maize contract was 2.8 percent lower at 3,992 rand a tonne, near the record 4,100 rand a tonne it scaled last week, according to Thomson Reuters data.

A farmer checks on his maiz crop in a file photo. REUTERS/Siphiwe Sibeko

South African maize prices remained near record highs on Monday on drought jitters, with the only pressure coming from a rand rebound after President Jacob Zuma named widely-respected Pravin Gordhan as finance minister.

The December white maize contract was 2.8 percent lower at 3,992 rand a tonne, near the record 4,100 rand a tonne it scaled last week, according to Thomson Reuters data.

White maize is the staple crop that provides the main source of calories for South Africa's lower-income households.

Traders said the main reason behind the dip was the rand's more than 5 percent surge after Zuma gave Gordhan the job late on Sunday, in a dramatic U-turn that gave Africa's most industrialised economy its third finance minister in a week.

Rand weakness makes it more expensive to import maize and shortages are widely expected as farmers grapple with a searing drought exacerbated by an El Nino weather pattern.

This in turn puts upward pressure on food prices and inflation, with South Africa's poor black majority being the hardest hit - a scenario that could have political consequences for the ruling African National Congress (ANC) ahead of local elections next year.

The weather remains a concern.

"We had a little bit of rain over the weekend in areas where we need it in the Free State but we need more. And we need follow-up rain," said one trader.

The forecast remains bad for grain farmers, with below-average rainfall and above-average temperatures expected for most of the country throughout the course of the southern hemisphere summer, according to the South African Weather Service.

"The El Nino may peak this month or next month but even when it starts weakening we may still have dry conditions because it is so strong," Cobus Olivier, a prediction scientist at the weather service, told Reuters.

Drought conditions last season shriveled the crop by a third to 9.94 million tonnes, the lowest since 2007.