South Africa is swimming in maize. For farmers that means a choice, between commercial suicide on the one hand and reaching for the impossible dream of a production cartel on the other. For government the choice is somewhat easier: Allow a globally competitive, export-orientated sector to flourish, providing food security and a modicum of energy independence to boot – or hobble empowerment efforts in the agricultural sector by doing nothing. By PHILLIP DE WET.
Thanks to good rains and improved seed and technology, this year's maize crop was South Africa's second biggest ever. And thanks to a strong rand and favourable global weather, maize prices are so low that farmers can barely give the stuff away. At current prices, virtually every maize farmer is losing between R300 and R450 for each ton of maize produced, and between them they produced around 12 million tons. If the same thing happens in 2011 – and there is currently really no reason to believe it won't – farmers predict that somewhere between a quarter and a third of them will go out of business before the end of that year, even as the country runs out of storage space to hold their produce. That means a disaster in employment next year, but much greater trouble with everything from food security to land redistribution for a long time to follow.
In part the problem was caused by forces of nature - weather and currency. 2010 was supposed to be a drought year, and the prospect of high prices encouraged planting. Except that the El Niño/La Niña cycle didn't play ball, instead bringing excellent conditions. The rand too was supposed to decline from its strong position in 2009, pushing up prices in the local market, but instead strengthened even further, giving cheaper input costs on the one hand while taking away price support with the other.
So we have too much maize. Way, way too much. Based on historic consumption, a highly accurate measure, South Africa already has half of the maize that will be required during 2011 in silos right now. Farmers could theoretically sell their stock, at a considerable loss, on the international market, but poor infrastructure allows for the export of only a fraction of the crop, and that capacity is declining. Many farmers have bought livestock and set up feedlots, which effectively allows them to turn their maize into meat, but there is a limit to the number of cattle in the country and high demand has reduced availability and increased prices to a point where that is no longer viable.
Farmers, hardly blind to the peril, are trying to find a solution outside of direct government intervention. You'd think that money or price support, whether by way of a bailout or national stockpiling, would be welcome, but you'd be wrong. The almost universally white and almost entirely Afrikaans-speaking farming community has a deep distrust of government intervention, which seems about equal parts ideological and political.
That leaves them with an Opec-like plan to control production. A current mainstream proposal calls for maize farmers to voluntarily plant a minimum of 15% fewer hectares of maize in 2011, while buying a portion of this year’s production on the open market, then pushing both that surplus and their reduced new production back on to the market next year. That, according to the calculations of advocates, will make everyone involved a lot more money than producing to their maximum ability.
If everyone plays along, that is. Like any cartel plan, a minority of producers anticipating a profit due to artificially high prices can easily bring the whole thing tumbling down. Farmers are counting on a combination of Christian values, a sense of brotherhood, enlightened self-interest and community censure to bring other planters in line, but no combination of those has ever proven particularly effective in similar situations. The lure of profit invariably wins.
