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BUSINESS & POLICY: South Africa (GE) corn surplus trapped by surging Rand as rail lines favor coal



                                  PART 1


------------------------------- GENET-news -------------------------------

TITLE:   SOUTH AFRICA CORN SURPLUS TRAPPED BY SURGING RAND AS RAIL LINES FAVOR COAL

SOURCE:  Bloomberg, USA

AUTHOR:  Carli Lourens & Mike Cohen

URL:     http://www.bloomberg.com/news/2010-11-24/south-africa-corn-surplus-trapped-by-surging-rand-as-rail-lines-favor-coal.html

DATE:    24.11.2010

SUMMARY: "Favorable weather and genetically modified seeds have given South African corn farmers their biggest harvest since 1982. If only it could be sold. [...] ?They can?t get it out because of the rand, because of infrastructure, because some countries don?t want it,? Henk van de Graaf, assistant general manager of the Pretoria-based TLU SA farmers union, said in an interview. ?It impacts the economics of the little farming towns who live off the farmers. Businesses in the towns close down, there is a real snowball effect.?"

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SOUTH AFRICA CORN SURPLUS TRAPPED BY SURGING RAND AS RAIL LINES FAVOR COAL

Favorable weather and genetically modified seeds have given South African corn farmers their biggest harvest since 1982. If only it could be sold.

Dilapidated rail lines and a surging currency are trapping a record corn surplus within the country?s borders. The buildup may force growers out of business and cut jobs in agriculture, the biggest employer in a nation where one in four is without work. And it has caused the benchmark corn price in Johannesburg to slump 19 percent in dollar terms this year, while its U.S. equivalent has risen by 33 percent.

?They can?t get it out because of the rand, because of infrastructure, because some countries don?t want it,? Henk van de Graaf, assistant general manager of the Pretoria-based TLU SA farmers union, said in an interview. ?It impacts the economics of the little farming towns who live off the farmers. Businesses in the towns close down, there is a real snowball effect.?

Competition authorities are considering a request by Grain SA, the Bothaville-based growers? organization, to allow it to hold the surplus off the domestic market to support prices. The government has tried, and failed, to find buyers in China, Egypt and Tunisia, Tina Joemat-Pettersson, the country?s agriculture minister, told lawmakers in Cape Town on Nov. 9.

Today the government?s Crop Estimates Committee will probably announce a final crop assessment of 12.9 million metric tons, according to the median estimate of 10 traders surveyed by Bloomberg. That could result in a 4.5 million ton surplus, according to Joemat-Pettersson, triple last season?s exports.

Bumper Harvests

South African farmers have compounded their difficulties by using genetically modified seeds, disliked across much of Africa, while at the same time allocating three-fifths of their crop to the white variety of the grain, popular on the continent but not in Europe or Asia. This year?s surplus comes after large harvests in 2009 and 2008.

Shipments have been further hindered by bumper harvests in southern African countries, where South Africa has traditionally trucked excess grain. While corn has been exported to South Korea, Kuwait, Spain and Japan, an inability to transport significant amounts of grain to ports has thwarted previous efforts to develop new markets.

?It?s been an absolute disaster,? said John Gordon, who retired last year as chairman of the South African Cereal and Oil Seed Traders Association, from Johannesburg. ?It?s the rail system that?s the problem. Grain is not profitable for them.?

Idled Lines

Transnet Freight Rail Ltd., the country?s freight rail monopoly, is short of locomotives. Coal is easier to transport because large quantities can be loaded at one location, Sandile Simelane, a spokesman for the Johannesburg-based, state-owned company, said by e-mail.

Transnet won?t repair 3,255 kilometers (2,023 miles) of idled rural lines because it wants private investors to run them, Public Enterprises Minister Malusi Gigaba said in a Nov. 23 reply to parliamentary questions. His ministry oversees Transnet.

?Our infrastructure has gone dramatically backwards,? said Ernst Janovsky, agribusiness head at Johannesburg?s Absa Group Ltd., the biggest lender to South African farmers. ?You struggle to export one to two million tons? annually.

Even as farmers can?t get their corn to ports, global demand may exceed production by 18.8 million tons this year, the U.S. Department of Agriculture said.

Rising Yields

?We?ve got such tight fundamentals for grain globally for any surplus there would be demand,? said Luke Chandler, head of agricultural-markets research at Rabobank in London.

More than two-thirds of corn planted in South Africa is genetically modified, Gert Heyns, marketing manager at the local unit of Monsanto Co., the world?s largest seed company, said from Johannesburg. That?s helped push up yields to 4.76 tons per hectare (2.471 acres) this year from 3.86 tons in 2006, according to the Crop Estimates Committee.

?The African market is reluctant to buy our maize due to its genetic modification,? Sue Middleton, a deputy director- general at the Department of Agriculture, told lawmakers this month.

South Africa has exported 365,265 tons of white corn in the marketing year that began May 1, compared with 1.41 million tons for all of last year, according to the Pretoria-based South African Grain Information Service. All of that was within Africa.

Rand, Peso

Yellow corn exports, mostly to East Asia, have risen to 508,226 tons from 261,338 tons for all of last season.

Gains in South Africa?s currency are also making its corn less competitive. The rand has climbed 34 percent against the dollar since the end of 2008 and 54 percent against the Argentine peso. Argentina and the U.S. are the world?s biggest corn exporters. South Africa ranks sixth.

The industry is looking to the government for help.

The lack of a market for South Africa?s corn ?represents a threat to the survival of farm owners? and employees, Katishi Masemola, general secretary of the Food & Allied Workers union, which represents 25,000 farm workers, said in an interview. ?In time of food surplus the state must buy, and in times of shortage, the state must then release to the market.?

While the government has sympathy, it can?t bail out farmers, Joemat-Pettersson told lawmakers.

?Producers must understand that demand must dictate supply,? she said. 



                                  PART 2

------------------------------- GENET-news -------------------------------

TITLE:   KOREA MAKES 'VERY RARE' PURCHASES OF SOUTH AFRICAN CORN, LOCAL BUYERS SAY

SOURCE:  Bloomberg, USA

AUTHOR:  Sungwoo Park

URL:     http://www.bloomberg.com/news/2010-11-24/korea-makes-very-rare-purchases-of-african-corn-buyers-say.html

DATE:    25.11.2010

SUMMARY: "South Korea, the third-largest corn buyer, imported the grain from South Africa this year after U.S. prices surged, according to trade data and buyers. Purchases of South African corn for feed production totaled about 161,000 metric tons from January through October from nil a year ago [...] Total imports of feed-corn in the period were 5.53 million tons, with the U.S. supplying 92 percent"

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KOREA MAKES 'VERY RARE' PURCHASES OF SOUTH AFRICAN CORN, LOCAL BUYERS SAY

South Korea, the third-largest corn buyer, imported the grain from South Africa this year after U.S. prices surged, according to trade data and buyers.

Purchases of South African corn for feed production totaled about 161,000 metric tons from January through October from nil a year ago, data on the website of the Korea International Trade Association show. Total imports of feed-corn in the period were 5.53 million tons, with the U.S. supplying 92 percent, compared with 4.89 million tons a year ago, the data show.

?It?s very rare for South Korea to buy South African corn, maybe once in a blue moon,? said Lee Tae Woong, deputy general manager of the purchasing team at Nonghyup Feed Inc. ?This year is an exception as African corn was cheaper than the U.S. grain on ample supplies after good harvests.?

Corn futures in Chicago have surged about 46 percent since July 1 as demand for the grain increased after global supplies of wheat shrunk because of adverse weather. Corn and wheat are both used as animal feeds and often substituted for each other.

Nonghyup Feed, the nation?s top feed-grain importer, bought 50,000 tons of African corn earlier this year, and has secured a further 100,000 tons since Oct. 1 for March and April next year, said Lee. The African grain was about $5 to $10 a ton cheaper than U.S. corn at the time the volumes were contracted, he said.

?If South African corn remains attractive in terms of prices, Korean buyers could buy more,? said Kim Chi Young, director in charge of purchases at the Korea Feed Association, South Korea?s biggest grain buyer. He didn?t say how much corn the group imported this year.

Asian Markets

South Korea bought 5.88 million tons of corn for producing feed last year from countries including the U.S., Brazil, Argentina and Ukraine, the trade data show.

South Africa?s government said Nov. 9 that the country should change the type of corn it plants to target markets in Asia and suggested setting up an agency to promote exports.

South Africa, the biggest producer on the continent, grows mainly white corn, locally known as maize. South Korean feed makers prefer yellow corn, Kim said.

Falling import prices for U.S. corn at the moment may dim the prospect of further large purchases from South Africa, Nonghyup?s Lee said. ?A couple more cargoes may be possible, but it depends on prices,? he said.

Favorable weather conditions and increased use of genetically modified seed have resulted in bumper harvests and a surplus in South Africa. This year?s harvest is expected to be 13 million tons, the biggest since 1982.

South Africa has shipped 500,900 tons of corn to nine African countries as well as to Spain, Taiwan, Japan, Kuwait and South Korea in the marketing year that began May 1, according to the Pretoria-based South African Grain Information Service. That compares with 261,338 tons in the previous marketing year.