Namib Mills has announced that the price of maize meal, wheat flour and pasta are all expected to go up on 20 August by between 5 and 6% respectively.
“We however want to warn that further increases are imminent, especially on maize meal. We cannot predict the effect that this will have on wheat prices. Our guess is that it will also increase,” said managing director Ian Collard last week.
Grains are used around the world for baking purposes and also to feed animals, which supply meat, so increases in international grain prices generally lead to greater increases of food prices and higher all round inflation.
Even though Namibia has had a bumper harvest of 75 000 tonnes this year, the country will still need to import to make up for annual consumption, averaging about 120 000 tonnes. International grain prices have taken a knock due to fire draughts and raging fires in the American bread basket.
He explained that, “the USA was expecting a bumper crop this year as the acreage increased with maize planting as prices made economic sense for maize as a preferred summer crop. They expected yields of 165 bushels per acre, which decreased with the first United States Department of Agriculture (USDA) estimate in the drought to 145 bushels per acre and they now even expect a drop to 135 bushels per acre. Every 10 bushels per acre drop in yield means a drop of 20 million tonnes on the total harvest. This means that the latest estimate harvest in the USA is currently 60 million tonnes lower than initially expected. This is about 5.2 times the whole annual maize harvest of South Africa,” he said.
“The USA initially expected a harvest of 380 million tonnes, which have been decreased to 340 million tonnes, as per the USDA, and the market expects another 20 million tonne drop,” he said. Though the drop in international demand has been mitigated by a coinciding drop in consumption with 23 million tonnes, and the southern African harvest was reasonably good despite local droughts, “the US price still influences local prices,” Collard explained.
“The world stocks to use ratio will be at about 12%. This means that the world will end up with about 44 days of stock left before the new harvest comes in during 2013, provided that there are no further droughts. They call this tight,” he explained.
Closer to home southern Africa produces about 2 million tonnes of wheat, with South Africa the biggest at 1.5 million tonnes. South Africa still has to import 50% of its domestic requirement, which is why the region still follows international price movements.
“Pasta is manufactured from wheat flour, therefore price increases are inevitable, when the price of wheat increases. Other expenses include the Namibian inflation rate for the past year in the region of 6.5%. We therefore have to increase the milling margins to compensate for remuneration increase and electricity increases,” Collard said.