Maize - the unaffordable staple

With global high food prices apparently here to stay, economists in South Africa warn that despite a bumper maize harvest, worldwide demand and soaring agricultural input prices mean that even maize-meal, the country's staple, could be off the menu.

Food prices in South Africa have risen by 15.7 percent since April 2007, and maize-meal – a stiff porridge, the starch of choice - had gone up by over 25 percent, Patrick Kelly, Consumer Price Index Manager at Statistics South Africa (STATSSA), told IRIN.

John Rook, Programme Manager of the Regional Hunger and Vulnerability Programme in South Africa, told IRIN that when over half the family income was spent on food, even a slight price hike on maize-meal could really hurt.

"The poorest are hardest hit; they spend the highest portion of their income on food," he said, and with meagre budgets already overstretched, "they can't keep on absorbing food price rises."

According to the latest Income and Expenditure survey by STATSSA, income deciles 1, 2 and 3 - each representing 10 percent of the total South African population, starting with the poorest - respectively spend 80, 45 and 36 percent of their income on food.

Bad for the pocket and bad for health

A year ago, one kg of maize-meal cost around US$0.60, now it sells for $0.75. Average income in the lowest 10 percent of the population is less than $19 per month, and the average consumption of maize-meal is 10kg per person per month, making the implications of a price rise painfully clear: for 4.7 million South Africans one year ago, just over 30 percent of income would have been spent on maize-meal, compared to nearly 40 percent today.

Considering the five most widely consumed food types [maize meal, white sugar, tea, whole milk and bread] in terms of very poor consumers, maize porridge contributes about 54 percent of energy intake

Hester Vermeulen, a researcher at the Bureau for Food and Agricultural Policy (BFAP), an independent research unit involving the University of Pretoria, the University of Stellenbosch and the Department of Agriculture, said rising maize-meal prices could worsen South Africa's already poor nutrition levels: over 30 percent of pre-school children are stunted.

"Considering the five most widely consumed food types [maize meal, white sugar, tea, whole milk and bread] in terms of very poor consumers, maize porridge contributes about 54 percent of energy intake," she noted.

"Reduced portion sizes are one of the prominent food-coping strategies available to poor households," Vermeulen said. The BFAP projects that the 382g average portion of maize-meal consumed per person in 2007 will decline to 350g in 2009.

According to BFAP estimates, the decline in total food portion per person (of the five most widely consumed types) would see the energy contribution of daily intake reduced from 4,500kj in 2007 to just over 3,000kj among the poorest 30 percent of the population; 10,000kj is the international health standard minimum.

Prospects for the staple look grim

André Jooste, Senior Manager of Market and Economic Research at South Africa's National Agricultural Marketing Council (NAMC), said the local prices for maize products had started showing signs of stabilisation by June 2007, but this was temporary.

A bumper 2006/07 harvest, yielding 7.1 million tonnes of maize, with even higher figures predicted in November 2007 for the 2007/08 harvest, had brought much relief, Jooste said. The latest estimates by the South African Department of Agriculture put the 2007/08 harvest at over 11.3 million tonnes, exceeding anticipated local demand by over 3 million tonnes.

"Usually that would reduce the price," Jooste commented, "but with what is happening globally, this only slowed down the increase [in prices]." He pointed out that the South African maize market was not isolated from dwindling global supplies and rocketing demand.

Increased speculation on international futures markets would add to maize price shocks, Ferdinand Meyer, senior lecturer at the Department of Agricultural Economics at the University of Pretoria and BFAB researcher, told IRIN. Meyer described the current bounty as a "nervous surplus" and said prices were likely to rise again.

An annual BFAP report, South African Agricultural Baseline, released in June 2008, projected that maize prices would continue to climb, on the back of sharply rising input costs such as oil, increasing global demand, and a decrease in projected maize production, causing "concerns about the affordability and accessibility of food for the poor."

Photo: Tomas de Mul/IRIN

It takes more than farming to maize meal to market

The report noted that input costs "increased tremendously in the first quarter of 2008, on the back of already rising input costs in 2006 and 2007." Fertiliser prices have increased by up to 400 percent and aggregate input costs were expected to rise by 53 percent in 2008, and by another 17 percent in 2009.

With inputs becoming more expensive and farmers opting for more profitable alternative crops, like wheat, sunflower and soybean, the amount of agricultural land South African farmers were dedicating to maize would decrease by 11 percent in 2009. Maize prices were projected to rise above R2,000/tonne ($ 252) in 2009 in response to decreased plantings, the report said.

Meyer said high global demand meant that maize exports would "increase significantly in 2008 compared to 2007", while the South African currency, the Rand (ZAR), was expected to depreciate further against the US dollar, so "the exchange rate would definitely have an impact, with local prices drifting upward.”

And by the time maize had finally made it to shop shelves as maize meal, Meyer said, numerous other factors would contribute to the ultimate price consumers would pay. All in all, some 60 percent of the $0.75 one kg bag of maize meal is estimated to cover transport and handling, milling and retail.

tdm/he