Market plan first, crop plan second...

The fallout from growers' love affair with n-stacked corn continues around the globe.  No matter how much we like them, it's customers who count in the end.  And this is what "the end" can look like.

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 34 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.

The country reaped 12.82 million metric tons of corn this year, the government’s Crop Estimates Committee said today in its final crop assessment. That could result in a 4.5 million ton surplus, according to Joemat-Pettersson, triple last season’s exports. At current prices that could be worth at least $818 million.

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.”[More]

So, let's review: Verify your market first, and if you can't easily export, plant stuff you can sell locally.

Actually, I have some neighbors who are putting SmartBoxes on their planter and using their last three years of results (in our admittedly atypical growing seasons) as justification to plant all conventional corn. While I expect seed companies to squeeze our choices by offering fewer and older conventional varieties compared to stacked seed, the burden of proof of trait value has become heavier for many of us.

Many of us remember SA as a significant corn export competitor back in the day. Blunders like this could prompt them to reconsider building ethanol plants. Of course, sitting on enormous gold deposits which make your currency really strong, doesn't help either. Yet another surprising version of the Resource Curse.