South Africa: Recent Sharp Increases in SA's Maize Price Shouldn't Be a Worry

analysis

There has been a market correction, and the price increases observed were a temporary blip.

In times of uncertainty, as we are in during Covid-19 and a 21-day lockdown, any unusual rise in prices of goods which society relies on the most can be discomforting. This is particularly the case with South Africa's staple white maize prices, which on 23 March 2020 reached the highest levels last seen in 2016, which was a drought period, at R3,981 per tonne.

The question some might be confronted with is, should such price moves be a concern to the extent that policymakers might need to intervene in the market by setting a price cap? The short answer is no. Temporary price fluctuations are largely a result of currency volatilities and Zimbabwe's entrance back into the market after the ban on GMOs was lifted. These volatilities will self-correct, as a new supply of maize hits the market. Ultimately, interventions are not needed to curb white maize price volatilities.

Maize price evolution

Monday 23 March 2020 was extraordinary in the South African maize market. White maize prices increased by 24% overnight to R3,981 per tonne, a price level as high as last seen in 2016....

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