“One of the many contributing factors to the rise of the demand is the increase in the population. Maize and maize products are staples in households across the world and as families grow the demand for Maize does the same. This goes further in the form of feed. Maize is a significant animal feed and as consumption of animal products increases, much like the current growing appetite for pork in China, so too does the demand for maize. Currently, maize prices are climbing so quickly that many farmers have decided not to plant wheat this winter and have opted instead to plant maize for the current season,” says Frank Winder, Managing Director of Advanced Nutrients – a supplier of soil fertility products and advice.
During the last 11 years, from 2001 to the beginning of 2012, the price of maize has fluctuating but steadily risen. In the first half of the last decade, percentage differences in the increasing or decreasing prices of maize were not above the 20 percent mark. Between 2001 and 2005, the highest percentage increase was 12 percent in 2003. However in the last half of the decade annual price differences reached staggering differences to the effect of 58% and 60%.
Interestingly the maize price shows an interesting relationship with the global population growth, which indicates how important a food commodity maize is, whether it be for human or livestock feed. The global population reached the seven billion people mark at the beginning of 2012 which is an increase of 14.38% from 2001. The year on year rate of increase has declined, while maize has accelerated, this seems to imply that the market is requiring more and more maize, raising demand levels that are disproportionate to the ability to increase maize supply.
Between 2001 and 2012 the maize price exhibited a total price movement of 197.54% in relation to the 14.38% movement in the global population. However on an annual compounding scale the maize price has risen steadily at 12.77% per year in relation to the global populations declining annual average increase of just above 1%. The increased demand in the face of declining growth projects much higher maize prices based upon on a global ‘per head’ basis.
The cost of 2.5 kilograms of maize in 2002 was R 5.93 and currently sits at R 17.49, indicating a total increase of 195 %. This seems to indicate that not only is the global population growth impacting on the price, but the expanding emergence of developed countries and citizens, now requiring and able to afford more, is too. The question then is not simply at what rate the population is growing, but also at what rate that growth, as well as the existing population, is being converted into buying consumers. Projecting these same figures to around 2025 when the population will be breaching 8 billion could mean a price of well over R 60.00 per bag, compared to the inflationary calculated price of R 36.00. That’s almost equivalent to just under R 40.00 a bag in today’s prices, and that is a conservative estimate, it could be much higher.
The state of the market and the demand on the commodities is putting pressure on the economy and indirectly, governments and of course the lower earning working classes. The pressure placed on farms to increase the output of crop is rising significantly (and naturally improves the financial prospects of farmers and the agricultural sector as a whole) but factors that influence the process play the most important role. They make or break how much is produced and farmers are almost always concerned about the climate, heavy rains or droughts.
“When farming on arable land, the soil is fertile and easy to plough. It supports warm summers and frosty winters and rainfall is minimal during the crop-growing season, and the land is generally flat so it is easy for machinery to be used on it. What famers worry about when working in land like this is flash floods,” explains Winder.
“Another human factor that affects farming is change, which is necessary if one needs to make a paradigm shift. Many farmers are set in their ways and what has worked for them over the years they are reluctant to change. Unfortunately what worked for farmers 10 years ago may not have the same results now. Everything is changing and farming styles need to change and farmers need to adjust to better and more effective ways of farming,” says Winder.
Frank also adds that, “What people need to realise is that the increased demand of commodities will come from a burgeoning population. Farmers need to gain skills on how to cultivate their land in order to yield more crops from it but also good quality crops. The need is to focus on “sustainable” farming, which is a phrase that is bandied about but which few can really implement practically”.
“Avenues that farmers need to explore include practices that improve soil fertility, focusing on fertilizer efficiency, improving tilth and soil water holding capacity. Famers should be given the opportunity to attend programmes that create awareness on how agricultural practices can affect their bottom-line and also guarantee food security,” concludes Winder.
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