South Africa Maize Buoyed

Posted 18 October 2006 @ 08:18 am EET     Print     Reprint     E-Mail     Comments

JOHANNESBURG (Reuters) - South Africa's most traded maize futures marched higher on Tuesday, buoyed by a rally in the U.S. market, and traders predicted more gains after a recent slump.

Lacklustre exports have been one of the factors to weigh down the South African maize market. Maize exports edged up slightly last week, but remained well short of levels needed to dent hefty stocks, data showed.

With the local market on weather watch and the rand still on the backfoot after tumbling to a 3-1/4 year low, there was still room for prices to climb further, traders said. December white maize ended 43 rand higher at 1,334 rand a tonne.

"It's Chicago again and the rand is a little bit weaker as well, then I think a couple of technical levels were also broken," one trader said. Speculation that farmers may be replacing some of next year's maize crop with wheat to cash in on high prices in the latter grain may also be a bullish factor, he added.

He said that could see prices test the 1,480 region by year-end. Traders expect Chicago's rally to peter out soon but say local factors will then take effect and cushion domestic prices from any massive reversal.

South African maize prices shot up to a peak of nearly 1,500 rand in July driven largely by fundamentals. But prices have eased as news of sizable stocks emerges.

"The way the rand is behaving and Chicago, I'd say 1,340, 1,345 (is the next target). If it can break through that, we'll target 1,390," a second trader said. He disputed the spillover impact of wheat prices, saying the two grains were not easily interchangable as they were planted in different seasons.

"We might bounce off 1,345 and crash down again. It all depends on the weather although the rand and Chicago are primary factors," the trader added.

"I think our own issues will certainly be a factor." White maize exports rose to 3,261 tonnes in the week to October 13 from 1,442 tonnes the previous week, the South African Grain Information Service (SAGIS) said after the market closed. Yellow maize exports rose to 1,183 tonnnes versus 1,056 previously. Imports of the yellow grain amounted to 15,913 from Argentina, SAGIS added.