The document discusses the need for a national maize risk management strategy in South Africa. Maize production decreased sharply in 2015 due to extreme drought conditions, impacting both 2015 and 2016 production. Historically, maize production in South Africa has high volatility even without drought. A national strategy is needed to help farmers and others in the maize industry mitigate the risks from volatile production through measures like a national maize insurance program with subsidies. This would help the industry better cope with shocks from weather and allow continued investment in maize farming.

1. 0 The South African Drought Crisis: the need for a national maize risk management strategy
The South African Drought Crisis
The need for a national maize risk management strategy
January 2016
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2. 1 The South African Drought Crisis: the need for a national maize risk management strategy
CONTEXT: maize is undoubtedly South Africa’s most
important field crop and staple food of the nation
Source: http://www.daff.gov.za/daffweb3/Portals/0/Fact%20Sheet/Maize%20profile.pdf
Background Production
• Maize can be produced in areas where
the rainfall exceeds 350 mm per year
• Production is dependent on an even
distribution of rain throughout the growing
season
• Due to variation in rainfall pattern,
temperature and duration of the growing
season, planting time varies from the
eastern to the western production areas
• The area planted per year represents
approximately 25 % of the country's total
arable land
• The South African maize industry was
deregulated in 1997 and is operating in a
free-market environment
• Producers may sell to whomever they
wish and prices are determined by supply
and demand
• Regarding the international marketing of
maize, phytosanitary requirements and
quality standards must be adhered to
• Maize is produced by approximately
9,000 commercial farmers who provide
direct employment for an estimated
workforce of 128,000
There is no government subsidy or any other form of direct
financial aid to South African maize farmers

3. 2 The South African Drought Crisis: the need for a national maize risk management strategy
PROBLEM: South Africa experienced extreme drought
conditions in 2015
Source: http://www.fao.org/giews/countrybrief/country.jsp?code=ZAF
…impacting both 2015 and 2016 maize
production dramatically
• Maize production in 2015 decreased by
30 percent compared to bumper 2014
harvest, on account of poor rains
• Reduced 2015 output results in tighter
supply situation for 2015/16 marketing
year (May/April) and lower exports
• Maize prices are significantly above last
year
• El Niño-associated drought
conditions result in unfavourable 2016
crop prospects
• Maize supplies tighter in 2015/16
marketing year (May/April) on account of
weather-reduced 2015 harvest
• Exports well down on last year’s level,
while imports increase

4. 3 The South African Drought Crisis: the need for a national maize risk management strategy
ONGOING SYSTEMIC RISK: SA maize production decreased
sharply in 2015 but historically high volatility is common
Source: www.indexmundi.com
Maize prices at record levels in December 2015

5. 4 The South African Drought Crisis: the need for a national maize risk management strategy
SOLUTION: government needs to develop a national risk
management strategy for the SA maize industry
Maize production volatility risk
occurs repeatedly even though it
could be mitigated
• Confront this risk by preparing for it and
for coping with its consequences to
reduce losses and pursue opportunities
• SA maize market stakeholders need to
identify, prioritize, and address the
obstacles to effectively managing maize
market risk
• For many people, this shock is too large
to cope with on their own. They need to
pool the risk collectively with their
household, their community, the
enterprise sector, the financial sector, and
the macro economy
By acquiring affordable insurance farmers would be able to invest more
in production and pursue riskier, higher-yield types of production
National Maize Risk
Management Strategy
National Maize
Insurance Programme
Market
Stakeholders
External
Insurance
Subsidies