GM-Maize-Report

to the vagaries of the wider economy (energyor fuel costs for example). Because this paperis primarily concerned with the behaviour ofthe largest white maize millers, this sectionwill focus on milling rather than retail. Itwould, however, be counterintuitive to treatthese two sectors as completely separateentities; the miller-to-retail margin of supermaize meal (as calculated by the NAMC) is theclearest publically available indicator of profitmargins in the milling and retailing of supermaize meal, yet, within this margin lie theprofits to the miller, the costs and profits of theretailer, and a host of complicated (and oftenconfidential) agreements between the majorfood processors and retailers.The millers’ costs can be broadly divided intotwo categories: the cost of buying the maizegrain (the ‘mill door cost’) and the cost ofprocessing that grain into maize meal anddistributing the final product to the retailspace (the ‘conversion cost’). In South Africamillers generally prefer to buy maize fromregistered silos because of quality controlexercised by silo owners and because storagecapacity at mills is generally limited. 86 Themiller purchases maize from a trader who, asillustrated above, could also be a silo owner, atthe ‘mill door price’. This is the combined costof the raw maize, as dictated by the SAFEXprice, storage, handling, and commission costs,and transport costs (including the transportdifferential). The miller can recover some of thisinitial cost by selling the leftover maize fromthe milling process to the animal feed industryas ‘chop’ (remember, on average only 63% ofthe raw maize purchased at the door will makeit into a packet of super maize meal).Information from the NAMC shows that themill door price’s overall contribution to theretail price fell from 2009 to 2011. It wouldappear that the falling cost of maize over thisperiod would be the primary factor (it wouldbe interesting to see the figures for 2012 whenthe maize price was generally higher. Sadly,this information was not available at the timeof writing). Transport costs have also hoveredbetween 10–12% of the mill door price overthe period under review, and do not appearto have shifted since 2003. Again, it would beinteresting to note the impact that the nearcontinual increase in petrol and diesel prices inthe interim have had.Since 2009 the NAMC’s has given two sets offigures regarding conversion costs, based onthe assumptions of a more or less efficientproduction process, and the resultant savingsfor milling operations. Slight changes canbe seen between the years under review.Looking at the two segments it is clear thattransportation (both to and from the millingoperation) contributes to approximately 20%of the retail cost. Reducing these costs is one ofthe major rationales behind the government’swish to establish a small scale maize milling2003 2009 2010 2011Mill door price as % of retailprice47.3 50 39.3 37.8– Grain (% of retail) 33.3 33 19.3 19.6– Storage, handling (%retail)6.5 6.5 7.7 7.1– Transport (% retail) 10.5 10.5 12.3 10.9Cost scenario – Low High Low High Low HighConversion costs as % ofretail price35.7 33.1 36.6 38.4 42.5 36.4 40.2– Manufacturing (% retail) 18 16.6 18.4 19.3 21.3 19 21– Distribution (% retail) 7.4 8.2 9.1 9.5 10.5 8.2 9.1– Capital costs (% retail) 10.3 8.2 9.1 9.6 10.7 9.1 10.1GM Maize: Lessons for Africa 21