* Rand weakness to lift debt and imported input costs
* S&P, Fitch downgraded S. Africa credit last week
* Zuma cabinet reshuffle triggered ratings cuts
By Tanisha Heiberg
JOHANNESBURG, April 12 South Africa's
drought-stricken farmers could come under extra pressure after
the currency weakened in the fallout from a credit ratings
downgrade to junk status that could also push up food prices,
industry experts said.
Ratings agencies S&P and Fitch downgraded South African debt
to sub-investment grade while Moody's placed its sovereign
credit rating on review, citing President Jacob Zuma's decision
to fire finance minister Pravin Gordhan as one reason.
The price of July contract white maize rose to 2,008
rand on Wednesday, from 1,700 on March 27 when Zuma recalled
Gordhan from an investor roadshow before firing him. The rand
has dropped more than 10 percent since then.
Rand weakness will also squeeze farmers who have borrowed
following the 2015 drought, the region's worst on record.
Farmers' debts looked to have risen more than 10 percent to 160
billion rand ($12 billion) yearly in 2016, experts say.
"We have already seen a response to the weaker exchange rate
with prices ticking up," FNB senior agricultural economist, Paul
Makube, said. "If the exchange rate blows out on us then
definitely there will be a further increase in prices."
The rand is forecast to further depreciate to 14 to the
dollar by March next year according to Reuters data, compared
with 13.6 on Wednesday.
Grain prices usually increase by 0.5 percent for every
percentage point drop against the dollar, the head of economic
and agricultural intelligence, Sihlobo said.
"Whatever increase you see on the grain prices, half of that
gets to be transferred to staple foods like maize meal and
samp," said Sihlobo. Samp is dried corn kernels, a staple in
South Africa where more than 20 percent of the population lives
below the food poverty line.
However this year's bumper maize crop, up 84 percent from
last year, could cushions price increases.
"Food inflation will continue to come down over the next few
months but this could change by early next year," said Sihlobo.
Input costs such as fertilisers and agro-chemicals, which
are highly exposed to the exchange rate and make up 60 percent
of grain production costs, will also rise after the downgrade,
denting farmers' profit margins further.
"The downgrading is like a slow death, you are not going to
see it immediately but over time it kills you and makes you
weaker and less competitive," industry group Grain SA chief
executive, Jannie de Villiers, said.
(Editing by James Macharia and Louise Ireland)