* Drought last year hit crops, fuelled inflation
* Bumper crop seen this year despite pest infestation
* Meat prices remain concern on inflation fron
* GRAPHIC: Maize futures tmsnrt.rs/2lS0wSJ
By Ed Stoddard and Tanisha Heiberg
JOHANNESBURG, March 1 Good rains and prospects
for a bumper crop have pulled South African maize prices to
2-1/2 year lows and while the bottom may be near, analysts say
inflation should start slowing as a result in the third quarter
This will ease the burden on poor households, which rely on
maize as a staple, and may give the central bank room to hold or
cut rates. The flip side is meat prices, which could accelerate
after drought-induced culls last year reduced cattle numbers.
The July white maize contract fell over 4 percent on
Wednesday to a 2-1/2 year low of 1,817 rand ($138.70) a tonne
after the government Crop Estimates Committee forecast a 2017
harvest of 13.918 million tonnes, 79 percent more than in 2016.
That forecast was 6 percent higher than expectations of 13.11
Domestic consumption is between 10 and 11 million tonnes.
Cold weather, rains and resilient genetically-modified crops
(GMO) have also limited the damage caused by an armyworm
The region offers potential export markets. Neighbouring
Zimbabwe has been hit by the fall armyworm, an invasive South
American species, denting crop output.
The difference with 2016 is stark, when the main white maize
contract scaled record peaks over 5,000 rand as an El
Nino-triggered drought parched lands. Prices are now around a
third of that.
Consumer inflation slowed to 6.6 percent in January from 6.8
percent in December, while food inflation braked to 11.4 percent
from 11.7 percent.
"There is a time lag. Food processors bought the grain we
are using now a few months ago. CPI for food should only really
start coming down in the third quarter," said Wandile Sihlobo,
an economist at the Agricultural Business Chamber.
Traders said prices should soon bottom out.
"We are already 83 rand below the calculated export parity
price but in the past it went up to 140 rand below so there is a
chance it can go a bit lower," said one trader.
But domestic meat prices could rise.
"There are concerns that the cull of animals during the
drought, and the necessary restocking now, will keep meat price
inflation...we see inflation remaining uncomfortably high," said
Razia Khan, chief Africa economist at Standard Chartered.
Other analysts see scope for lower rates.
Dennis Dykes, Nedbank chief economist, said lower maize
prices were in line with the central bank's outlook at its
January policy meeting, adding this gave the regulator some
space to move on interest rates.
($1 = 13.1000 rand)
(Additional reporting by Mfuneko Toyana; Editing by James
Macharia and Susan Thomas)