Let’s Discuss Bread and Butter Issues for a Minute

I know we have a lot to contend with at the moment, but bread and butter issues will take the front burner.

Let me tell you something, in January 2018, South Africa produced 170 million loaves of bread – yes – you heard that right, ONE HUNDRED AND SEVENTY MILLION loaves of bread. But that is not all, this was actually down by 3 percent from the previous month and a percentage point from the corresponding period last year.

Our bread basket is comprised mainly of brown, white, and whole wheat bread. But, brown and white bread are the most dominant, with a combined share of 98 percent of all commercial pan baked bread produced in the country.

Although there is a rise in the popularity of brown and whole wheat bread, white bread still commands 50 percent of South Africa’s bread production. Brown bread makes up 48 percent and the rest is whole wheat and other types of bread.

Surprisingly, the overall decline in bread production in January was mainly in brown bread, which declined by 3.1 percent from December 2017, whilst, white bread production declined by just 2.5 percent from December 2017.

Despite this, the overall number of loaves reaching our plates is expected to increase over the following years. But who knows, maybe brown bread will tip the scales within the foreseeable future and take pole position.

Next time, let’s talk about the origins of the wheat that is used to produce South Africa’s bread – hint, almost half of it is imported.

Bye for now!

Note: I’m leaning on data from the good folks at the South African Grain Information Services (SAGIS).

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Horse Meat?

South Africa imported 80 tonnes of horse meat in 2017, up by 51 percent year-on-year. The key supplier was identified as Brazil. Of the imported horse meat, only 5 tonnes was re-exported to the Maldives and Swaziland, the rest appears to have been utilised within the country.

Looking at trade data, it is unclear whether this was for animal or human consumption.

From a global front, the key importers of horse meat are Italy, Belgium, France, Russia, Vietnam, China and Japan. The leading exporters are Argentina, Canada, Spain, Portugal and Poland amongst others.

Note: Data source: Trade Map, HS code is 0205 (Description – Meat of horses, asses, mules or hinnies, fresh, chilled or frozen)

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The Relative Contribution of Black Farmers to South African Agricultural Production

I’ve been getting tweets from folks interested in knowing the share contribution of black farmers to overall agricultural production in South Africa.

The only up-to-date data we have that comes close to responding to this request looks into the separation of key crop production into commercial and non-commercial production. (maize, wheat, etc.).

However, it still doesn’t provide a clear-cut answer to this pending question as it would be unreasonable to assume that all non-commercial farming is done by black farmers. Granted, a large share of it might be smallholder black farmers, but there are also black farmers producing commercially.

The most accurate data I have found regarding agricultural production along racial lines is that of the late Dr George Frederick Liebenberg’s PhD thesis, which has this wonderful table (featured image) showing the relative contribution of black farmer’s to national production. Unfortunately, Liebenberg’s dataset ends in 2002. Here are key points from Liebenberg’s data:

  • The share of farmed (farmed – not to be confused with owned) area by black farmers was 31% in 2002. This area produced less than 4% of field crops such as maize, wheat and sorghum.
  • Similar to other sectors, the share of the country’s livestock held by black farmers had marginally decreased by 2002, particularly sheep and poultry which were estimated at 10% and 29% respectively. However, the most recent estimates presented by trade economist Sifiso Ntombela of the Agricultural Business Chamber (Agbiz) suggest that about 40% of cattle in South Africa are owned by emerging and communal black farmers.

Whilst the share contribution by black farmers to agricultural production seems minimal from this data, keep in mind that this was collected 15-years ago. There has definitely been progress in recent past (I’ve highlighted recent progress made in areas such as Matatiele in the Eastern Cape) driven by both government and the private sector.

Essentially, agricultural economists should do a better job in future of maintaining credible databases of transformation and progress of black farmers; that way we can avoid confusion when we discuss agricultural development policy issues, which will no doubt need to be addressed in the coming months given our current political and economic climate.

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South Africa’s Agricultural Export Growth Depends on Rainfall and Rand

SA’s agricultural sector has an auspicious outlook, despite the fact that challenges such as policy uncertainty and climate change remain dark clouds overhead.

In 2017, SA’s agricultural exports grew past the $10bn mark for the first time, boosted by growth in exports of edible fruit, beverages, spirits, vegetables, grains and other agricultural products. This is a 15% increase from 2016, a year that was characterised by El Niño-induced drought.

In the same year imports also increased but by a marginal rate of 5% year on year, reaching $6.7bn. This was driven by a notable uptick in grain imports, particularly wheat and rice, on the back of reduced domestic production as a result of the Western Cape’s drought and an increase in domestic consumption.

SA recorded rice imports growing by 10% year on year to 1.1-million tonnes in 2017. There were also large imports of meat, sugar, tobacco and coffee, among other products.

Above all, a closer look at the trade statistics shows that SA’s agricultural sector recorded a positive trade balance of $3.3bn in 2017, which is also a record level in a dataset dating back to 2001. The trade impact of the drought in the Western Cape was minimal in 2017. It will only be felt in the 2018 trade statistics, as table grapes and major vegetable products are set to decline by double digits from the 2016-17 production season.

From a destination point of view, Africa and Europe continued to be the largest markets for SA’s agricultural exports, collectively absorbing 67% of total exports in 2017, measured in value terms.

Africa remained SA’s largest market, accounting for 42% of agricultural exports, which is a percentage point increase from a five-year average share. The sector’s export growth to the continent was led by relatively competitive industries such as beverages, cereals, fruits, sugar and vegetables.

Trailing Africa was the EU region, which absorbed 25% of SA’s agricultural exports in 2017, up 13% from the five-year average share. SA’s agricultural exports to this region were led by beverages, wool, sugar, fruit and animal fats.

Asia is an important market for SA’s agricultural exports, taking a 24% export share in 2017, up by a third from the previous year. Wool, fruit, grains, beverages, vegetables and meat were the leading products.

The Americas and the rest of the world accounted for 5% and 4%, respectively, with 3% and 14% increases from 2016, respectively. Exports to these regions were dominated by fruit, beverages, sugar, flowers and ornamental foliage.

Owing to the domination of beverages and fruit in the exported products across almost all the aforementioned regions, the decline in production in 2018 owing to the Western Cape’s drought could have a notable impact in total export value.

The only mitigating factor could be better value for beverage products. This could happen if global prices of wine remain at relatively higher levels for some time owing to lower wine grape production in Europe.

Maize exports could also soften from the 2017-18 export forecast of 2.3-million tonnes, owing to an expected lower harvest in the current production season.

However, agricultural imports could increase as the production of commodities such as wheat declined to 1.5-million tonnes due to drought in the Western Cape. While this is not a desirable trend, it could be short-lived if the Western Cape receives good winter rainfall this year.

Overall, the weather, global prices and the rand’s performance remain key determinants of whether the country’s trade performance will remain vibrant or soften in the coming years.

* Written for and first published in Business Day on 01 March 2018.

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A Few Notes on South Africa’s Maize Market

We received some good news in South Africa’s agricultural sector this week. There is a possibility for the maize market to be well supplied in the 2018/19 marketing season owing to expectations of relatively large harvest, as well as carryover stock from the 2017/18 marketing year.

The National Crop Estimates Committee placed its first production estimates for maize at 12.2 million tonnes, well above the market estimate of 11.2 million tonnes. Although having declined by 27% from the 2016/17 production season, this is still above the annual consumption of 10.5 million tonnes.

In terms of stocks, total maize ending stock for the 2017/18 marketing year is estimated at 4.2 million tonnes of maize, which is treble the volume seen the previous year. This, together with the expected harvest of 12.2 million tonnes, will form South Africa’s maize supplies in the 2018/19 marketing year which starts on 01 May 2018.

From a consumer and food security point of view, this is a welcome development as it implies that maize prices could possibly remain affordable for some time.

With that said, these are first production estimates, going forward, the weather will be a key factor to monitor as it could still have a notable implication on crop development. Fortunately, the South African Weather Service forecasts above-normal rainfall between this month and April 2018 over the summer rainfall areas, which bodes well for crops. 

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Economic Impact of the Drought on the Western Cape Agricultural Sector

When it comes to agriculture, the Western Cape is essential – not only because of its production of fine wines, but also for its contribution to South Africa’s agricultural labour market and the broader economy.

The province is a leading employer in primary agriculture, commanding a share of 23 percent of the country’s total agricultural labour force in the fourth quarter of 2017. In addition, the province is the second-largest contributor to the agricultural economy in terms of gross domestic product, with a contribution of 22 percent.

It is thus clear that when the province’s agriculture encounters headwinds, a lot will be at stake; the current unrelenting drought is no exception. The most recent Drought Policy Brief by fellow agricultural economists Louw Pienaar and Johann Boonzaaier puts the cost of the drought to the Western Cape agricultural economy at roughly R5.9 billion in gross value added. In volumes terms, the average agricultural production could decline by roughly 20%, and this is widespread across all crops as illustrated in the chart (featured image).

From an employment point of view, around 30 000 job-losses are expected due to the drought. This does not include the spill-over impact in the next few years as the sector recovers from the drought. Even if the province receives rainfall that is in line with average rainfall patterns, it could take more than two years for dam levels to replenish sufficiently.

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South Africa is a Key Player in Global Fruit Market

South Africa is a Key Player in Global Fruit Market

If you managed to part ways with some of your hard-earned Rands by acquiring a copy of the Business Day this morning, you could have read my column, which you probably thought offered sufficient agricultural rumination for one day.

However, I just had to share this wonderful chart (featured image) depicting South African fruit contribution to the global market as it is a welcome feather in our cap. More so, as challenges such as policy uncertainty and climate change remain dark clouds overhead.

The chart is from a presentation by Professor Ferdi Meyer of the Bureau of Food and Agricultural Policy at the University of Pretoria. It is based on their 2017 Baseline study. Here are key points:

  • South African citrus now makes up almost 9% of world market share from 4% 16 years ago.
  • SA grapes, as well as apples and pears, account for about 6%. All gaining world market shares.
  • Unfortunately, South African wine global market share declined by a third from its peak in 2010 to 2%. Other countries are growing faster.

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