Solid increase in SA winter crop production

Solid increase in SA winter crop production

The national Crop Estimate Committee kept its estimate for South Africa’s wheat crop unchanged from last month at 1.86 million tonnes. This is a 21 percent increase from last year – a drought period. Also, this means that the heavy rain and wind in the Swartland region of the Western Cape a few weeks back had minimal impact on the harvest but might have affected crop quality. We will get more information form farmers in the coming weeks.

Overall, this means South Africa’s wheat imports could fall by roughly a third from last season to 1.4 million tonnes in the 2018/19 marketing year. This is good for the country’s agricultural trade balance.

On the positive note, the production of barley is expected to exceed 400 000 tons. This implies that barley production has nearly doubled over the past decade. Similarly, with production expected to come it at 115 000 tons, canola’s production has increased by almost 300 percent over the past decade. This is a robust performance by the South Africa agricultural sector increasing crop diversification towards sustainable farming practices.

Anyway – here is beautiful photo outside the conference venue we are in — see image below (Zanzibar, Tanzania, 28 November 2018).

Zanzibar, Tanzania, 28 November 2018. Picture by Wandile Sihlobo

With editions by Prof Ferdi Meyer, BFAP.


Follow me on Twitter (@WandileSihlobo). E-mail: wandile@agbiz.co.za

South Africa is still dry!

South Africa is still dry!

It is a cloudy and humid afternoon in Nairobi. I am currently sitting in a small coffee shop at Jomo Kenyatta International Airport, in transit to Zanzibar where I will be participating in a conference about unlocking Africa’s agricultural potential through land reform, youth employment and markets. While I will be participating in the discussion and sharing the South African story – I am essentially on listening mode — trying to gather lessons that South Africa can draw from the experiences of our northern neighbours. More to say about this tomorrow if time permits for blogging.

Back on home soil – the key focus in the agricultural sector is the weather as we wait to see if the forecast rainfall within the next two weeks materialises. The past couple of weeks have proved fruitful for the eastern parts of the country and the enabled yellow maize and soybean planting to start on a sound footing. But the other provinces have not received good rainfall since the beginning of the season, hence crop planting activity have not started in these particular areas. The impact this has had on soil moisture is clear form Figure 1 below. 

Figure 1: South Africa’s soil moisture
Source: World Weather Inc

Not to be alarmist, but it is worth highlighting that it is getting rather late in the planting season in the eastern parts of South Africa, particularly for the maize regions (Figure 2). Other crops can still be planted until December and early January in the case of sunflower seed. I am mentioning this because while the eastern regions received comparatively higher rainfall than the western areas, the rain was somewhat scattered – a clear example of this is the Free State (see Figure 1).

The western areas still have time to plant until early January 2019. So, if the estimated rainfall arrives within the next couple of weeks, farmers in these areas could commence with planting. But what I am somewhat concerned about is whether the intended area of roughly 4.22 million hectares of summer grains and oilseed will be achieved in the 2018/19 production season given the aforementioned weather dynamics. I don’t know! We will get a better sense of planted area later in January and that might force those of us who have published the production estimates of key crops to relook the data.

Figure 2: South Africa’s maize optimal planting dates
Source: Grain SA, Agbiz Research

Above all, South Africa still has fairly good grain supplies, so the above-mentioned production dynamics will have minimal implication on food prices in the near term. The best thing to do right now is just to keep an eye on the weather developments within the next couple of weeks and the implication thereafter on crops before making notable adjustments on your food inflation forecasts for next year.

Another point to make is that crop production is typically a key focus in my notes, although not a big contributor to the South African agricultural economy in terms of value added. Roughly 47 percent of the country’s agricultural gross value added is derived from the livestock sector. However, the growth of the livestock sector depends on field crops which play a key role as feed in the cattle, sheep, poultry, pig, and goat industries, etc. This partly explains my constant focus on crops.

OK, enough about our domestic agricultural conditions. I chose the coffee shop I am currently in because I wanted to enjoy some Kenyan coffee (with carrot cake) while in Kenya. So, I will stop here and do just that!


Follow me on Twitter (@WandileSihlobo). E-mail: wandile@agbiz.co.za

Kenyans can celebrate food price relief, but they are not out of the woods

Kenyans can celebrate food price relief, but they are not out of the woods

Celebrations were in order when Kenya recovered from the 2017 drought, when food price inflation was at double digits, causing political tension during the general election.

However, while food price inflation eased from double digits in 2017 to 0.5% year on year in October following a general recovery in agricultural production, the country is not completely out of the woods.

Production of maize, one of the country’s staple foods, recovered by 8% year on year in the 2018/19 marketing year to 3.2-million tons, partly contributing to the aforementioned deceleration in food price inflation. But over the past couple of months hardly a day passes without stories of declining maize prices adding to the pressure on Kenyan farmers.

While the bearish trend is typically presented as a function of abundant supplies following a good harvest, this is hardly the case. Yes, Kenya’s maize production has recovered to a degree, but it remains below annual consumption of 4.2-million tons. In fact, the country will require imports of about 1-million tons of maize in the 2018/19 marketing year, which is 17% lower than the previous season. This is according to data from the US agriculture department.

The decline in maize prices is rather due to harvest pressure, as Kenyan maize farmers typically harvest between September and November. Therefore, prices should recover somewhat early next year as the recently harvested supplies clear or stabilise. So, to Kenyan farmers who are complaining about low prices, the lower price cycle is temporary.

I say this because the expected imports in the 2018/19 marketing year still far surpass the usual import volumes of about 500,000 tons in Kenya. To be fair, this is not only a function of declining production but also increasing consumption. Between 2000 and 2018, Kenya’s maize consumption almost doubled as the population grew from 31-million people in 2000 to nearly 50-million people in 2017, according to data from the World Bank.

So, where is Kenya going to get additional maize to boost its supplies? Outside of the Common Market for Eastern and Southern Africa countries, the few countries that are likely to be able to supply Kenya are Mexico, SA, Russia and Ukraine, as they have been the prominent suppliers in the past.

SA’s presence could be limited though, as the restrictions Kenya put on the importation of genetically modified maize are still in place. More than 80% of SA’s maize production is now genetically modified, which has seen it rise to pole position in Africa. If anything, exports will probably be nongenetically modified, but prices will have to be attractive for that to happen.

Zambia, which would normally have been among the key suppliers, as was the case in 2017, might not have the capacity this year as its maize harvest is expected to fall 34% to 2.4-million tons due to unfavourable weather conditions earlier in the season, according to data from the US agriculture department. Therefore, the most likely suppliers will be Mexico and the Black Sea countries (Russia and Ukraine), as they have fairly good supplies this year, with a large share of their harvest not affected by the aforementioned nontariff restriction.

Overall, the Kenyans have a right to celebrate the relief in food prices after a tough couple of months, but they are by no means out of the woods. The supplies will again be tight in the coming months and that could lift prices, albeit not to the levels seen in 2017.

From a SA perspective, the Kenyan market will continue to have nontariff barriers that will somewhat lessen exports. SA’s focus should rather be on markets such as Zimbabwe, Japan, Taiwan, Botswana, Swaziland, South Korea, Namibia, Lesotho, Mozambique and Italy, which have a high potential for growth and are therefore attractive, as I demonstrated in an academic paper in 2016.

*Written for and first published on Business Day on 22 November 2018.


Follow me on Twitter (@WandileSihlobo). E-mail: wandile@agbiz.co.za

Partnerships Key to Boosting the Eastern Cape’s Agricultural Economy

Partnerships Key to Boosting the Eastern Cape’s Agricultural Economy

WEEKEND ESSAY


It was almost 9 on a sunny Tuesday morning as I walked out of the arrival terminal at the East London airport. I was greeted with a smile by Felix Hobson, a senior agricultural practitioner at the Eastern Cape’s Department of Rural Development and Agrarian Reform. I am in town for an agricultural roundtable discussion, which is organised by the provincial government.

Whilst previous engagements of this nature with the private sector have generally been through organised agriculture groups, Hobson told me that this time around they wanted to hear from the guys in the real economy, agribusinesses and farmers on the ground.

Their expectations were somewhat exceeded as we walked into a full hall with participants from citrus, deciduous fruit, macadamia nuts, pineapples, chicory, grains, oilseeds, forage crops, red meat, wool, mohair, dairy, poultry and aquaculture. I noticed great diversity amongst the participants, both from an age and gender perspective, a critical factor as youth and women are often underrepresented in agricultural events.

A representative from each industry or commodity was asked to share a few words, touching on three important points:

  • What are the current business or production conditions?
  • Any plans for expansion in the near-to-medium term, and what needs to be in place for the expansion to occur?
  • What do they need from the Eastern Cape’s Department of Rural Development and Agrarian Reform?

The feedback from industry was mixed. Focusing on the positive aspects of the feedback; the success in most projects was due to strong partnerships, joint ventures and provincial government support. This was further highlighted by Simphiwe Somdyala, the CEO of Amadlelo-Agri, who said, “We need to move beyond transactional relationships and build real partnerships in order to drive agricultural development in the Eastern Cape province”. The projects that seemingly fell within this territory were the; wool, citrus, grains, dairy, mohair and chicory, amongst others.

Unsurprisingly, the challenges that Eastern Cape farmers and agribusinesses face are no different from other provinces, it is largely; poor infrastructure, climate change, access to markets, insecure property rights on land in some areas which hinder access to finance, amongst other things. If not addressed, these factors could hinder potential expansion that most agribusinesses that attended the roundtable highlighted as a goal in the years ahead.

What excited me the most was the diversity of the agricultural entities, largely horticultural, that outlined their plans to expand their operations if ongoing land policy discussion in South Africa leads more secure property rights, amongst other aspects. Improvement of infrastructure (roads, silos, irrigation systems, etc.) in rural towns in the province was also highlighted a key issue that needs to be addressed.

I have long argued that the underutilised and arable land present in the Eastern Cape is an advantage for agricultural expansion. A few things that are needed are not to only bring underutilised land in communal areas in full production, but also land reform farms that currently function at a sub-optimal level, then expand irrigation systems. This will require investment and strong and efficient institutions for implementation. Fortunately, the government does not have to carry this all in their shoulders, it can leverage on private sector investments and human capital. This is an approach that the province’s successful farmers and agribusiness highlighted as a key strength to agricultural development.

I couldn’t have felt the meeting without chatting to the province’s senior government official about what seems to be a key plant to high agricultural economic growth in the province – cannabis. I shared the essay I wrote that morning (November 20) for Fin24 with senior official – they clucked as they read saying “ufuna silime intsangu ngoku?” – loosely translated as ‘you want us to plant dagga?’.

You will remember that about two months back the Constitutional Court ruled that the private use of marijuana is now legal.

About four States in the United States – Alaska, Colorado, Oregon and Washington – have legalised cannabis for personal use, followed by California legalising recreational use as of 1 January 2018.

These could be key markets for South Africa, in addition to other destinations where it has been legalised for medicinal purposes.

To my surprise, the idea was well received and was encouraged to do craft a formal research proposal that can be presented to the official to open the discussion about potential research on this crop.

After fruitful deliberations, the real work for the province will begin as they seek to address the challenges identified by farmers and agribusinesses.

Hopson and I drove back to the airport that afternoon, knowing that there is hope for the Eastern Cape’s agricultural economy.


Follow me on Twitter (@WandileSihlobo). E-mail: wandile@agbiz.co.za

The Promise of the Eastern Cape’s Cannabis-belt?

The Promise of the Eastern Cape’s Cannabis-belt?

Tomorrow (November 20) I will participate in a roundtable discussion in East London, organised by the Provincial Department of Rural Development and Agrarian Reform. My focus area will be to provide a brief update on South Africa’s agricultural economy with a key focus on the role that the Eastern Cape can potentially play going forward, particularly from a job creation perspective.

For context, South Africa has about 842 000 people working in the agricultural sector (the Eastern Cape accounts for an 10 percent share). About two-thirds of South Africa’s agricultural jobs are in the field crop and horticultural industries. The employment in these subsectors has slightly increased over the recent past, particularly horticulture. Meanwhile, other subsectors saw a marginal decline. This somewhat tells us that if we are to see an increase in agricultural employment, horticulture will have to be a priority (the rise of technology is not an immediate threat to jobs in this subsector due to its nature of production and harvesting – its labour intensive).

Given that the presence of underutilised land and water, there is a need to focus on communal land. The Eastern Cape will be one of the focus areas for agricultural expansion and growth in the South African agricultural sector over the coming years. A few things that are needed to achieve this are to bring underutilised land in communal areas and land reform farms into commercial production, expand irrigation systems, identify and support agricultural expansion in areas that have a high potential for growth and employment. This will require investment and strong and efficient institutions.

Amongst many things that I will present on, I will throw into the discussion ‘cannabis’ to get a sense of the province’s senior government leaders’ thinking about the prospects of doing a formal study on this crop and its potential economic benefits in the province. You will remember that about two months back the Constitutional Court ruled that the private use of marijuana is now legal.

I saw this long list of cannabis companies that are specialising in all range of issues, and it struck me that the Eastern Cape, specifically the former Transkei area has the right terrain and climate for cannabis production. This is according to the research paper presented by Stellenbosch University’s agricultural economist Heinrich Gerwel at the 2018 Agricultural Economics Association of South Africa’s Annual Conference in Summerset West in September.

Gerwel points out that about four States in the United States — Alaska, Colorado, Oregon and Washington — have legalised cannabis for personal use, followed by California legalising recreational use as of 1 January 2018. These could be key markets for South Africa in addition to other destinations where it has been legalised for medicinal purposes. Notwithstanding the potential unintended consequences, and the fact that legislation is still required to outline the conditions under which it could be commercially produced, I think it is worth considering whether there should not be some research on the possibilities of legalising marijuana for international trade purposes.

The Eastern Cape’s dagga-belt (cannabis-belt) has a high level unemployment and abundance of underutilised land. In the quest to explore high value crops (no pun intended), I think we shouldn’t leave dagga behind, particularly as there is now a growing international market for the product.

In fact, there should be discussions with the medicinal companies about prospects of breeding the right varieties of dagga that are needed in the market, and systems to train farmers to produce such products. Legalisation could allow the development and use of specific controls to ensure produce safety, whereas no such guarantees exist in the black-market trade. Instead of being associated with negative connotations – the formalisation of a dagga-belt for production to export markets deserves some consideration.

To clear, I am not endorsing cannabis here, the essential purpose of this article to to start a discussion about its commercial use.


Follow me on Twitter (@WandileSihlobo). E-mail: wandile@agbiz.co.za

Perspectives on Farm Sizes

Perspectives on Farm Sizes

The growing need to boost rural economic activity through agricultural development has re-introduced the discussion on the subdivision of land to create as many small farms as possible that will benefit communities in South Africa. Some agricultural economists (myself included) have been sceptical of this idea due to potential viability of small farms when viewed from a land size perspective only.

In 1970, a law was put in place in South Africa to prevent the subdivision of farms along family lines without the consent of the Minister. At the time, family farms were being subdivided so that all of the farmers’ children could inherit a portion of their family farm. However, the Government of the time was concerned that this may create a network of farms that are not economically viable.

Viability was adjudged to be the income potential equivalent to that of an average civil servant. Farms that were too small to produce this income were deemed economically unviable.

In the recent weeks, this has brought to the public discourse a debate, which for a long time has largely been confined to academic corridors – what should be regarded as a ‘viable’ income from a farming business and what is a small-scale farmer?

In this respect, an article published in Agrekon Journal in 1998 by agricultural economists Johann Kirsten and Johan van Zyl is illuminating. I will draw from it and other international examples to address this issue.

To lay a foundation from a South African perspective, the fact that we do not have a strong small-farming sector contributes to the scepticism and confusion about small-scale farming. Hence, some people (even its proponents at times) equate small farmers to the farmers in the former homelands farming on one hectare of dryland or less.

This is not a small farm.

Size is not a good criterion for defining small farms. For example, one hectare of irrigated peri-urban land, suitable for vegetable farming or herb gardening, has a higher profit potential than 500 hectares of low-quality land in the Karoo. Turnover, or rather the level of net farm income, determine the farm size category, not the land size.

This is why the AgriBEE Sector code defines exempted micro, qualifying small and large enterprises according to their turnover, and not according to the physical size of the farm.

Also worth noting is that roughly 45% of all commercial farms in South Africa are small-scale family farms, with a gross farm income of less than R500 000, hardly making a full-time livelihood. This is according to data from Statistics South Africa.

Therefore, a small farm is a relative concept–relative to the particular ecological region and soil quality and also relative to the particular farming industry.

It should also be emphasised that small-scale farms are not simply scaled-down models of large farms since technology and cultural issues and the livelihood mix might differ. These are some of the issues that the proponents of small-scale farming need to consider in their arguments of subdividing farms into small units while remaining silent on the ecological and agrarian realities of this country.

From a global perspective, a recently published article in the Food Policy Journal by agricultural economists Nicholas Rada and Keith Fuglie explored case studies from Malawi, Tanzania, Uganda; Bangladesh; Brazil; Australia; and the United States in the interest of contributing to the farm size and productivity debate.

Rada and Fugile conceded that with economic and market growth, smallholder advantage (that might exist in some countries at times) will likely weaken, moving toward constant and eventually increasing returns to size. Simply put, the larger the farm, the better the returns (see Figure 1 below).

 

Figure 1: Relationship between farm size and
agricultural total factor productivity (TFP).
Source: Rada and Fuglie (2018)

 

In closing, let me touch on one critical point I have noticed in this farm size debate — citing Asian countries as an example of successful small “size/scale” farms that South Africa should emulate. This is a bit disingenuous, aside from factors discussed above, some Asian countries typically have superior climatic conditions and soil quality than South Africa. We live in a semi-arid country, folks!


Follow me on Twitter (@WandileSihlobo). E-mail: wandile@agbiz.co.za

No American Eggs In your Breakfast Yet?

No American Eggs In your Breakfast Yet?

Three months back the United States Department of Agriculture published a note indicating that South Africa has officially opened its market for imports of shell eggs from the US.

You see, South Africa is typically self-sufficient in eggs. For example, in the past 17 years, the largest egg imports were in 2013, a volume of about 66 tonnes, of which 98 percent was from Lesotho, according to data from Trade Map.

This year, however, started on a bad footing due to reduced domestic eggs supplies on the back of the 2017 avian influenza, which negatively affected the domestic layer flock.The country had to import in order to supplement domestic supplies. And it looks like we are heading towards record levels of eggs imports.

In just the first two quarters of this year, South Africa imported 153 tonnes of eggs, which surpassed the the annual volumes seen in the past 17-years. About 99 percent of these eggs came from Brazil, with the rest supplied by Lesotho.

The preliminary numbers for the third quarter of 2018 shows that Brazil was again a dominant player, with no presence of the US eggs. So, no Amarican eggs in your breakfast folks, if anything – its Brazilian!

NOTE: For shell eggs data, I’ve used HS code 040721


Follow me on Twitter (@WandileSihlobo). E-mail: wandile@agbiz.co.za

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