by Wandile Sihlobo | Oct 9, 2024 | Food Security
South African households are generally under pressure, and the relatively higher food prices add to the difficulty. Still, it is wrong to accuse anyone of being responsible for higher food prices (I am making this statement in response to the article published in Business Day this week titled “Retailers not cutting food prices fast enough, says watchdog,” October 7).
The factors driving up costs are clear — among many others we have had a drought that led to a poor harvest, higher fuel prices for much of 2024 and higher labour costs. Most agricultural commodity prices remain elevated, mirroring the effects of these factors.
One can argue that the food prices at the retail level do not mirror the extent of increases we see at the farm level, which means retailers have probably absorbed some of the higher costs.
Most importantly, even when agricultural prices start to ease there is typically a lag of three to six months before one sees these reflected at the supermarket till.
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by Wandile Sihlobo | Oct 8, 2024 | Agricultural Environment and Natural Resource
Some often view the Eastern Cape’s economy through the lens of its auto industry, amongst other sectors. However, the province does well in agriculture — in various commodities, including dairy, wool, sheep farming, and citrus.
The Eastern Cape is also making encouraging inroads, boosting communal farmers’ output on wool and, soon, hopefully, in other value chains. The efforts for inclusive growth require a collaborative effort between the government and the private sector.
On October 7, 2024, with my colleagues at the Agricultural Business Chamber of South Africa, we met with multiple agribusinesses operating in the province for our members’ engagements sessions. One of the things I noticed in our engagements is the rising optimism about the outlook for the sector in the province and the upcoming 2024-25 season. This is important because, for some time, the province has been strained by animal disease and water challenges in some key agricultural regions.
But optimism is not without a deep appreciation of the challenges. The agribusinesses are concerned about various challenges, including poor-performing municipalities, deteriorating roads that increase transaction costs, animal disease issues, etc.
The political leadership of the Eastern Cape must realise that the province has great potential in agriculture and agritourism. And to unlock this potential, the provincial government and municipalities must do their part in improving roads, access to water, and water infrastructure, and addressing crime, in addition to issues that require the national Department of Agriculture’s intervention. I have recently discussed what the new leadership in the Department must consider in their policies, which would be beneficial to the Eastern Cape (read here).
However, for a more comprehensive discussion, I outlined the critical interventions that could unlock the Eastern Cape’s agricultural possibilities in my latest book, A Country of Two Agricultures. I hope you can get a copy and read it. It is available nationwide in all good bookstores and on eBook platforms.
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by Wandile Sihlobo | Oct 7, 2024 | Agricultural Environment and Natural Resource
In the cities, people are often divorced from the value chain of various products we use. Some usually think their exquisite leather handbag, shoes, jackets, or jerseys comes from their favourite clothing shops. They rarely picture sheep, goats, cattle, or ostrich being slaughtered for the leather to use in their bags.
Similarly, those who wear their nice cotton clothes or woollen jerseys rarely think of sheep or cotton fields when they shop for their favourite items. We don’t usually draw connections between the finished product and the supply chains — the real story of how supply chains work is not well told.
The farming industry is an integral part of the fashion industry.
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by Wandile Sihlobo | Oct 6, 2024 | Agricultural Trade
Does South Africa’s agriculture have any future in global markets in the face of deepening geopolitical frictions among major economies? It all depends on what the country’s leaders do to prepare for an uncertain future.
Success is not guaranteed. It is a product of the combination of a clear reading of today’s trends and how these will shape the future of global markets, how they envision South Africa’s place in this fast-changing global economic order, the choice of policy actions, and daring speed. What made us successful yesterday may not be adequate for the challenges ahead.
South Africa stands at a crossroads where a bold, export-driven strategy is no longer optional but essential. As the global trade landscape shifts, with nations forging ahead through plurilateral deals and free trade agreements, the urgency for South Africa to secure its place in an uncertain global economy has never been greater.
We cannot afford complacency nor expect fortune to favour us without action. Already, half of South Africa’s agricultural production by value is exported — a testament to our potential.
But to power ahead and secure our prosperity for the long term, we must not only protect our existing agricultural markets but aggressively seek out new opportunities in Asia, the Middle East, and beyond. An overhaul of our trade approach is vital, especially in agriculture, to stay competitive and be attuned to the evolving global economy.
South Africa has enjoyed great fortunes in the past precisely because it worked hard to sustain the competitiveness of its agriculture and corner vital international markets. South Africa is the only African country in the top 40 global agricultural exporters, ranked 32nd in 2023.
Imagine how far we could go if we were to put more effort into honing a robust global competitiveness strategy and diversify our trade relations through well-considered free trade agreements and plurilateral deals. Currently, the African continent accounts for 40% of South Africa’s agricultural exports, with the EU making up nearly 20% and the UK making up about 7%. These impressive numbers represent the efforts we made in the past.
Yet, we cannot be complacent if we want to sustain our edge. There is nothing currently that we are doing on the global front that suggests we are inventing a better future. This requires that we are bullish, deliberate, and do things differently.
That geopolitics are driving global trade fragmentation and thus threatening the export success we have enjoyed is a cold reality we must face head-on – not with ideology but pragmatism. This is true for all the export sectors of the economy.
For its part, the South African agricultural sector should have a refreshed trade strategy, which will guide the country’s posture with various regions, especially to broaden the footprint in Asia and the Middle East. Our trade strategy should be let loose on all pillars – free trade agreements, plurilateral engagements, and multilateral trade front.
Domestic growth strategies must be complemented by a relentless focus on widening our export markets. We cannot do the same things we have been doing in the past and expect different, better results, especially in light of the ongoing shifts in a global economy marked by geopolitical uncertainties.
We need to immediately refresh and implementation of the Agriculture and Agro-processing Master Plan, which proposes plans for various commodities and interests and seeks to achieve export growth. The value add of the strategy would be core principles and guidelines that could guide engagements of the country’s representatives in the various regions.
This would also bring a sense of urgency and coherence to South Africa’s seriousness in strengthening its export-led growth in agriculture. This is even more urgent today than in the past, particularly in the changing geopolitical environment that necessitates South Africa to engage with the world in a way that ensures the sustainability of domestic export-led industries. Agriculture is one such industry, and we push for this approach to trade.
Written for and first published in the Business Day.
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by Wandile Sihlobo | Oct 5, 2024 | Agricultural Trade
While South Africa’s maize production is down 22% from the last season because of the tough mid-summer drought to an expected harvest of 12,8 million tonnes, we continue to export maize to the Southern African region.
The expected harvest, combined with large carryover stock from the last season, has made South Africa comfortable about maize supplies.
For example, in the week of September 27, South Africa exported 38k tonnes of maize. Of this volume, 54% was exported to Zimbabwe, 17% to Botswana, 15% to Namibia, and the balance to the neighbouring African countries.
Last week’s maize exports placed South Africa’s total maize exports in the 2024-25 marketing year at 929k tonnes out of the expected 1,90 million tonnes (down from 3,44 million tonnes in the 2023-24 marketing year because of the mid-summer drought).
The 2024-25 marketing year started on May 1 2024, and will end by April 2025.
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by Wandile Sihlobo | Oct 4, 2024 | Agricultural Environment and Natural Resource
Global food prices have risen slightly. This morning, the FAO released its Global Food Price Index results for September 2024, a measure of the monthly change in international prices of a basket of food commodities.
The Global Food Price Index showed a 3% increase from August to 124 points in September 2024. The monthly price increase was broad-based across all major commodities or sub-indices: meat, dairy, cereals, vegetable oils, and sugar.
There are varied reasons for price upticks in these products, mainly related to slightly tight supply in some, weather concerns in some, and strong demand in some products like dairy and meat.
The FAO’s Global Food Price Index is now 2% up from September 2023.
Still, the current reading of the Global Food Price Index is 22% below its peak of 160.3 points reached in March 2022.
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by Wandile Sihlobo | Oct 3, 2024 | Agricultural Production
South Africa is on its eighth summer grain and oilseeds production forecast for the 2023-24 season. There are two more monthly reports to follow. Given that we are at the tail end of the season and will soon be in the optimal planting window for the 2024-25 production season from mid-October, we thought there would be no major revisions of the production figures at this late stage.
But this has not been a typical season, and the lower producer deliveries we have been observing over the past few weeks are not only a function of on-farm storage but a poor harvest. Indeed, we struggled with a mid-summer drought in February and March, undermining crop yield potential in various regions.
On September 26, South Africa’s Crop Estimates Committee lowered the 2023-24 maize harvest to 12,80 million tonnes, down 2% from last month and 22% from the previous season. This sharp decline in harvest prospects signifies the harsh impact of the drought.
Of the current estimate, white maize is about 6,08 million tonnes (down 2% m/m), with yellow maize at 6,72 million tonnes (down 2% m/m). The current maize crop of 12,80 million tonnes is the lowest in six years, again showing the sharp impact of the drought.
We believe the expected harvest and carryover stocks from last season will meet South Africa’s annual maize consumption of roughly 12,00 million tonnes. This will still leave the country with a sizable volume for export markets.
The latest data from the South African Grains and Oilseed Supply and Demand Estimates Committee suggests that South Africa’s maize exports could reach 1,90 million tonnes in the 2024-25 marketing year (this corresponds with the 2023-24 production season).
In the week of September 13, about 843k tonnes had already been exported (the 2024-25 marketing year started on May 1).
In this export forecast, about 1,20 million tonnes will likely be white maize, with 700k tonnes could be yellow maize. Still, the estimated exports of 1,90 million tonnes are down notably from 3,40 million tonnes in the previous 2023-24 marketing year (this corresponds with the last 2022-23 production season). With the further downward revision of the harvest, we suspect that the export figure may have to be revised somewhat, particularly the white maize component.
Also worth noting is that while South Africa will likely remain the net exporter of maize in the 2024-25 marketing year (which corresponds with the 2023-24 production season), the coastal regions will import small volumes of yellow maize for animal feed because of price advantage. We have recently seen the imports of yellow maize from Argentina through Cape Town.
South Africa’s 2024-25 maize imports currently stand at 173k tonnes. The imports for the year (2024-25 marketing year) could rise to 350k tonnes. Brazil is another potential supplier of yellow maize to South Africa. Notably, after accounting for these potential imports, South Africa will likely remain a net maize exporter.
Importantly, these figures are still tentative. There may still be adjustments in the coming months, particularly on white maize export forecasts. We are in a tricky season with many unknowns, and the recent downward revision of white maize has further complicated an already challenging season.
The implication for the consumer is that white maize prices may remain elevated over the near term. On September 26, the white maize spot price traded around R5 505 per tonne, roughly 38% up year-on-year.
Meanwhile, yellow maize was at R4 240 per tonne, up 10% year-on-year. The price difference is because of the abundant yellow maize supplies in the world market relative to scarce white maize.
The regional demand for white maize will also continue to present upward price pressures, especially towards the end of the year and going into the first few months of 2025.
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