How top political parties stack up on land and farm policy

How top political parties stack up on land and farm policy

With votes counted and the ANC’s support having fallen sharply to only 40%, some form of coalition government is likely to govern SA. The nature of such an arrangement is likely to emerge in coming days and weeks.

As with any coalition negotiations, trade-offs are likely to be made involving several government functions and policies. The question that should be addressed in the agriculture sector is: what are the implications for potential changes in government functions on agriculture and land reform policy?

Regardless of the formation of the coalition the ANC settles with, the policies of the agriculture, land reform and rural development department should be maintained.

Expropriation

Still, from a reading of the top four political parties trailing the ANC in the voter outcome, two stand out with contrasting views on land reform to the current policy path, namely the EFF and the uMkhonto weSizwe party (MK). These parties have a strong preference for the expropriation of land without compensation.

The MK manifesto states that the government should “expropriate all land without compensation, transferring ownership to the people under the custodianship of the state and traditional leaders”. This is the direct opposite of the programme of rolling out title deeds and strengthening land tenure that the department is now pursuing.

Similarly, the EFF manifesto states that its approach to the resolution of the land question will be “anchored on the principle of expropriation of land without compensation for equal redistribution and use, and for the state to be the custodian of all land in SA.” This policy path is unfavourable for investment, long-term inclusive agricultural growth agenda, and job creation.

For its part, the DA champions strong property rights. Moreover, the DA has been implementing national agricultural policies in the Western Cape. This suggests that the DA would not be inclined to significantly change the agricultural policy path.

The IFP has a slightly different view, which advocates the growth of SA’s agriculture, with the release of land to the beneficiaries in the state’s hands. This, too, is aligned with ANC policies.

The slight ambiguity of the IFP policy on land is the following statement from the manifesto: “Continue to support the policy of land expropriation with reasonable compensation.”

From a purely agricultural perspective, the IFP policies are aligned with the government’s approach. For example, the IFP states that the government must “ensure significant state support, especially for new entrants into the agriculture industry”. This work is already being implemented through the blended finance instrument that the department is rolling out in partnership with financial institutions.

The IFP further argues for partnerships, stating that the government must “promote the involvement of both private and public sectors in the country’s agricultural development processes”. This partnership approach is at the heart of the Agriculture and Agro-processing Master Plan.

Property rights

Admittedly, forming alliances would likely result in trade-offs in policy positions of the political parties that would join the ANC in government. Therefore, whether there is solid conviction for this expropriation of land without compensation policy in the EFF and MK is something that is likely to become clearer as parties outline their non-negotiables.

Ultimately, when the new administration has been formed, the master plan should remain the primary programme for the government to drive inclusive growth in SA’s agriculture.

I also believe that the protection of strong property rights and the continuous release of government land to appropriately selected beneficiaries are essential steps in driving inclusive growth in agriculture.

The leadership at the department remains in office until a new government is formed. Much about the political leadership of the department in the new administration remains unknown.

Written for and first published in the Business Day.


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SA’s summer grains and oilseed production estimate slightly lowered from last month

SA’s summer grains and oilseed production estimate slightly lowered from last month

South Africa’s Crop Estimates Committee (CEC) recently released its fourth production estimate for the 2023/24 summer crop production season. The harvest across the country is underway so we may put more weight on the accuracy of this figure than our tentative view in the previous estimates.

The CEC places South Africa’s 2023/24 total summer grains and oilseed production forecast at 15,9 million tonnes, down 0,5% from the previous month’s forecast and 21% lower than the last season’s harvest.

Maize

A closer look at the data shows that white and yellow maize harvest could be 6,4 million tonnes (down 0,9% m/m) and 6,9 million tonnes (down 0,3% m/m). These revisions place the total maize production estimate at 13,3 million tonnes (down 0,6% m/m).

When viewed annually, white maize harvest is down 25%, with yellow maize down 13% from the 2022/23 season. The expected harvest of 13,3 million tonnes is down 19% from the 2022/23 season.

We are optimistic that this harvest may materialize, although we are unsure of the quality. Suppose we are correct; this harvest would meet South Africa’s annual maize consumption of roughly 12,00 million tonnes, leaving the country with over a million tonnes for exports.

With that said, maize prices will likely remain elevated for some time because of potentially tighter supplies later in the season. Admittedly, in recent weeks, white and yellow maize prices have moderated from the levels we saw last month because of the harvest pressure and the relatively stronger domestic currency, amongst other factors.

Still, white maize prices are over 30% higher than levels we saw a year ago, with yellow maize prices up roughly 7% from a year ago. On May 28, South Africa’s white maize spot price closed at R5 005 per tonne, while the yellow maize spot price was R4 035 per tonne.

Yellow maize prices have not increased much, as imports could make the supply risk manageable. There are ample maize supplies (yellow) in the world market.

The International Grains Council (IGC) forecasts the 2023/24 global maize harvest to be 1,2 billion tonnes, up 6% year-on-year. A majority of this expected global maize is yellow. The stocks are also robust, thus keeping the international yellow maize prices moderate.

This also partly explains the relatively mild increase in yellow maize prices compared with the surge in white maize prices, which is scarce in the world market and primarily produced in Southern Africa and Mexico.

Concluding remarks

The current production data illustrates the scale of damage caused by the mid-summer drought to the South African agricultural sector. The complete scale of the financial impact of this drought on the farming businesses is yet to be clear.

Still, from a consumer perspective, South Africa is not in a crisis, in our view. The recent drought presents upside risks to food price inflation but not the overall basket.

The challenge is primarily the white maize, especially considering the potentially more robust regional demand later in the year.

The favourable supplies of other grains in the world market, mainly yellow maize (also rice and wheat), and the moderating prices mean South Africa could be slightly cushioned in these commodities.


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SA’s summer grains and oilseed production estimate slightly lowered from last month

Maize harvest kicks off: South African farmers brace for challenging season

South African farmers and workers in the maize-growing regions are getting ready for a busy period. The harvest season has just started and should gain momentum in the coming weeks, lasting until July for some areas.

There has already been good progress in the first two weeks of the new marketing year for the grain, which started at the beginning of May. For example, farmers delivered 1.2 million tonnes of maize to commercial silos in the first two weeks of the month. The overall expected maize crop for the year is 13.3 million tonnes according to data from the South African Crop Estimates Committee.

The delivery figures should be much higher in the next few weeks, however, with a possible slump in the figures for last week’s harvest activity — the third week of the month — which will be released by the service this week.

Some farmers might have taken a break last week to attend Nampo, one of the largest agricultural exhibitions in the Southern Hemisphere, held in Bothaville in the Free State.

While we are happy to see these harvest volumes, and hope the expected 13.3 million tonnes overall harvest materialises, we also think of the many farmers who lost much of their crops during the mid-summer drought and won’t have a lot to harvest this time. For them, the hope lies in the upcoming season, which starts in October.

Fortunately, the weather forecasts paint a promising picture of a return of a La Niña in the 2024-25 summer-crop production season. This would bring much-needed rain and support agricultural production in South Africa and the broader Southern African region.

Still, there will be financial strain in the coming months resulting from the significant crop losses caused by the mid-summer drought. The expected harvest of 13.3 million tonnes of maize is down 19% from the 2022-23 season and we are yet to fully understand the effect on farmers’ finances.

Still, if it materialises, the expected harvest will be sufficient to meet South Africa’s annual maize consumption of roughly 12 million tonnes, leaving the country with a small export volume.

Consumers will probably see maize prices remain elevated for some time because of the potentially tight supplies later this year.

The Southern African regional demand, particularly for white maize, remains a significant upside driver of South African maize prices. Zimbabwe, Zambia and Malawi have had a poor harvest and will require large maize imports later this year, going into the first quarter of 2025.

If we look beyond maize, we know that South Africa’s 2023-24 summer grains and oilseed harvest is estimated at 16 million tonnes, down 20% from the previous season. As well as maize, this figure comprises sunflower seeds, soybeans, sorghum, groundnuts and dry beans. The harvest of these grains and oilseeds is underway.

What is clear is that we are closing a difficult season for the South African farming community.

Farmers planted a slightly bigger area for summer grains and oilseed this season, which shows that the 20% year-on-year decline in the harvest we mention above results from poor yields, not the reduction in area planted.

With relatively warm clear skies and warm weather conditions in the days ahead for much of South Africa, the farming community will be working hard to complete the harvest in areas spared of the mid-summer drought misery.


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The preliminary projections for the 2024-25 global grains and oilseed production look promising

The preliminary projections for the 2024-25 global grains and oilseed production look promising

On May 10, the United States Department of Agriculture (USDA) released its flagship monthly report – the World Agricultural Supply and Demand Estimates. This report is keenly observed monthly by the agricultural market participants worldwide. It provides annual forecasts for supply and use of maize, wheat, rice, soybeans, sunflower seed, cotton and other grains and oilseeds. The report provides insight into these commodities in the US and the world.

The USDA typically provides their first estimates for each new marketing year in May. On Friday, we received the first estimates for the 2024/25 season. However, the observers of the USDA reports typically have to read the first month’s data with caution. These data are still preliminary as the season has recently started in the northern hemisphere, and the southern hemisphere is still at the tail end of the 2023/24 season. The 2024/25 season that the USDA is reporting about will only start around October 2024 in the southern hemisphere. So, a lot could change in most countries between now and October.

Moreover, weather forecasters, such as the International Research Institute for Climate and Society and the Australian Bureau of Meteorology, predict a return of a La Niña weather event in the 2024/25 season. This weather phenomenon typically leads to heavy rains in some regions, such as Southern Africa, while South America could see drier weather conditions. Still, the impact of the weather primarily depends on the intensity of the weather event. We can deduce that there remains major uncertainty about the global grain and oilseed production outlook for the 2024/25 season.

Be that as it may, the USDA projections paint a broadly positive picture of the harvest. For example, the 2024/25 global maize harvest is projected at 1.2 billion tonnes, well above the long-term average (although down 1% year-on-year). The annual decline is due to an expected shift in area planting in parts of the US from maize to soybeans and somewhat lower harvests in Argentina and Ukraine.

Moreover, the 2024/25 global wheat harvest is estimated at 798 million tonnes, up 1% from the previous season. The bigger harvests are expected in Canada, Australia, the US, Kazakhstan, and China.

The 2024/25 global rice production is projected at 527 million tonnes, up 2% from the previous season. This is on the back of the expected large crop in Asia. Also worth noting is that the USDA forecasts the 2024/25 global soybean harvest at 422 million tonnes, up 6% year-on-year. This improvement is due to the expected large harvest in Brazil, Argentina and the US.

These preliminary estimates paint an optimistic outlook for the 2024/25 global grains and oilseeds. If they were to materialize, the stocks would continue to improve and thus keep global grains and oilseed prices at moderate levels, which is beneficial to the consumers. Still, these are early days, and a lot will depend on the weather outlook.

So far, the International Research Institute for Climate and Society signalled the return of a  La Niña, a welcome development for the Southern Africa region, but less so for other major producing regions such as South America. One will have to keep a close eye on these production data in the coming months and how the USDA assesses the impact of weather.

Notably, the weather projections through the International Research Institute for Climate and Society are vital in assessing the coming season’s production prospects and commodity price expectations. If the La Niña is not strong, the world could still have a decent harvest of grains and oilseeds in the 2024/25 season. Moreover, if these forecasts are communicated carefully, the farmers may not be deterred from planting the typical crop area worldwide. If anything, they will carefully plan season production in various countries to deliver a decent harvest.


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

An end to an El Niño and the possible return of a La Niña in the 2024/25 summer season is positive for SA agriculture

An end to an El Niño and the possible return of a La Niña in the 2024/25 summer season is positive for SA agriculture

After a scorching summer season that led to significant crop failure, the El Niño cycle seems to have ended. The major weather forecasters, such as the International Research Institute for Climate and Society and the Australian Bureau of Meteorology, recently confirmed this view. We are currently in a neutral state, where neither El Niño nor La Niña is active.

Hope beyond the El Niño – winter cropping season prospects

While an end to an El Niño is always welcome development, it comes at a time when the 2023/24 summer crop season is on its tail end. Therefore, this update on weather conditions will not have a material impact on harvest prospects. If anything, ending an El Niño cycle would mean a normal transition into a winter season. Such normal weather conditions would favour the drying up of mature crops in the summer crop-growing regions, as well as improved harvesting conditions. It would also mean normal to favourable weather conditions for the winter crop-growing regions.

So far, the farmers have witnessed the damage of unfavourable weather conditions during the 2023/24 season and are cautious about the 2024/25 winter crop season. For example, the farmers’ intentions-to-plant data released by the Crop Estimates Committee this past week signalled a 3% year-on-year decline in South Africa’s 2024/25 winter crop plantings to 798 800 hectares. This figure comprises possible plantings for wheat, barley, canola, oats, and sweet lupines.

The decline in the area is primarily in wheat, which is down 3% year-on-year to 520 200 hectares. The barley plantings could also fall 5% year-on-year to 102 000 hectares, and the oats plantings could be at 20 500 (down 26% year-on-year) and sweet lupines at 15 000 hectares (down 6% year-on-year). Canola is the only winter crop whose area plantings could lift 8% year-on-year to 141 100 hectares.

Admittedly, it is still too early, and the farmers will adjust their planting decisions in the coming weeks as they progress with the seasonal activity.

The need for cautious optimism

Beyond the near-term winter crop season, the weather outlook for the 2024/25 summer season is also positive. The International Research Institute for Climate and Society forecasts a return of a La Niña weather phenomenon from May 2024 throughout the year. This means the excessively hot and drier weather conditions of the 2023/24 summer season that resulted in crop failures may have been temporary.

In the coming months, we could soon transition into a favourable rainy season for South Africa’s agriculture. However, it is certainly too early to be confident about the outlook.

Still, the rise in the probability of La Niña occurrence to over 50% from August 2024 throughout the year is a source of optimism. The 2024/25 summer crop season will start in October, and if the current La Niña forecasts hold, South Africa should receive early rains during that period to support the season.

Admittedly, the farmers across South Africa are focused on the current 2023/24 summer crop season, and the yield prospects are bleak for various regions. The financial impact of the poor 2023/24 summer crop season on farmers will be more evident over the coming weeks and months as the market receives crop deliveries.

Therefore, while the weather outlook for the 2024/25 season looks promising, this may be something that farmers will pay attention to after the harvest season of the current crop. By then, we will also better understand whether the La Niña will prolong into 2025 and for how long.

The current forecasts only cover until December 2024. The early months of 2025 are vital for summer crops. For example, the 2023/24 summer crop season started well, with favourable rainfall. It was only in February that the problem of dryness and heatwave intensified through to March. This two-month event changed the agricultural fortunes of the country for the worse.

Still, after a challenging 2023/24 summer season, the International Research Institute for Climate and Society and the Australian Bureau of Meteorology signal relief to an end of El Niño. Notably, the return of a  La Niña is an even more welcome development for agriculture.

While we primarily focused on crops in this note, the positive weather outlook applies to all agricultural activity in the entire Southern Africa region. We will continue to monitor these developments over the coming months.


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

South Africa’s summer crop production estimate has been lifted mildly

South Africa’s summer crop production estimate has been lifted mildly

Many, including myself, may have been a bit pessimistic about the 2023/24 summer crop growing conditions when we signalled a potential further downward revision of the harvest estimate in April. The data released at the end of April 2024 by the Crop Estimates Committee showed mild upward adjustments in the crop size from the previous month’s figures. South Africa’s 2023/24 summer grains and oilseed harvest is estimated at 16,0 million tonnes, up 1% from last month.

Indeed, this is not a cause for celebration. The figure does not change the reality that we have been through a challenging season of El Niño-induced drought and heatwave in February and March that weighed on the summer grains and oilseed harvest in various regions of the country. The current estimated harvest of 16,0 million tonnes is down 20% from the 2022/23 production season.

Maize

A closer look at the data shows that white and yellow maize harvest could be 6,4 million tonnes (up 2% m/m) and 6,9 million tonnes (roughly unchanged from last month). These revisions place the total maize production estimate at 13,3 million tonnes (up 1% m/m).

When viewed annually, white maize harvest is down 25%, with yellow maize down 13% from the 2022/23 season. The expected harvest of 13,3 million tonnes is down 19% from the 2022/23 season.

If it materializes, the expected harvest will be sufficient to meet South Africa’s annual maize consumption of roughly 12,00 million tonnes, leaving the country with a small export volume. Still, we will likely see prices remaining elevated for some time because of the potentially tight supplies.

The Southern African regional demand, particularly for white maize, also remains a significant upside driver of prices. On April 25, white maize spot price closed at R5 477 per tonne, up 56% y/y. At the same time, the yellow maize spot price closed at R4 420 per tonne, up 22% y/y.

Yellow maize prices have not increased much as the supply risk could be manageable through imports. There are ample maize supplies (yellow) in the world market. The International Grains Council (IGC) forecasts the 2023/24 global maize harvest to be 1,2 billion tonnes, up 6% year-on-year.

A majority of this expected global maize is yellow. The stocks are also robust, thus keeping the international yellow maize prices moderate. This also partly explains the relatively mild increase in yellow maize prices compared with the surge in white maize prices.

In the world market, outside the Southern Africa region, the other significant producer of white maize is Mexico. Given that the northern hemisphere is at the start of its 2024/25 production season, it may be helpful in the Southern African countries with poor harvests, such as Zimbabwe and Zambia, to continuously engage with Mexico or even the United States to plant white maize on contract for export to the region.

In my calculation, I think South Africa will not be able to fulfil the regional demand even if the forecast harvest of 6,4 million tonnes of white maize materializes.

Oilseeds

The 2023/24 soybean harvest remained unchanged from last month, estimated at 1,8 million tonnes (down 35% y/y). This annual decline results from lower yields in various regions of South Africa. We now believe South Africa may not play a robust position in soybean exports like the previous season. If anything, soybean oilcake imports this new season are now a possibility.

Meanwhile, the sunflower seed harvest estimate was lifted from last month by 4% to 615 000 tonnes (down 15% y/y). The area plantings are moderately down from the previous year, which means the primary driver of the annual decline in the harvest is the expected poor yields, especially as most of South Africa’s sunflower seed is planted in the western regions that experienced dryness and heatwave in February and March.

Concluding remarks

The recent rains in much of South Africa’s summer crop-growing regions are too late. The damage to the crop occurred in February and March during the heatwave and the El Niño-induced dryness. The current crop forecasts reflect this challenge, as the major crops are down notably compared to the 2022/23 production season.

Still, from a consumer perspective, South Africa is not in a crisis, in our view. The recent drought presents upside risks to food price inflation but not the overall basket. The challenge is primarily the white maize, especially considering the potentially more robust regional demand later in the year.

The favourable supplies of other grains in the world market, mainly yellow maize (also rice and wheat), and the moderating prices mean South Africa could be slightly cushioned in these commodities.

The IGC forecasts the 2023/24 global wheat harvest at 789 million tonnes, well above the long-term average. There is a lot of rice globally, with the 2023/24 global harvest forecast at 511 million tonnes, well above the long-term average. The 2023/24 global sunflower seed harvest is forecast at 57,9 million tonnes, well above average.

Still, the exchange rate will be important when assessing the possible imports of wheat and rice (and possibly yellow maize) into South Africa.


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

South African white maize price climbs again due to heatwave and lack of summer rain

South African white maize price climbs again due to heatwave and lack of summer rain

The SA spot price for white maize gained another 2% on Monday (April 15), bringing the increase so far this year to about 36%, sparking fears of the effect it will have on food prices and inflation. By market close the spot price of white maize on the SA exchange had risen R110 to R5,450 a tonne.

Beyond the effect at the farm gate, the higher prices will put consumers under pressure while they are already battling high interest rates and inflation.

While it may be a few months before consumers feel the effects, white maize is a staple crop for most South Africans, primarily low-income households, where it is used in the form of maize meal and samp.

The extreme heat and prolonged dryness in February and March destroyed maize fields and other crops in various regions of the country. At the end of March, the national crop estimates committee lowered its 2023/24 white maize production forecast to 6.9-million tonnes, a drop of 25% on the previous year.

The problem is not unique to SA, with Zambia having lost about half of its maize crop. Zimbabwe, Malawi, and other Southern African countries face a similar challenge.

The culprit behind the regional crop failure is the El Niño weather event, which brought drought conditions. The 2023/24 season began with excellent rains, prompting farmers across Southern Africa to plant their typical area of maize. However, a heatwave and extreme dryness hit the region from the start of February when the crop was nearing its pollination stage.

Despite the price rise, SA is still in a better place than it has been in other drought years as the country only needs about 5.5-million tonnes of white maize for domestic use.

Fears the government will be tempted to restrict maize exports to secure supplies for local markets have been put to bed after the agriculture department said recently it was committed to the existing open market policy. The higher prices this year will incentivise farmers to plant more next year.

But there are near-term challenges. South African farmers that lost their crop will face financial pressures, with calls being raised to the government for assistance.

Production volumes are forecast to recover in the 2024/25 season.

In the near term consumers in the broader Southern Africa region are likely to see much higher prices due to maize shortages in some countries. This may result in the need for the likes of Zimbabwe and Zambia to import from Mexico and the US as farmers there start their production season this month.

While yellow maize is their predominant crop, they can plant white maize on contacts for Southern African countries, and that maize could arrive timely at the end of the year and into early 2025.

Written for and first published by Business Day.


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

Zimbabwe and Zambia should look to Mexico and American farmers for more white maize

Zimbabwe and Zambia should look to Mexico and American farmers for more white maize

Farmers in Mexico and the U.S. are starting to plant grains and oilseeds for the 2024/25 season. The U.S. does not typically plant much white maize in the grains component of the crop. It usually is a few million tonnes for contracts. Mexico plants a large volume of white maize mainly for domestic consumption.

But we are opportune for Zimbabwe and Zambia to nudge the Mexican or American farmers to increase their white maize plantings for Southern African exports this season. The El Niño-induced dryness and heatwave hit the Southern Africa region, resulting in roughly half of Zimbabwe and Zambian maize crop failure. South Africa’s maize crop is also down by 20% y/y, with a harvest estimated at 13,2 million tonnes. If it materializes, it would still meet the domestic needs of about 12 million tonnes, leaving the country with a small export volume.

But this is a tough season requiring white maize imports for Zimbabwe and Zambia. The neighbouring small producers such as Botswana, Lesotho and Namibia are also struggling and will require white maize imports. These countries will need white maize, not yellow maize, which is widely traded in the world market.

At the end of 2024 and into the first quarter of 2025, the maize (mainly white) supplies will be tight in Southern Africa. This is also when the U.S. and Mexico would be harvesting their 2024/25 maize crop. Thus, this is the right time to nudge the Mexican and American farmers to plant more white maize this year.

Therefore, the Zambian and Zimbabwean governments, collectively with the private sector, should consider engaging Mexico and the U.S. to produce more white maize in their 2024/25 season. This would be for exports to the Southern Africa region at the end of this year and the first quarter of 2025.

Moreover, the regional governments should also engage with the World Food Programme to prepare to assist the least well-off countries with maize imports from the world market.


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

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