by Wandile Sihlobo | Oct 23, 2024 | Agricultural Trade
This past week, the leaders of the BRICS Business Council from all member countries met in Moscow, Russia, for the annual meeting. The BRICS Business Council’s workflow is based on working groups covering vital economic sectors.
One such working group is agribusiness, which comprises all matters related to agriculture, food, fibre, and beverages. This year’s discussions were built on themes discussed in 2023 at the Johannesburg BRICS Summit. One of these was the need to deepen agricultural trade amongst BRICS countries. This is an important and relevant theme for South Africa, which has an export-led agricultural sector.
South Africa’s agricultural exports to BRICS remain marginal, about 8% of the country’s overall exports to the world. The significant challenges are the higher import tariffs and the phytosanitary barriers. This is to be expected as BRICS is not a formal trade bloc. Thus, in this year’s conference, South Africa pushed for lowering the import tariffs and for the BRICS member countries to address the non-tariff barriers so that intra-BRICS agricultural trade can improve.
The expanded BRICS is a vital agricultural market, accounting for nearly half of global agricultural trade. Thus, the export-led agricultural sectors, such as South Africa, must push to expand exports to the region. Notably, the export-driven agenda aligns with South Africa’s domestic policy of expanding production. There must be a market for the product that South Africa will produce, and BRICS is a suitable place.
Today, the political leaders of BRICS countries are meeting in Kazan, Russia. South Africa’s political leaders’ message should build on the themes of the Business Council; for agriculture, exports are the primary concern.
Notably, the drive for BRICS agricultural exports is not at the expense of the existing agricultural export markets such as the African continent, EU, Middle, Americas and Asia. South Africa must maintain warm relations with these countries while pushing for broader agricultural access in various BRICS countries.
I have written an expanded view that you can read here.
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by Wandile Sihlobo | Oct 20, 2024 | Agricultural Trade
This is one of those blog posts that I will regularly update when we receive new data. This week, I want to highlight that South Africa continues to export maize to the Southern Africa region. Most of these exports are white maize, a staple for the area. The major producers of white maize globally are South Africa and Mexico.
In times of drought, there are always fears that the major maize producers may not have sufficient supplies for the region or may limit exports. We are certainly in a season where Southern African countries have lost most of their harvest and now require imports. For example, Zambia lost 50% of its maize crop; Zimbabwe lost 60%. There were also significant crop losses in Malawi, Lesotho, and the broader region.
South Africa was not insulated from this devastating drought. However, the crop losses were relatively better because of the improved seed varieties South Africa uses and the better input application, which supported the crop in some regions of the country. Still, South Africa’s maize production is down 22% from last season’s expected harvest of 12,8 million tonnes.
But this decline in harvest doesn’t mean South Africa will suddenly trim exports. We maintain an open market policy.
We believe the expected harvest and carryover stocks from last season will meet South Africa’s annual maize consumption of just under 12,00 million tonnes. This will still leave the country with a sizable volume for export markets.
Thus, South Africa continues to export maize. The country exported 57k tonnes of maize on October 11, 2024. Of this volume, 47% was exported to Zimbabwe and the balance to the neighbouring African countries.
This puts South Africa’s total maize exports in the 2024-25 marketing year at 1,03 million 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).
This means, roughly 900k tonnes is yet to be exported.
Yes, while South Africa will likely remain the net exporter of maize in the 2024-25 marketing year, 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 230k 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.
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by Wandile Sihlobo | Oct 13, 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 October 4, South Africa exported 42k tonnes of maize. Of this volume, 52% was exported to Zimbabwe, 17% to Botswana, 17% to Namibia, and the balance to the neighbouring African countries.
This placed South Africa’s total maize exports in the 2024-25 marketing year at 971k 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).
Moreover, while South Africa will likely remain the net exporter of maize in the 2024-25 marketing year, 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 221k tonnes.
The 2024-25 marketing year started on May 1 2024, and will end by April 2025.
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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 | Jul 12, 2024 | Agricultural Trade
The Kingdom of Saudi Arabia has not featured prominently in South Africa’s beef export markets in the past, with only small volumes last exported in the early 2000s. The renewed access to this market since the start of 2024 is critical to South Africa’s ambition to expand beef exports. The Saudi beef market is sizable, with annual imports worth around US$647 million.
About 62% of the Saudi beef imports were frozen beef, while 38% were chilled or fresh beef imports. Some leading suppliers to Saudi Arabia include Brazil, Australia, Pakistan, The US, New Zealand, and Canada.
Beyond beef, the Saudi meat market is large, with all meat imports valued, on average, at US$1,9 billion annually over the past five years. This means over time, as South Africa increases its production in other meat value chains, Saudi Arabia could remain a strategic country for growing exports.
This positive news of export market development provides some relief when the South African beef industry has faced a challenging operational environment for several reasons. One of the significant challenges was the rise in feed prices since 2020, especially for maize and soybeans.
The rise in animal feed prices coincided with a worsening financial strain on consumers due to the COVID-19 pandemic’s damaging effects. Thus, we saw a decline in the demand for red meat products as consumers opted for relatively cheaper forms of protein.
Moreover, the spread of foot-and-mouth disease to six of South Africa’s nine provinces for the first time in history was another challenge for the industry. This brought temporary bans in specific export markets, extending to auctions and livestock movement, mainly cattle, for some time in 2022.
Fortunately, the feed prices have now softened somewhat. This is in response to large domestic maize and soybean harvests and the easing of global grain prices (irrespective of lingering worries about the Black Sea Grain Deal).
Therefore, opening beef export opportunities to the Kingdom of Saudi Arabia adds to this improving operational environment in the future.
Despite the foot-and-mouth disease challenge, South African beef exports did not collapse. Some markets remained open, although with strict controls. This is evident in South Africa’s beef exports for 2022, which amounted to 28 422 tonnes (albeit down 12% from 2021). This is only mildly below the ten-year average.
Overall, the broadening of South Africa’s beef export markets is a welcome development and shows the possibilities the country could achieve through collaboration and aligned interests between the government and private sector.
These efforts of opening key markets such as the Kingdom of Saudi Arabia should extend to other commodities, mainly fruits and wine, that are eager to expand the export markets while retaining the existing markets in the EU, the African continent, Asia and the Americas, amongst other regions. Addressing the daily challenges at the ports, roads, and municipalities is equally essential for the success of this export initiative.
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by Wandile Sihlobo | Jun 14, 2024 | Agricultural Trade
The collaboration between Transnet, organised business and agriculture sector stakeholders to improve efficiency at SA ports must go on. Efficient logistics are the lifeblood of SA agriculture and other exporting sectors of the economy.
Admittedly, the deciduous fruit industry faced many challenges at the Port of Cape Town at the start of 2024 related to delays that proved costly to farming businesses. Still, continuous collaboration to ensure improvements is the only viable path forward.
We are already seeing the benefits of the improvements in the agricultural sector through the rise in the value of exports. In the first quarter, agricultural exports increased 6% year on year, reaching $3.1bn according to Trade Map data, a result of both higher volumes and prices. The products leading the export list were grapes, apples and pears, maize, wine, apricots, sugar, wool, fruit juices, peaches and apricots.
From a regional perspective, Africa received the lion’s share of SA’s agricultural exports, accounting for 42%. The main export products were maize, cereal meals and pellets, sugar, prepared foods, apples and pears, fruit juices, wheat, ciders and other fermented beverages, and soya bean oil.
The EU regained its position as SA’s second-largest agricultural market, overtaking Asia, with a share of 22%. Grapes, apricots, peaches, cherries, plums, wine, apples and pears, dates, figs, avocados, guavas, mangos, wool and fruit juices were the primary products exported to the EU in the first quarter.
Asia and the Middle East as a collective were the third-largest agricultural markets for SA, accounting for 19% of exports. The main products were apples and pears, grapes, wool, sugar, beef, citrus, apricots, cherries and peaches, mutton and lamb, and soya beans.
The Americas region accounted for 6% of SA’s agricultural exports in the first quarter, manly grapes, wine, fruit juices, apples and pears, nuts, apricots and cherries. The rest of the world, including the UK, accounted for the remaining 10% of our exports.
Of course, SA doesn’t engage in one-way trade — the country imports various agricultural products. In the first quarter, these imports amounted to $1.6bn, down 4% year on year, according to data from Trade Map. The drop resulted from slightly lower volumes and prices of the major products SA imports, such as wheat and rice, whose prices cooled off at the start of this year from the rally we saw in 2023.
As in most years, SA’s major imports in the first quarter were wheat, rice, palm oil, poultry products and whiskies. SA lacks favourable climatic conditions to grow rice and palm oil, and thus relies on imports of these products. In the case of wheat, we import nearly half of our annual consumption because of unfavourable climatic conditions to expand domestic wheat production beyond the regions where we already cultivate winter wheat.
In the Free State, once one of the country’s major wheat-growing regions, production has declined notably over time because of unfavourable weather conditions and profitability challenges of wheat relative to other crops. SA also imports about 20% of the annual domestic consumption of poultry.
Accounting for both exports and the imports, SA’s agriculture recorded a trade surplus of $1,4bn in the first quarter, up 20% from the first quarter of 2023. The sharp rise resulted mainly from imports falling, while exports lifted slightly.
Policy considerations
The first-quarter export figures are encouraging, but the trend may not be sustained in subsequent quarters due to a decline in grain exports, a major part of SA exports in the first quarter and much of 2023. Grain and oilseed production suffered due to the midsummer drought, which resulted in major yield losses.
Beyond the quarterly activities, there are some policy considerations that would support agricultural exports:
- SA should stay focused on improving the logistical infrastructure efficiency and on the export market expansion mission for the agricultural sector. There is a need for increased investment in port and rail infrastructure and improving roads in the farming towns that continue to constrain the sector’s growth.
- We must work hard to retain existing markets in the EU, Africa, Asia, the Middle East and the Americas. Importantly, in an increasingly divided and fragile world SA must walk a careful path so that its foreign policy approach does not result in a negative trade policy response from its traditional trading partners. This is fundamental for the country’s agricultural growth, sustainability and job creation.
- SA should expand market access to some of the key Brics+ countries, such as China, India and Saudi Arabia. Other strategic export markets for SA’s agricultural sector include South Korea, Japan, Vietnam, Taiwan, Mexico, the Philippines and Bangladesh. The private sector and the government share this ambition for export market expansion.
- The departments of trade, industry & competition and agriculture, land reform & rural development should lead the way for export expansion in these agricultural strategic markets. The outcome of the 15th Brics conference in agriculture also focused on deepening trade within the Brics+ countries while retaining other markets outside this grouping. This was anchored on the emphasis for Brics members to lower import tariffs and address sanitary and phytosanitary barriers hindering deeper trade within this grouping.
Written for and first published on Business Day.
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by Wandile Sihlobo | May 25, 2024 | Agricultural Trade
April marked the end of South Africa’s 2023/24 marketing year for maize. This marketing year corresponds with the 2022/23 production season, as the crop harvested mid-year in 2023 was marketed from then through to the end of April 2024.
According to data from the Crop Estimates Committee (CEC), the 2022/23 production season was characterized by an excellent harvest of 16,4 million tonnes. This was on the back of large plantings and the favourable summer rainfall that boosted the yields.
The ample harvest allowed South Africa to maintain its position in export markets. South Africa is the world’s ninth largest maize exporter, trailing the US, Brazil, Argentina, Ukraine, Romania, France, Paraguay and Poland. Data from the South African Grains Information Services shows that in the 2023/24 marketing year, the exports amounted to 3,4 million tonnes, down by 6% from the previous year. About 63% of the exported maize was yellow, with 37% being white maize.
In the past, South Korea, Japan and Taiwan were the leading markets for South Africa’s maize exporters. But in the 2023/24 marketing year, Zimbabwe took the lion’s share of the exports, accounting for 18% of the 3,4 million tonnes of exports.
The surge in exports to Zimbabwe comes after a few years of modest exports to the country because of decent domestic harvest and the restrictions on genetically modified maize, which the government often used as a barrier to imports in certain seasons. However, the regulations have changed, and Zimbabwe now imports genetically modified maize.
Other large maize export markets in the African continent are Botswana and Mozambique, which accounted for 9% and 6% of South Africa’s total maize exports, respectively. South Korea, Japan and Taiwan remained significant export markets for South African maize, accounting for 14%, 13% and 13% shares in the total exports, respectively. Another important maize export market for South Africa in the Asian region is Vietnam. Still, its exports were slightly lower than other countries, accounting for a 5% share in the overall export markets.
While the export season was a success, the coastal regions of South Africa started worrying about the maize supplies at the end of the 2023/24 marketing year, specifically pricing when considering the transport costs from central regions of the country that are main maize producers. Disappointingly, the excellent 2022/23 maize production season is followed by a less promising season.
In the 2023/24 production season (which corresponds with the 2024/25 marketing year), South Africa’s maize harvest is forecast to fall by 19% year-on-year to 13,3 million tonnes. This is according to data from the CEC. This decline in harvest is primarily due to unfavourable weather conditions in February and March, where dryness and heatwave caused widespread crop damage in various regions of South Africa.
Subsequently, the coastal areas in South Africa worry about tight supplies in the new marketing year. This led to 32 691 tonnes of yellow maize imports from Argentina in the last week of the 2023/24 marketing year. We suspect there will be additional imports in the 2024/25 marketing year, primarily for the country’s coastal regions. These imports will help increase supplies for the animal feed industry.
Notably, while South Africa expects a significantly lower harvest this year, the country could remain a net exporter of maize. With an annual maize consumption of approximately 12,0 million tonnes and a harvest of 13,3 million tonnes, South Africa will have over a million tonnes of maize for exports.
We also believe there are decent carryover stocks from the past season, which will help increase the maize supplies for the new marketing year of 2024/25. Still, there remains heightened uncertainty about the actual size of the maize crop this year. The forecast of 13,3 million tonnes is the third estimate by the CEC. In the coming months, the Committee could still adjust the figures depending on their observations of the yields in the various regions of South Africa.
Moreover, it remains unclear what the impact of the rains in early April, after two months of damaging dryness, mean for the crop size. Many observers, ourselves included, were surprised when the CEC mildly lifted their crop forecast on April 25. The market expectation was a possible downward revision of the crop.
Another challenge that lingers as we start the 2024/25 marketing year is Southern Africa’s maize demand. The major maize producers and consumers in the region, such as Zambia, Zimbabwe, and Malawi, all saw notable crop failures because of dryness at the start of this year. While the limited harvest from the fields could cover the next few months of domestic consumption in each country, these countries’ import needs could intensify at the end of the year and into 2025.
Aside from South Africa, the hope for these countries is that Mexico could export to the region. Still, this will depend on whether Mexico planted sufficient maize. Unlike in the past, South Africa will likely be unable to satisfy the needs of the regional maize. More information about the regional maize needs will be clearer in the coming months. The important thing for South African farmers and traders to do right now is to monitor regional maize developments closely.
In sum, May is the start of the 2024/25 marketing year for South African maize. Unlike the previous years of high export volumes, this new marketing year will likely see significantly lower export volumes. Still, the regional maize need should remain on the radar of the South African grain traders. Significantly, with all these maize trade difficulties, the South African government will thankfully not intervene in the maize markets.
The Department of Agriculture, Land Reform and Rural Development provided this assurance to market participants last month. The tight supply could cause price volatility in the coming months but this should not be a cause for deviations in the current agricultural policy.
What the government has urged, which is already a practice in South Africa, is a timely reporting of the export and import activities. Such data is critical for effective market functioning so that the participants know when the supplies are tight, and price adjustments could help moderate the export activities.
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