Agricultural Economics Today

It is hard to imagine where South Africa’s horticultural sector would be without effective trade policy. The recent expansion in South African horticultural production has largely been export driven. One fruit that clearly mirrors this is avocado.

South Africa produces on average about 90 000 tonnes of avocados a year. This has grown significantly from levels of just under 70 000 tonnes in the early 2000’s. The key driver behind this has largely been an expansion in area planted, which in turn was supported by an uptick in both domestic and global demand.

To illustrate the point of global demand — in the past six seasons, South Africa exported roughly two-thirds of its avocado production. The typical key markets are the Netherlands, the United Kingdom, Spain, Portugal, Russia and regional markets such as Botswana, Namibia, Zambia and Swaziland.

This year also started on a good footing for South African avocado producers and exporters. The exports for the first quarter of 2018 reached 4 524 tonnes, up by 32 percent from the corresponding period last year, and the largest volume for this period since 2015. About 94 percent of these exports went to the Netherlands, the United Kingdom and Spain, with the rest destined for regional markets, as well as Portugal, Russia and Lebanon, amongst others.

Other fruits such as citrus, stone fruit and table grapes, amongst others, also mirror a similar trend. One can only hope that South Africa will maintain this momentum and further explore new attractive and growing markets to diversify and support the horticulture industry.

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

South Africans are a very inquisitive nation. Each time I tweet about South Africa’s agricultural fortunes, someone asks about proportions of that particular product in racial terms. This past week, I posted a chart about liquor consumption – 76% of it is accounted for by beer. Almost immediately, the question popped up – what proportion of the barley and sorghum used to make the beer was grown by black farmers?

The most recent data we have that comes close to responding to this question deals with the separation of key crops – mainly grains and oilseeds – into commercial and non-commercial. However, it still doesn’t provide a clear-cut answer because it would be unreasonable to assume that black farmers are responsible for all non-commercial farming. Granted, a large share might be smallholder black farmers, but there are also black farmers who produce commercially, and white farmers who produce non-commercially.

The most convincing data I have found regarding agricultural production along racial lines is contained in a PhD thesis by the late George Frederick Liebenberg of the University of Pretoria. Unfortunately, Liebenberg’s data set ends in 2002 and is therefore outdated. This data simply does not provide the most recent production statistics.

One of the key takeaways from it is that black people accounted for 31% of the land being farmed – “farmed”, as opposed to “owned” – in 2002. This area produced less than 4% of field crops such as maize, wheat and sorghum. Black farmers, Liebenberg found, accounted for 10% of sheep production and 29% of poultry. They grew an estimated 17% of our pumpkins.

While the contribution by black farmers to agricultural production seems minimal from this data, keep in mind that this was collected 16 years ago. There has definitely been progress in the recent past, spurred by government-driven land reform programmes, as well as transfers of privately held land from white to back farmers.

In the livestock sector, the most recent estimates presented by trade economist Sifiso Ntombela of the Agricultural Business Chamber suggest that about 40% of cattle in South Africa are owned by emerging and communal black farmers. But a large proportion of this herd doesn’t enter into the meat supply chain. Ntombela also estimates that in the fruit industry, the contribution of black smallholder farmers is about 16% of overall production.

This week in Business Day I highlighted recent progress made in the grain industry in the Eastern Cape. In 2013, black farmers in the Matatiele area of the province were producing 6000 tons of maize on roughly 1200ha. By 2017 the area planted with maize had increased to 4000ha and the harvest was 28000 tons, according to data from Matatiele Grainco. At the moment, black farmers in Matatiele, Ugie and Maclear in the Eastern Cape are preparing field trials for various dryland winter wheat cultivars.

The wool, livestock and horticultural industries have also been engaged in transformation and producer-support programmes in the province over the past couple of years, which I believe has somewhat changed the picture from what was recorded in 2002.

Such programmes were not limited to the Eastern Cape; other provinces also have them, and hopefully are making progress. Unfortunately, we do not have a clear data set which can cast a macro view on these issues, which makes it difficult to measure the progress made thus far in terms of transformation.

Clearly, the racial question cannot be easily answered in the absence of statistics. However, there are signs and indications that transformation in the sector is under way given the increase in the land holdings of black farmers, some of whom are entering commercial farming.

Written for and first published in the Business Times on 08 July 2018.

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

 

July 7 is celebrated as World Chocolate Day – a day that marks the introduction of chocolate to Europe in 1550.

Damn! Folks have been indulging in chocolate for 468 years. So, for those who need an excuse to get some more this weekend – this is it.

Oh, I’ve just quickly scanned a few articles online marking this day. Interestingly, its origins are rarely mentioned. But, let’s get a bit of background on who are the producers of chocolate and leading consumers in the African continent.

In terms of production, the best place to start is cocoa production – the central ingredient of chocolate. Africa is the leading producer of cocoa, particularly the Ivory Coast, Ghana, Cameroon and Nigeria. Trailing Africa is South America and Southeast Asia (see the Chart below).

Now that we know the cocoa producers, one would generally assume that these countries will also be the leading producers of chocolate – WRONG. The value addition largely takes place outside of the African continent.

The United States, Italy, Japan, Switzerland, the United Kingdom and Argentina are the leading producers of chocolate (see the Table below). While Africa is a leading producer of cocoa, there isn’t a single cocoa producer featured amongst the top chocolate producers.

So, what is happening in Africa? The best we can tell is that the continent is importing a large share of chocolate that is found on retail shelves. The leading importers are South Africa, followed by Moroco, Algeria, Libya and Egypt.

I am tempted to talk about the old story of Africa failing to add value to its primary produce, but that is a topic for another day. For now – you must enjoy your chocolate folks!

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

Almost every Sunday afternoon I make a couple of phone calls to a number of farmers across the country to catch up on regional news and agricultural conditions. This past weekend I followed that routine, with a number of farmers briefing me about summer crop harvest progress.

Feedback from Western Cape folks indicated an appreciation for heavy rains, which according to the South African Weather Service might be more frequent over the next three months. The Eastern Cape farmers brought to my attention something I have not been thinking about of late – the possible expansion of winter wheat plantings to new regions in the country.

Victor Mongoato, who farms in Matatiele, together with associates in Ugie and Maclear in the Eastern Cape, are preparing field trials for various dryland winter wheat cultivars. Mongoato says they are starting the trials “in one of the best seasons, with high soil moisture following good summer rainfall, and there is a good chance for snow and light showers over the winter season”.

I was impressed by this initiative for two reasons. First, the idea of possible expansion of winter wheat plantings in SA is encouraging given that the area planted has been steadily decreasing over the years. Between the 1994-95 and 2017-18 production seasons, the country’s winter wheat plantings declined by more than half to 491,600ha, according to data from the South African Grain Information Services.

This decline could partially be attributed to the effects of climate change, which has resulted in many farmers, particularly in the Free State, opting out of high-risk wheat production in favour of other crops and farming activities.

Due to the decline in production and growing domestic consumption, wheat imports have increased significantly. In the 2017-18 marketing year, SA’s wheat imports are estimated at 1.9-million tonnes, up from 681,559 in the 1994-95 season.

Most importantly, the expected import volumes equal two thirds of this country’s annual wheat consumption.

Second, the farmers who are embarking on dryland trials in the Eastern Cape have in the past demonstrated success in the expansion of maize production. I highlighted this back in March, but it is worth restating to add a bit of context. In 2013 black farmers in the Matatiele area of the Eastern Cape province were producing 6,000 tonnes of maize on roughly 1,200 ha.

By 2017 the area planted to maize had increased to 4,000ha and the harvest was 28,000 tonnes, according to data from Matatiele Grainco. This harvest is almost a third of the Eastern Cape’s commercial maize crop, and the yield is higher than the national average. This growth was underpinned by an improvement in yields, coupled with expansion in the area.

I am not saying Mongoato et al will ultimately solve the country’s declining wheat production problem, but their intent at a time when agriculture is topical in terms of transformation and development should be supported. The previous example of their success in maize production was backed by both organised agriculture and the government. I sincerely hope their exploration of dryland wheat production will receive similar support.

As encouraging as this initiative sounds, the Eastern Cape still has fundamental challenges that could slow its agricultural development. These include poor infrastructure (particularly roads and silos) across agricultural production zones and the issue of communal land tenure, which limits the ability of farmers to access additional finance.

Such infrastructure is an important precondition for thriving crop production.

Written for and first published on Business Day on 05 July 2018. 

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

I keep a close eye on the Zimbabwe agricultural sector because of its potential impact on regional demand. Since the collapse of the sector after the land reform programme in the early 2000s, the country has been one of the key markets for South African maize.

On average, South Africa’s maize exports to Zimbabwe accounted for nearly a third of overall maize exports between 2001 and 2017, according to Trade Map data. This came to a halt in October, when Zimbabwe banned maize imports after a recovery in domestic production to 2.2  million tons – its largest harvest in 23 years.

However, this season’s production estimates point to a lower harvest.

Recent data from the US Department of Agriculture shows that Zimbabwe’s 2017-18 maize production could reach 1.2 million tons, 46% lower than last season’s bumper crop. This is largely due to a reduction in area planted, lower yields in some areas and unfavourable weather early in the season.

The expected decline puts the country in a net importing position, but it might not require the large volume seen in the past couple of years as the expected harvest is still higher than some years before the drought of 2015-16. Moreover, if the Zimbabwe Grain Marketing Board is to be relied on, there are about 500 000 tons of maize from the previous season. This means the total supply for the 2018-19 marketing year could amount to about 1.7 million tons.

Given that Zimbabwe’s annual maize consumption could vary between 1.8 million and 1.9 million tons, the country will still need to import to supplement domestic supplies, so the government would have to lift the maize import ban. This presents a small window of opportunity for South African farmers and traders to exploit.

The volume available is not large – about 720 000 tons, according to national supply and demand estimates committee data. The rest of the estimated 2.4 million tons of maize exports for the 2018-19 marketing year is yellow maize, which should flow to the world market. A large share of white maize exports may go to other regional markets.

It is worth noting that there might be limited competition in the 2018-19 marketing year in traditional African export markets from countries such as Zambia and Malawi. They are set to record a decline in maize production.

South Africa will also record a decline in production from last season’s record, but there will still be large supplies. This week, the crop estimates committee lifted its estimate from last month for 2017-18 maize production by 2% to 13.2 million tons.

Considering the domestic annual maize need of about 10.8 million tons, on the back of expected production coupled with an opening stock of 3.7 million tons, South Africa could see maize exports exceed the aforementioned estimate of 2.4 million tons in the 2018-19 marketing year, which ends on April 30.

Overall, the key fact is that Zimbabwe will again be a net importer of maize in the 2018-19 marketing year.

Most important, South African maize traders and farmers will have to look further afield for maize export markets, as the surplus might not all be absorbed by regional markets.

 Written for and first published in the Business Times on 01 July 2018.

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

It looks like the Western Cape is beginning to experience what the South African Weather Service highlighted in their Seasonal Climate Watch on 25 June 2018 — which was the likelihood of above-normal rainfall between this month and September 2018.

OK, maybe I am getting ahead of myself here – there were heavy rainfall and snow over the weekend, but not evenly distributed across the province.

That said, the weekend rainfall should not only benefit crops but also improve dam levels. The Western Cape provincial dam levels averaged 36 percent in the week of 25 June 2018, up by 2 percentage points from the previous week (ending 18 June 2018) and 13 percentage points from the corresponding period last year. Tomorrow (3 July 2018) we will receive an update for the week of 02 July 2018, which should show a notable improvement.

All this has brought optimism about this season’s winter crops harvest (official production estimates will be released at the end of August). I recently talked a bit about the Western Cape’s importance in South Africa’s wheat production (major winter crop), which is its 64 percent contribution to the intended planting area of 500 500 hectares in the 2018/2019 production season.

Furthermore, the weather forecast for the week (ending 6 July 2018) shows a likelihood of widespread showers over the province, which could further improve soil moisture and subsequently benefit the winter crops. Maybe the local weather bureau predictions are starting to materialise – will keep a close eye over the coming months.

I will comment on other field crops (barley and canola) and horticulture during the week. Let me stop, for now, I am needed in the kitchen to do the dishes.

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

Regular readers of this blog might remember that back in March 2018, I wrote about increasing imports of horse meat into South Africa. Given the interest on the issue at the time, I thought it would be good to keep tabs on it on a quarterly basis.

Well, I have just looked at the trade data for the first quarter of 2018 and I’m pleased to inform all of you that there were no horse meat imports. This, however, is unsurprising. Historical data shows that the first quarter is always a quiet period, with horse meat imports tending to flow in during the second and third quarters of the year. So, it is too early to rule out whether South Africans are slowing down on horse meat imports or if we will see some activity in the coming months.

For context to those who have not been following the story or blog – South Africa imported 80 tonnes of horse meat in 2017, up by 51 percent from the previous year, according to data from Trade Map. The key supplier was Brazil.

Of the imported horse meat, only 5 tonnes was re-exported to the Maldives and Swaziland, the rest appears to have been utilised within the country. Looking at trade data makes it hard to tell if this was for animal or human consumption (I’m making this point because this is a question that came up from many people back in March 2018).

The horse meat trade is not unique to South Africa — from a global perspective, the key importers of horse meat are Italy, Belgium, France, Russia, Vietnam, China and Japan. The leading exporters are Argentina, Canada, Spain, Portugal and Poland amongst others.

Let me stop here – I will post an update on this issue when the second quarter trade data comes out.

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