Daily chart: South African Farmers Have Embraced Technological Developments

Some African countries are still sceptical about the health risks associated with Genetically Modified (GM) crops. However, farmers in the southern tip of the continent, South Africa, have long been planting GM crops for over a decade and there seem to be minimal health risks, but rather greater benefits in terms of yields and savings on inputs cost.

Hence, it is not surprising that South Africa produced 26% of Sub-Saharan maize in the 2016/17 production season while utilising a relatively small area of 2.6 million hectares. In contrast, countries such as Nigeria planted 4 million hectares in the 2016/17 production season but only harvested 7.2 million tonnes of maize.

GM maize crops were introduced in South Africa in the 2001/2002 season. Before the introduction of GM maize, average yields in South Africa were around 2.4 tonnes per hectare, but these increased to around 6.4 tonnes per hectare in the 2016/2017 production year, which is the highest average national commercial yield on the African continent to date (see featured image). Meanwhile, sub-Saharan African average maize yields have remained at levels below 2 tonnes per hectare.

A recent study by agricultural economists Jayson Lusk, Jesse Tack and Nathan Hendricks shows that the adoption of GM maize has led to a 17% increase in yields across the globe. Moreover, the study shows that there are several other benefits from the adoption of GM crops beyond yield increases.

These non-yield benefits come in the form of labour savings, reduced insecticide use, and improved weed and pest control which has facilitated the ability to adopt low and no-till production methods and utilise higher planting densities.

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

Daily chart: Key Export Markets for South Africa’s Agriculture

In 2017, South Africa’s agricultural exports grew past US$10.0 billion for the first time, boosted by growth in exports of edible fruits, beverages, spirits, vegetables, grains and other agricultural products. This is a 15 percent increase from 2016 – a year that was characterised by El Niño induced drought.

From a destination point of view, Africa and Europe continued to be the largest markets for South Africa’s agricultural exports, collectively absorbing 67 percent of total exports in 2017, measured in value terms (see featured image).

In more detail, Africa remained South Africa’s largest market, accounting for 42 percent of agricultural exports, which is a percentage point increase from a five-year average share. The sector’s export growth to the continent was led by relatively competitive industries such as beverages, cereals, fruits, sugar and vegetables.

Trailing Africa was the European Union region which absorbed 25 percent of South Africa’s agricultural exports in 2017, up by 13 percent from the five-year average share. South Africa’s agricultural export growth to this region was also led by industries such as beverages, wool, sugar, fruit and animal fats.

Asia is also an important market for South Africa’s agricultural exports, demanding a 24 percent export share in 2017, up by a third from the previous year. Wool, fruit, grains, beverages, vegetables and meat were the leading products exported to this particular region.

The Americas and the rest of the world accounted for 5 percent and 4 percent shares, which are 3 percent and 14 percent increases from 2016 exports, respectively. Exports to these regions were also dominated by fruits, beverages, sugar, flowers and ornamental foliage.

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

Daily chart: South Africa to Remain a Net Exporter of Maize in 2018/19

There is generally some optimism in the South African maize market following good rainfall received in the past few weeks. This week, the United States Department of Agriculture (USDA) lifted its estimate for South Africa’s 2017/18 maize production by 200 000 tonnes from last month to 13.2 million tonnes (well below the record level of 17.5 million tonnes achieved in the 2016/17 season, but better than market expectations at the start of the year). This is on the back of expected higher yields in some parts of the country. 

It is worth noting that the USDA’s data covers both commercial and non-commercial production, hence the numbers differ from the National Crop Estimates Committee’s (CEC) one which mainly focuses on commercial production. The non-commercial production, which is mainly subsistence farming accounts for a 6 percent share in the estimated harvest of 13.2 million tonnes. Therefore, the USDA’s commercial maize production estimate is almost at par with the CEC’s estimate of 12.42 million tonnes (well above annual consumption of 10.5 million tonnes).

The key message from these numbers is that South Africa’s maize market will be well supplied in the 2018/19 marketing year which starts on 01 May 2018. This marketing year will open with a large carryover stock of about 4.1 million tonnes, which will add to the expected large harvest noted above.

As a result, South Africa could remain a net exporter of maize in the 2018/19 marketing year. The current estimates suggest that exports could reach 2.2 million tonnes (see featured image), slightly below the 2017/18 marketing year’s exports of about 2.5 million tonnes. Importantly, this suggests that the SAFEX maize prices could remain at fairly lower levels for some time, all else being equal.

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

SA Soybean Oil and Oilcake Imports on a Decline, But Crushing Plants Not Yet Functioning at Full Capacity

One of South Africa’s key objectives behind the expansion of the soybean crushing plants was import substitution of soybean oil and oilcake. The country has made notable progress on both products as imports have been on a decline in the past few years due to an increase in domestic production.

Most notably, between 2010 and 2017, South Africa’s soybean oilcake imports declined by 42 percent to 553 003 tonnes. Moreover, South Africa’s soybean oil imports declined by 30 percent between 2010 and 2017 to 191 255 tonnes.

With all the aforementioned improvements, the sector hasn’t fully utilised its soybean crushing capacity (see featured image). South Africa has an estimate of 2.2 million tonnes soybean crushing capacity, which equates to 183 333 tonnes per month. The country utilised 43 percent of its monthly soybean processing capacity in February 2018, which is double the capacity utilised in February 2017.

Over the past two years, the sector has utilised, on average, about 40 percent of its monthly crushing capacity due to a combination of factors, which include relatively lower domestic soybean supplies, amongst others.

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

Land dynamics in Africa: What is the potential for agricultural expansion?

Estimates by Fischer and Shah (2010) suggest that the world has 446 million hectares of potentially available uncultivated land. Of this, sub-Saharan Africa accounts for 202 million hectares or 45 percent.

Further qualifying estimates by Chamberlin et al., (2014) reflect that 47 percent of the 202 million hectares of potentially available uncultivated land in sub-Saharan Africa is less than 6 hours from the nearest market. Under a set of more relaxed assumptions, estimates of potentially available uncultivated land in the sub-Saharan African range from 52 percent (Deininger et al., 2011) to as high as 60 percent of the world’s remaining arable land.

A closer look at land availability in Africa

Regardless of methodologies and assumptions, sub-Saharan Africa remains the last frontier of larger land expansion for crop production in the world. However, much of this land is concentrated in just eight countries. As much as 90 percent of sub-Saharan Africa’s unutilized arable land is located in just 6–8 countries (see featured image). The rest of the continent is characterised by large rural populations clustered in remarkably small areas.

Recent research suggests that many regions across sub-Saharan Africa’s most populous countries will soon exhaust their land frontiers (e.g. Uganda, Nigeria, highland Ethiopia etc.). Other parts of densely populated countries in sub-Saharan Africa have largely exhausted their potential already (e.g. Kenya, Rwanda, Burundi, Malawi etc.).

This means that to expect production growth to come from area (or horizontal) expansion will be increasingly untenable in many areas across the African continent. Land use intensification, therefore, remains an important pathway, but sustainable intensification may not occur without more holistic and more effective public support for smallholder and even large-scale commercial agriculture.

In an increasingly globalized but complex agro-food system, land availability per se is only but one consideration driving investment decisions. Also of importance are the land governance systems per country, and specifically tenure security considerations, as well as infrastructure provision, market considerations, access to and cost of finance, political arrangements and stability, local skills availability, and others.

*Wandile Sihlobo and Tinashe Kapuya (Ph.D.) are agricultural economists.

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

A Few Notes on South Africa’s Banana Market

South Africa produced 402 053 tonnes of bananas in 2016, which is an 8 percent production growth from 372 204 tonnes in 2000. While a notable improvement, this has not kept up with local demand as the country is now a net importer of bananas. South Africa was last a net exporter of bananas in 2014, according to data from Trade Map.

In 2017, South Africa imported 114 913 tonnes of bananas, which is a 50 percent increase from the previous year. This notable upsurge was underpinned by a steady domestic consumption and a decline in (domestic) banana production after the 2015-16 drought.

The leading suppliers were Mozambique, with a share of 82 percent, followed by a share of 9 percent from Swaziland, a share of 6 percent from Ecuador, and a share of 2 percent from Zimbabwe. The balance originated from other countries, which included Zambia, Nigeria and Philippines, amongst others.

This has, however, not gone unnoticed in the domestic banana industry. In December 2017, Farmers Weekly ran an article where Banana Growers’ Association of South Africa raised concerns that increasing banana imports could keep the industry under pressure and possibly lead to job losses.

Overall, the steady domestic banana consumption, and a marginal growth in local production – growing at an annual rate of a percentage point a year between 2000 and 2016 – suggest that imports could continue in the near term.

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

Oh, Soybeans Dominating Agricultural Headlines Again

I know we are dealing with a lot on our home soil, and it is easy to lose track of developments beyond our shore. However, there are other interesting developments in the world of global trade, such as the souring US-China trade relations.

On this chapter, what caught my attention this past weekend was the Financial Times piece entitled “China holds fire on imposing US soybeans tariffs.”

Some have speculated that China’s response or retaliation to the US tariffs would hurt the US soybean sector the most – rightly so – since more than two-thirds of US soybean exports go to China.  In fact, in 2017, the US exported agricultural exports to the tune of $19.6 billion to China. Of that, $14 billion was soybeans.

China is the world’s leading importer of soybeans, commanding a share of 64 percent of global soybean imports totalling 151 million tonnes in 2017/18.

In the past five years, the US has been one of the key suppliers of soybeans to China accounting for a nearly 40 percent share of that market, according to data from Trade Map.

Brazil and Argentina were also amongst the key suppliers, hence the talk in the market points to a possible increase in South America’s share of the Chinese market at the expense of the US over the coming years.

Fortunately, soybean hasn’t got a hiding yet (though folks like CHS Hedging argue that soybean is next). China’s counter tariffs announced on Friday included agricultural products such as pork and pork products, horticultural products, wine, American ginseng, and denatured ethanol.

Be that as it may, the spectre of Chinese retaliation will worry the soybean markets for some time. At least, for small soybean producers such as South Africa, there will be a minimal impact in the short term.

Our (South Africa) immediate key risk in this part of the world is the weather. Luckily, good showers are forecast within the next few weeks, which is good not just for soybeans but for all summer crops.

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