Burundi’s Maize Market Through the Eyes of a South African

Remember the public outcry in 2016 when news came out that some greedy Zambian businessmen were smuggling maize meal to Burundi in the quest for better gains? Then, this was on the back of high maize prices in Burundi owing to lower supplies following a poor production season. I’m sad to say that two years down the line, while ‘smuggling’ seems to be muted, the situation hasn’t changed much in terms of maize prices. On 09 February 2018, the retail price of a tonne of white maize was US$543.05 (R6 326) in the Ngozi market of Burundi. A similar situation was observed in other big maize markets within the country such as Gitega and Bujumbura.

This notable uptick in maize prices is partially on the back of lower supplies due to adverse weather conditions in the last production season. Although Burundi’s 2016/17 maize production slightly recovered to 150 000, this is well below the annual consumption of 175 000 tonnes which means the country needs imports in order to fulfil its domestic needs (see Chart). This has, however, proven to be a challenge as trade restrictions continue to limit Burundi’s capacity to import food. Thus, keeping maize prices at elevated levels.

Burundi maize market

In contrast, South African maize farmers struggle to break even due to lower prices. The R6 326 a tonne of maize price seen in Ngozi Market of Burundi is treble the current prices at the Johannesburg Stock Exchange (On 16 February 2018, white and yellow maize spot prices settled at R1 777 and R1 862 per tonne, respectively, at the Johannesburg Stock Exchange).

The South African maize prices are currently under pressure due to a record harvest of 16.7 million tonnes in the 2016/17 production season. As a result, South Africa has regained its status as a net exporter of maize after being a net importer for two consecutive seasons in the 2015/16 and 2016/17 marketing years. The exports for 2017/18 marketing year are currently estimated at 2.3 million tonnes.

Ideally, part of these expected exports would serve African markets, such as Burundi. Unfortunately, this is unlikely to be the case due to restrictions on the importation of Genetically Modified (GM) crops, other trade restrictions, and logistics challenges, amongst others. Approximately 85% of South Africa’s maize production is grown with GM seeds.

Overall, Burundi is in for a tough period, we can only hope that the country gets good rainfall and the 2017/2018 production season turns out to be a better than the previous ones.

Rest of Africa Must Follow SA’s Lead to Feed Her Children

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.

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.

This shows that the restrictions on the growing of GM maize crop in African countries deprive farmers an opportunity to prosper like other nations such as South Africa, Brazil, Argentina and the US, amongst others.

One might raise the point of Mexico, which has also banned the growing of GM crop. However, Mexico is an exception for two specific reasons. Firstly, maize is a heritage crop in Mexico, therefore the country strives to maintain the pure genes of the crop – as a national pride. Secondly, Mexico does import the GM crop, particularly from the US, it just domestic planting that is restricted.

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. Meanwhile, sub-Saharan African average maize yields have remained at levels below 2 tonnes per hectare.

The benefits of planting GM crops were further exemplified in 2017 when the African continent was hit by an outbreak of the Fall Armyworms. Countries such as Zimbabwe and Zambia relied heavily on pesticides to mitigate spread of the pest, whereas South Africa had minimal damage, with GM crops proving to be resistant to the pest.

Given these pest outbreaks (and benefits of GM crops), we should ask whether it’s time for Africa to follow in South Africa’s “food steps” and embrace genetic modification technology in order to boost production and feed her children?

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My Home Province and Its Agricultural Potential

My home province, Eastern Cape, has not been very good at maximising its agricultural potential. But, that doesn’t mean there is absolutely nothing happening on the ground.

For instance, one-third of country’s fresh milk and wool is produced from the Eastern Cape. The province is also a key producer of citrus, with new emerging farmers joining the industry and leading the way into export markets.

There is also the rise of new commercial grain and oilseed farmers in areas around the Matatiele, Ugie and Maclear towns. Most of which benefited from the support of organised agriculture, as well as other private investors. The province’s 2016/17 total commercial maize production reached 97 300 tonnes, a 28% recovery from the previous season (although this makes a mere 0.5% of South African maize production). 

Moreover, the province holds enormous potential for agricultural development, which could bring new entrants to the agricultural sector and create much-needed jobs. A study by McKinsey Global Institutes showed that the bulk opportunity for development in the Eastern Cape exists in the 250 kilometres stretch between East London and Queenstown, where there is suitable unused land. 

However, for this to materialise the province requires investments to bring the new agricultural land to its full arable potential. Capital is needed for activities such as soil preparation, irrigation facilities and farm infrastructure, amongst others.

Unfortunately, this tends to be a stumbling block to unlocking the province’s economic possibilities. The World Bank, in its 2016 Africa’s Pulse report, observed that insecure property rights over land remain a key constraint to Africa’s agricultural productivity. The Eastern Cape province is no different from many African countries, as farmers in communal areas continue to see limited capital investments. 

As things stand, the way to unlock the value of land in the Eastern Cape would be by means of improving the security of ownership to land, in order to attract new capital for investment into the sector. 

Moreover, increased support to emerging smallholder farmers by organised agriculture could also play a crucial role in skills development. The government could play a role by increasing its support to emerging smallholder organisations, through additional finance and capacity, to strengthen collective marketing schemes and farmer development programmes. 

The agricultural sector presents a number of opportunities for the Eastern Cape province. However, this potential will continue to be hindered by the current communal land situation/status quo and lack of infrastructure and support mechanism. There’s a need for bold steps in order to unlock investments and create jobs in the province. Maybe then, the discussion about the province’s agricultural economic standing will hopefully change to a positive outlook.  

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Who is the Cupid of Africa? – Evidence from Chocolate sales

OK folks, it is Valentine’s Day! This means that chocolate will be on the cards across the world as a romantic gesture. Therefore, annual chocolate sales could partially inform us a bit about the ‘romantic’ status of each country.

Before I prove my hypothesis, let’s get a bit of background on who are the producers of chocolate (hint: it is not your significant other). But, first let’s talk about 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).

cocoa

Now that we know the cocoa producers, one would generally assume that these countries will also be the leading producers of chocolate – WRONG. 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.

Chic sales

Luckily, romance is in the air and all hope is not lost for Africa. I will use the trade data as a form of assessing the key buyers of chocolate in Africa, and these will then qualify as the MOST ROMANTIC countries in the continent. In the data analysis, I use Trade Map statistics, imports by value for 2016 (see the Chart below).

chock chart

Surprise, Surprise!!! South Africa, followed by Libya, Algeria, Egypt and Morocco are the top five most romantic countries in the African continent. Given the realities illustrated in this data, I therefore conclude that South Africans demonstrated a sweet taste making South Africa the MOST ROMANTIC country in the continent.

*Don’t take this blogpost too serious – have a bit of chocolate and savour this romantic moment! You too can be romantic, even if you are closer to the tail-end of the ranking (see the last Chart).

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Understanding Food Prices Between Farm and the Kitchen

Food prices have been in the headlines for some time in South Africa – from drought related concerns to the abundance of supplies on the back of a big harvest.

However, there’s has been little discussion or explanation of the price transmission mechanism in the food industry. This has led to a situation where some consumers expect a decline in maize prices to lead to a similar movement in maize meal prices.

An example of this is a recent tweet I sent out with a chart showing a long-term trend of South Africa’s maize prices and the message behind it was that the price of a tonne of maize declined by roughly 54% year-on-year in January 2018. The question posed by other folks on Twitter was whether the decline in maize prices had been passed to the end consumer.

The answer to this is partial yes because product prices such as one kilogramme of maize meal had only declined by 20% year-on-year during the same period. However, there are reasons behind the stickiness of maize meal prices. The first thing to note is that at most times, farmers do not necessarily produce food products, but agricultural commodities. This means that there is a processing time lag between the farm gate and the retail levels, which includes costs such as labour, transport and processing, amongst others.

This processing chain typically explains the delays in price transmission between agricultural commodity prices and the food products. In the case of maize meal, this lag could vary between three to six months. A recent research paper by agricultural economists Marlen Louw, Ferdi Meyer and Johan Kirsten show that there is roughly 63% price transmission between the prices of white maize and retail maize meal, with a delay of three months. Simply put, this means if the white maize spot price declines by 10%, then consumers can expect a 6.3% decline in maize meal prices, with a delay of three months.

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Development Strategies in Africa’s Agriculture Should be More Inclusive Across Gender and Age

Strategic interventions should be informed by facts in order to be effective in addressing societal challenges. This rings true to the gender debate in the agricultural sector. Many researchers (myself included) have been arguing that women should get more support if we are to boost Africa’s crop production, owing to the role that female farmers play in agricultural crop production.

This argument is typically premised on the Food and Agricultural Organisation (FAO) documents which suggest that 80% of Africa’s agricultural production comes from small farmers, who are mostly rural women.  Concurring with this notion is the World Farmers Organisation, which argues that “women comprise the largest percentage of the workforce in the African agricultural sector, but do not have access and control over all land and productive resources.”

Against this backdrop, the World Bank released a book in October 2017 which questions a number of datasets and statements about Africa’s agricultural sector. The book is titled Agriculture in Africa: Telling Myths from Facts. It covers a wide range of topics from smallholder farmer land access, financing of agricultural inputs, labour productivity and women’s work in agriculture amongst others.

Having recently written an article on women’s contribution to the agricultural sector, I was quickly drawn in on the chapter that dealt with the subject. The first thing which stood out was the notion that the figure often cited, namely, that roughly 80% of agricultural labour input in Africa is by women, is flawed. The book puts women’s share of labour in crop production at an average of 40%, with variations across countries. Worth noting, however, is that the data does not cover the entire continent, but selected countries, namely: Ethiopia, Malawi, Niger, Nigeria, Tanzania and Uganda. With that said, these countries cover a wide extent of the continent’s farming zones.

Across the aforementioned countries, the highest share of women’s contribution to agricultural labour is 56% in Uganda, with the lowest being 24% in Niger. Although there is room for error in these survey results, the data is nonetheless illuminating and poses bigger questions about the support systems and strategies that will be necessary to increase Africa’s food supply. Should support systems be focused on women empowerment or be inclusive to anyone that produces food for the continent?

Another salient point in the book is the need to focus on tapping into the biggest source of under-utilised human capital, which at this stage is the unemployed youth, in order to promote food production.

Overall, the key takeaway from the World Bank’s book is that strategic interventions need to be backed by solid research as incorrect assumptions could have long-term implications for society. For instance, based on the aforementioned flawed labour statistics, men would find themselves at the lower end of agricultural support systems. However, in light of this new data, the focus should rather be at calibrating more gender-inclusive policies and also prioritise youth involvement.

In countries such as South Africa where farmers are ageing with the average age estimated at 62, youth involvement in food production will be key for long-term sustainability.

The commonly held view is that young people show little interest in the agricultural sector – preferring sophisticated office jobs. On face value, this notion is plausible. But there is limited evidence to support the claim.

Overall, my take considering the book’s findings is that development strategies in the agricultural sector should be more inclusive across gender and age spectrum. Then again, from a continuity perspective, perhaps the youth should be the priority, as we are a young continent, with ageing farmers.

Notes on South Africa’s Wheat Import Tariff

The movements of the international wheat prices will be of importance in the local market this season. This is not only due to their influence on local wheat prices, but also their implications on the import tariff. South Africa’s wheat import tariff is currently at R716.30 per tonne. A new import tariff level can only trigger when international wheat prices deviate by more than US$10 per tonne from the base price for three consecutive weeks.

Over the past two weeks, the international wheat prices consistently traded higher than the base price of US$218.00 per tonne by more than US$10 per tonne. If this trend continues for another week, a new wheat import tariff, which would be less than the current rate of R716.30 per tonne, could be triggered.

fredgraph

A bit of context — the recent uptick in international prices was largely underpinned by concerns of dryness in the U.S. Plains. However, the recent monthly report from the United States Department of Agriculture somewhat eased the fears of possible crop damage. The agency left its 2017/18 US wheat production estimate unchanged from last month at 47 million tonnes.

Moreover, the agency revised its 2017/18 global wheat production estimate up by 0.2% from January 2018 to 758 million tonnes. This is 1% higher than the 2016/17 production season. These developments suggest that the international wheat prices could slightly decline from levels seen in the past few weeks as the market is well supplied. Such a scenario would break the price trend observed in the past two weeks, and thereafter the prospects of a change in the South African wheat import tariff.

The wheat import tariff is of importance as South Africa’s 2017/18 marketing year wheat import estimate is the second largest on record, estimated at 1.9 million tonnes. The country has thus far imported 40% of the seasonal import forecast, which makes trade matters vital as a large share of wheat is yet to be imported.