by Wandile Sihlobo | Jun 11, 2020 | Agricultural Production
This essay first appeared on Business Day, June 9, 2020
Some countries in the Southern and East Africa regions will again need large imports of maize in the 2020/2021 marketing year, which ends in April 2021. However, their saviours won’t be your typical major global producers such as Ukraine, the US or Brazil. Rather it is most likely to be SA and Zambia waiting in the wings.
In Southern Africa, the recent data released by Zimbabwe’s department of lands & agriculture placed its 2019/2020 maize harvest at 907,628 tonnes, up 17% from the previous season. Nevertheless, this is below Zimbabwe’s 10-year average maize production of 1.1-million tonnes and annual domestic consumption needs of between 1.9-million and 2-million tonnes. The 2019/2020 production season corresponds with the 2020/2021 marketing year, which means Zimbabwe will still need to import about 1-million tonnes of maize to fulfil domestic needs in the 2020/2021 marketing year.
Meanwhile, in East Africa, the International Grains Council forecasts Kenya’s 2019/2020 maize harvest at 3.4-million tonnes. This is roughly unchanged from the previous season, though there have been good rains over the past few weeks in the grain-producing regions of the country. With Kenya’s annual maize consumption at about 4.7-million tonnes, the aforementioned production estimate means the country could require imports of about 1.3-million tonnes in the 2020/2021 marketing year.
Unlike the other seasons, where African countries would look outside the continent for maize supplies in seasons of deficiency, SA and Zambia could emerge as key maize suppliers. Both countries are expecting their second-largest maize harvests on record for the 2019/2020 production season. In the case of SA, the expected harvest is 15.6-million tonnes, against domestic consumption of about 11-million tonnes. In the case of Zambia, the 2019/2020 maize harvest is estimated at 3.4-million tonnes against domestic maize consumption of 2.2-million tonnes.
This means SA could have at least 2.7-million tonnes of maize for export markets in the 2020/2021 season, which is 89% up year on year. Meanwhile, Zambia could have 1-million tonnes of maize exports, up from 100,000 tonnes the previous year. This would be the third year on record that Zambia would be able to export as much as 1-million tonnes of maize.
Other key maize producing and consuming countries in the Southern and East Africa regions, such as Malawi and Tanzania, will most likely have balanced supplies for their domestic markets and therefore limited room for exports. Hence our focus is on Kenya and Zimbabwe. Also, worth noting is that SA and Zambia are among the most prominent suppliers of maize to Zimbabwe and Kenya and featured among the top five maize suppliers to both countries in 2019, according to data from Trade Map.
Biosecurity policy is always an important consideration when it comes to African markets. To this end, SA has in the past experienced phytosanitary barriers because of its use of genetically modified maize seeds, which account for about 80% of its output. But this time around things will be different. Zimbabwe lifted its ban on genetically modified maize imports from January 31 as the country tried to improve local supplies after a poor harvest in the 2018/2019 season.
With the harvest of the 2019/2020 season also likely to be relatively low, this policy decision will help ease maize imports into Zimbabwe in the coming months. In the case of Kenya, however, there is still a ban on the importation of genetically modified maize. This might limit SA’s participation in Kenya, while Zambia, which produces non-genetically modified maize, might become a prominent player in the Kenyan market. SA’s importance is likely to be concentrated in the Zimbabwean market, but the bottom line is that SA and Zambia will be key sources of maize imports for the southern and East Africa regions within the 2020/2021 season.
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by Wandile Sihlobo | May 26, 2020 | Africa Focus
Since the pandemic started several countries have adopted restrictive trade policy approaches such as export bans and export quotas. The justification for such policies was consumer-focused, as the countries needed to ensure domestic food security during this pandemic. Fortunately, when International Grains Council data showed ample global grain supplies in the 2019/20 and prospects for a larger crop in the 2020/21 production season; countries such as Russia, Cambodia and Vietnam, amongst others, reversed these protectionist policies. These countries had intended to restrict their wheat and rice trade.
Unfortunately, on the African continent, we continue to witness restrictive trade policy, although the policies are producer focused instead of consumer-focused as has been the case in other continents. Consider Namibia, where the country’s Agronomic Board recently announced that there will be a suspension of imports of maize and millet from 01 June 2020 until the domestic harvest has been absorbed by domestic millers. The Namibian authorities expect this ban to be in place at least until November 2020, which is a period they expect the domestic supplies to last. The rationale provided is that the policy will ensure that domestic farmers have a market for their produce, which will support them during this pandemic.
But I can’t stop to wonder if this policy is practical if one seriously considers Namibia’s maize market as an example. Maize is one of the major staple crops in the country, although largely dependent on imports. Over the past five seasons, Namibia’s maize production averaged 59 000 tonnes, according to data from the United States Department of Agriculture. This is a small fraction against their average annual maize consumption needs of 216 000 tonnes. The difference is usually imported, which is the volume the Namibian Agronomic Board wants to put a temporary stop on. The policy appears to be heavily producer focused at the expense of the consumers that could benefit from competitively priced imports.
With maize import needs of about 72% of Namibia’s annual maize consumption, placing a temporary ban on imports is not an informed policy option, especially during the pandemic where the objective of the governments should be to get the most affordable food to the citizens. Such affordable food, in the absence of trade barriers, could be a reality this year.
South Africa, which is a major maize supplier to Namibia is expecting its second-biggest maize harvest on record, about 15.2 million tonnes, according to data from the Crop Estimates Committee. This means as soon as the harvest process gains momentum around mid-June 2020, South Africa’s maize prices will likely fall to levels below R2 600 per tonne for both white and yellow maize, where they are currently hovering around. Such potential price declines would be beneficial to the Namibian consumers. The Agricultural Business Chamber of South Africa (Agbiz) currently estimates that South Africa could have about 2.7 million tonnes of maize for the export market, up by 90% y/y.
From a Namibian farmers’ perspective, the government is attempting to provide support through trade policy, but that will most likely yield very limited success. There is no certainty that the domestic maize harvest will be of acceptable quality to attract millers. Also, as best as one can tell from Namibia’s aforementioned maize production data, the country has not been self-sufficient in maize production for over the past two decades. Therefore, to boost local maize production and global competitiveness, the interventions would have to be through increased investment in higher-yielding seeds, irrigation, expansion of planting, and various more efficient farming techniques, rather than a temporary ban on imports, which the Namibian Agronomic Board is currently pursuing. These interventions are long-term and could be part of the post-COVID recovery strategy for Namibia’s agricultural sector. In the near-term, the focus should be to ensure that the citizens receive the most affordable and high-quality staple food possible. If this means imported, as is usually the case, that should be permitted.
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by Wandile Sihlobo | May 14, 2020 | Agricultural Production
This week, the United States Department of Agriculture (USDA) released the World Agricultural Supply and Demand Estimates data – arguably among the most anticipated data releases in global agricultural markets. The agency reinforced the message painted by the International Grains Council (IGC) last month, that there are large supplies in the global market.
This message also allays the fears of countries that had placed export bans fearing for a global shortage of grain commodities.
To start with maize, the USDA forecasts the 2020/21 global production to nearly 1.2 billion tonnes, up 6% y/y (see Exhibit 1). Similar to the point made by IGC, this will mainly be underpinned by an expected expansion in area plantings and higher yields in the US, Mexico, Canada, Brazil and the EU. The planting of this crop has begun in the northern hemisphere and progressed with minimal interruptions, albeit with the additional coronavirus-related precautions on farms. Moreover, input supply chains appear to be functioning well across the globe. In the southern hemisphere, planting will only begin around October for the 2020/21 season.
Exhibit 1: Global maize supply and consumption (million tonnes)
Source: USDA
In terms of wheat, the USDA forecasts a 1% y/y increase in 2020/21 production to a new high of 768 million tonnes (see Exhibit 2). The improvement is expected in Australia, India and Russia boosted by an increase in area planted and expected higher yields. This will compensate for a potential production reduction in the EU, Ukraine, the US and North Africa. This will mean that the 2020/21 global wheat stocks could increase by 5% y/y to 310 million tonnes.
The wheat importing countries such as South Africa stand to benefit with such an outlook, assuming there are no further restrictions on exports imposed as the data shows that there should be no global supply worries.
Exhibit 2: Global rice supply and consumption (million tonnes)
Source: USDA
South Africa’s 2020/21 wheat production season recently commenced and the outlook is not encouraging. Plantings are set to fall by 8% y/y to 495 000 hectares, mainly in the Free State. This means that South Africa will continue to have a large dependence on imports, about 50% of annual consumption. Fortunately, the lockdown regulations have had minimal interruptions on wheat plantings, and now the “level 4” regulations mean that the sector is largely operational, albeit observing all health protocols.
In the case of rice, the USDA forecasts a 2% y/y increase to a record 502 million tonnes (see Exhibit 3). This is boosted by a potential increase in area planted in Asia, Africa and the Americas. Under this production estimate, the USDA forecasts a 2% y/y increase in global rice stocks in the 2020/21 season to 184 million tonnes, which would add bearish pressure to prices and, in turn, be beneficial to net importing countries such as South Africa.
Exhibit 3: Global rice supply and consumption (million tonnes)
Source: USDA
While the road ahead is remarkably uncertain because of the COVID-19 pandemic, export restrictions on agricultural products should not be a policy option that countries pursue. Fortunately, Russia and Kazakhstan have recently indicated that they intend to abolish their recently imposed export quotas on wheat. This comes as it is increasingly becoming clear that there are prospects for large supplies in the market. There are currently large carryover supplies in the market from the 2019/20 season, and the 2020/21 production season promises to be even more bountiful. Over the coming month, we will closely monitor the production developments and weather conditions in key grain-producing countries.
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by Wandile Sihlobo | Mar 12, 2020 | Agricultural Production
Amid the news flow of the coronavirus, which we have also contributed to (see here), there have been some positive developments on South Africa’s maize production front. The United States Department of Agriculture (USDA) has revised its estimate for South Africa’s 2019/20 maize production up by 10% from last month’s estimate to 16.0 million tonnes. This is up by 35% from the previous season.
One thing we should remember, however, is that the USDA data includes both commercial and non-commercial production, and therefore not directly comparable to South Africa’s Crop Estimates Committee’s number of 14.6 million tonnes released last month, which accounts for only commercial production. Nonetheless, this doesn’t change the view we expressed last month, which is; this could be the second-largest maize harvest on record after the 2016/17 season (which was 16.8 million tonnes for total maize).
Aside from a favourable food price inflation outlook, which we estimate at 4% y/y in 2020 (see here), this data essentially means that South Africa would remain a net exporter in the 2020/21 marketing year which starts in May 2020 (this corresponds with 2019/20 production season). This is at a time where Southern African maize import needs could outpace the previous year, with Zimbabwe in need of maize supplies to an extent that the country lifted a ban on the importation of genetically modified maize, which eases access for South African maize exporters.
Moreover, a maize harvest of 16.0 million tonnes would enable South Africa to export maize beyond the continent to other typical markets such as Japan, Taiwan, Vietnam and South Korea who are not prominent in the current marketing year. With that said, the coronavirus remains a key threat to global trade and may disrupt South Africa’s agricultural exports in various markets as we explained here.
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by Wandile Sihlobo | Feb 27, 2020 | Agricultural Production
This promises to be a good year for South Africa’s grain sector, at least from a production front. The data released yesterday by the Crop Estimates Committee (CEC) show that South Africa’s 2019/20 summer grains production could increase by 26% y/y to 16.8 million tonnes. While this is still the first estimate for this season, with eight more to follow, if it materialises, this could be the second-largest summer grains harvest on record after the 2016/17 crop. The major gains are on maize, soybeans and sunflower seed.
The 2019/20 maize, soybeans and sunflower seed harvest are forecast at 14.6 million tonnes, 1.2 million tonnes, and 699 130 million tonnes. This is respectively up by 29%, 6% and 3% from the previous season. The increase is mainly supported by an expansion in area planted in the case of maize and expected improvements in yields on the back of favourable weather conditions.
The maize production estimate is well above ours of 13.7 million tonnes, while the soybean and sunflower seed estimates are below ours of 1.5 million tonnes and 761 070 tonnes. The variation can largely be explained by adjustments in area plantings, which for maize was revised up and soybean and sunflower plantings slashed from the preliminary estimates released on the 29th of January 2020.
The weather conditions have generally been favourable over the past few weeks with a fair amount of rainfall which improved soil moisture across many regions of the country. As a result, the crop is in good condition, and thus, we are convinced that the CEC estimates are plausible.
In the case of maize, the data essentially means that South Africa would remain a net exporter in the 2020/21 marketing year which starts in May 2020 (this corresponds with 2019/20 production season). This is at a time where Southern African maize import needs could outpace the previous year, with Zimbabwe in need of maize supplies to an extent that the country lifted a ban on the importation of genetically modified maize, which eases access for South African maize exporters.
What’s more, a maize harvest of 14.6 million tonnes would enable South Africa to export maize beyond the continent to other typical markets such as Japan, Taiwan, Vietnam and South Korea who are not prominent in the current marketing year. Unlike maize, however, South Africa could remain a net importer of soybean products, specifically oil cake, and a net importer of sunflower oil, irrespective of the potential improvement in the harvest. This is caused by the growing domestic demand for these particular oilseed products.
Written for Agbiz.
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by Wandile Sihlobo | Feb 26, 2020 | Agricultural Production
South Africa’s Crop Estimates Committee releases its first estimate of the country’s 2019/20 summer crop harvest today. Market expectations are largely positive because of two factors. First, the area planted for major summer crops such as maize, soybeans and sunflower seeds is up 10% y/y, 4% y/y and 7% y/y, respectively. Second, although summer rains were delayed which subsequently led to a share of plantings occurring outside the optimal window in some regions of the country, weather conditions have improved notably since the beginning of January 2020. And as a result, the crop is in good shape in most regions of the country with anticipation of higher yields.
On the 27th of January 2020, we (Agricultural Business Chamber of South Africa (Agbiz)) tentatively placed our forecast for South Africa’s 2019/20 maize harvest at 12.50 million tonnes. We have now lifted this to 13.72 million tonnes, which is 22% higher than the 2018/19 season’s harvest. This is underpinned by an upward revision of yield estimate to 5.40 tonnes per hectare, from our earlier assumption of 5.00 tonnes per hectare, in an area of 2.54 million hectares.
If such a harvest materialises, South Africa would remain a net exporter of maize in the 2020/21 marketing year which starts in May 2020 (this corresponds with 2019/20 production season). This is at a time where Southern African maize import needs could outpace the previous year, with Zimbabwe in need of maize supplies to an extent that the country lifted a ban on importation of genetically modified maize, which eases access for South African maize exporters.
Other typical maize export markets for South Africa outside the African continent, include Japan, Taiwan, Vietnam and South Korea. While these particular countries have not featured prominently in the 2019/20 marketing year exports, which were largely dominated by African countries, we anticipate that they could return in the 2020/21 marketing year. We think the potential increased supplies could lead to possibly attractive or competitive prices in the coming months, which should be a catalyst for increased exports to countries outside the continent.
Moreover, we estimate that South Africa’s soybeans and sunflower seed 2019/20 season harvest could lift by 26% and 12% from the previous season, to 1.48 million tonnes and 761 070 tonnes, respectively. This too is underpinned by an expansion in area plantings and anticipation of higher yields. Our soybean yield estimate is 1.95 tonnes per hectare, with sunflower seed yield estimate at 1.38 tonnes per hectare. All these are within the historic range of seasons of good rainfall. Unlike maize, however, South Africa could remain a net importer of soybean products, specifically oil cake, and a net importer of sunflower oil, irrespective of the potential improvement in the harvest. This is largely caused by the growing domestic demand for these particular oilseed products.
Overall, an improvement in the summer crop harvest bodes well with South Africa’s food price inflation for the year. As a result of our optimism on 2019/20 summer crop yields, food price inflation could remain benign in 2020, hovering around 4% y/y in our view.
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by Wandile Sihlobo | Feb 22, 2020 | Agricultural Production
One of the research papers I read this weekend was by agriculture economists, Marnus Gouse, Debdatta Sengupta, Patricia Zambrano, and José Falck Zepeda published in World Development, a monthly peer-reviewed academic journal, in July 2016. It assesses whether men and women farmers derive different benefits from using genetically modified (GM) maize in South Africa.
While GM crops were introduced in 1996 in the United States, with several countries following through in the years after, in South Africa, the first commercial GM maize was planted in 200/01. Since then, the maize area plantings in the country is over 85%.
There have been several writings about the contributions of GM maize in improving yields and also other non-yields benefits, as well as cost-savings from herbicides and pesticides which I highlighted in a Business Day today (see here). But there hasn’t been much research on the gender question that Gouse et al. (2016) focuses on. The study draws from data collected from smallholder farmers in the KwaZulu Natal province of South Africa. It trenches over a period of eight seasons.
In brief, the study found that men preferred GM maize because of yield benefit (higher yields). Meanwhile, women farmers had a different motivation. They planted GM maize because of the quality and taste of maize (this surprised me), as well as because of it being labour-saving (women farmers save in weeding time).
Overall, what this research reveals is that men and women farmers in South Africa derive differentiated benefits from the cultivation of GM maize, at least from a perception point of view. This can be summed up by; growing GM maize means less work for her and more maize for him.
Download Gouse et al. (2016) paper here.
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