by Wandile Sihlobo | Feb 18, 2020 | Agricultural Production
Nowadays we take for granted how the world agricultural productivity has improved over the past couple of decades. Today’s farms produce more maize, wheat, soybeans, etc. per hectare than any other time in history. This has been made possible by, amongst other interventions, the use of improved seeds, fertilizers, and better farming skills in most regions of the world.
The growth in agricultural productivity and production have not only meant that there have been savings in area plantings (see here) as farmers produce all the world needs in a relatively small area because of higher yields than it would have been the case had yields not improved much since the 1920s; it also had implications for food security as commodities prices softened over time. There is no better chart to illustrate the agricultural commodities price trend over time than Exhibit 1 below.
This is adapted from a research article by agricultural economists Julian M. Alston and Philip G. Pardey, published in the Journal of Economic Perspectives in 2014.
Exhibit 1
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by Wandile Sihlobo | Feb 13, 2020 | Agricultural Production
The South African Grain Information Services releases the country’s grain trade data for the week of 7th of February 2020 by midday. The data covers maize and wheat. While these data are important for tracking the movement of grains into and outside South Africa, they are rarely market moving. This is because of the week’s long lag in reporting. By the time we get a glimpse of the numbers, the key grain market players are probably aware of the levels of sales.
South Africa is generally a net exporter of maize. The exports for the 2019/20 marketing year have thus far amounted to 935 980 tonnes (both white and yellow maize). This equates to 71% of the export forecast for this season, which is an estimated 1.32 million tonnes.
The leading markets include Botswana, Ethiopia, Mozambique, Namibia, Zimbabwe and Eswatini. Taiwan, Vietnam, Japan and South Korea, who are usually amongst the key buyers of South Africa’s maize have been oddly quiet in the 2019/20 marketing year. This could be because of favourable prices elsewhere.
But one could see them returning to the South African maize market in the 2020/21 marketing year which starts in May 2020. The new season for maize production is expected to improve by at least 11% y/y to 12.5 million tonnes (some analysts are forecasting 14.0 million tonnes). This would boost supplies available for exports, and subsequently, to exert downward pressure on domestic maize prices. This would thus improve its attractiveness to maize-importing nations.
But that’s all in the future. In the 2019/20 marketing year which ends in April 2020, we expect South Africa to imports 525 000 tonnes of maize, all yellow maize, albeit being an exporter of over a million tonnes of maize in the same season. These imports will mainly be for the coastal provinces of the country. This is up from an estimated 171 622 tonnes in the 2018/19 marketing year. The country has thus far imported 452 229 tonnes of yellow maize.
In terms of wheat, as we’ve pointed out in the previous note, South Africa’s 2019/20 wheat imports could increase by 28% y/y to 1.8 million tonnes because of expected lower domestic harvest on the back of unfavourable weather conditions in the Western Cape. In the week of 31 January 2020, South Africa’s 2019/20 season amounted to 537 882 tonnes, which equates to 26% of the aforementioned seasonal import forecast.
That’s all on weekly grain trade development which will be out at midday. Later in the day, South Africa’s President, Mr Cyril Ramaphosa, delivers the State of Nation Address. This will be a most-watched event by analysts and South Africans at large.
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by Wandile Sihlobo | Dec 1, 2019 | Agricultural Production
It is well understood within South African agricultural circles that inclusive expansion in production in the coming years needs to prioritize labour-intensive and globally sought-after products. Pursuing this goal requires effort, but not much in the way of new ingenuity as the country is already on this trajectory. It is quite encouraging to note that about two-thirds of the 880 000 primary agricultural jobs in the third quarter of 2019 were in horticulture and field crops, which are labour-intensive agricultural sub-sectors.
What’s more, the top value agricultural exports over the past five years were also within the horticulture and field crop subsectors. These were namely; citrus, wine, table grapes, apples and pears, maize, wool, nuts, sugar, fruit juices and animal feed products. These products accounted for a 52% share of the average US$9.5 billion worth of agricultural exports in the period between 2014 and 2018.
Some may ask if there has been growth in the exports of these products at least over the past five years or they have stagnated, which warrants a shift in focus? Aside from wine, apple and pear exports, most products registered a notable uptick in export revenues over the past five years. But the contraction in wine, apple and pear export values over the observed period has not been caused by softer global demand. Rather, it is because of lower domestic production in the case of wine and flat output in apples, both because of unfavourable weather conditions in the Western Cape. About 80% of the apple production in South Africa is from the Western Cape, therefore, the drought and its spillover effects have had a negative impact on apple output. The same is true for wine, where 93% of production is in the Western Cape.
Aside from the aforementioned top-10 products, other agricultural products that are still relatively small in terms of export values, but with higher growth rates over the past five years are figs, pineapples, avocados, guavas, mangoes, strawberries, raspberries, blackberries, black, white or red currants, gooseberries, and beef. Most importantly, these are also products that are labour-intensive and their expansion would be in line with South Africa’s broad agriculture vision as these generate much need support to various communities.
The expansion of these industries should not mainly be in traditional agricultural provinces such as the Western Cape, the Free State or Mpumalanga, but rather in former homeland areas (KwaZulu Natal, the Eastern Cape and Limpopo). It is within these areas that increased agricultural activity would have a comparatively greater impact on communities. Investments within this initiative, of course, should be guided by agroecological endowment and land governance precepts.
Another important observation from the agricultural trade data is that within the aforementioned top-10 exported agricultural products, there are a few value-added products, aside from wine, fruit juices, animal feeds, and sugar. On this note, it is important to remember that to attain a million potential agricultural jobs mentioned in chapter six of the National Development Plan, the value-chains of these industries need to mature in as far as agro-processing is concerned.
There now needs to be a deliberate effort to expand export markets, specifically on the African continent. South Africa’s relatively more developed agricultural value chains provide an advantage to pursue this goal. Fortunately, the Department of Trade, Industry and Competition are currently drafting an agro-processing Master Plan, which would serve the industry best if it focuses on processing for both the domestic and export markets.
It is encouraging to note that the current trajectory of agricultural production is in line with the broader vision of growing South Africa’s agriculture sector in export-led and labour-intensive industries. What is now essential is ensuring that provinces with underutilised land are also part of this broader agricultural development plan and investment in processing facilities is made in situ. This also requires a common vision for development amongst government, community and traditional leaders and businesses. And in this, land governance will be central in guiding essential investment to drive expansion in production and concomitant socio-economic benefits.
Written for and first published on Business Day on 26 November 2019
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