Farmers’ profit margins deteriorating – NAMC food cost review

The National Agricultural Marketing Council (NAMC) has launched the 2014 South African Food Cost Review.

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The report reveals worrying trends about the input cost price squeeze faced by SA’s primary producers.

Speaking at the launch, Bonani Nyhodo, senior researcher: trade analysis at the NAMC, said the overall financial position of primary producers was constantly under pressure.

“Prices farmers receive for their outputs at primary level have deteriorated significantly over time,” he said.

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Between 2013 and 2014, real net farm income and real gross income increased by 25,8% and 6,7% respectively. “It is concerning that the prices farmers are getting are not following the same upwards trend as input costs, which have increased sharply,” he said.

In the 2013 to 2014 period, fertiliser costs increased by 3%, and animal feed by 6,1%. International cost trends for fertiliser, which have a direct impact on SA prices, showed that commercial farmers reduced their fertiliser application rates in 2014. This was in response to sharply declining crop prices. World fertiliser demand was forecast to rise by only 0,6% in 2014/2015 to 183,8 million tons.

South Africa is a net importer of potassium and imports about 40% of its nitrogen requirements. These prices will be affected by the exchange rate, price of raw materials, and shipping costs.

For the same period under review non-food inputs used at all stages of the food value chain such as fuel, electricity and labour also increased. Farmers paid 8,3% more for machinery and implements, the price of fuel went up by 9,3%, regulated minimum wages for primary agriculture increased by 5,4%, and electricity tariffs increased by 7,5% in 2014.