Crop estimates for summer and winter grains are looking good, with maize up 117,1% from 2006/07 and winter cereals such as wheat up by 16,1% from the 2007 season, according to data released by the Crop Estimates Committee (CEC). Producers are reaping the benefits of high volumes, together with high yields due to favourable climatic conditions.
They are also benefiting from high commodity prices, the result of last season’s relatively low input costs. Lindie Botha, agriculturalist at the Agricultural Business Chamber, said that when factoring in the low international reserve stock levels, and increased demand from countries such as China and India, this is a good time to be in agriculture. B ut next season will be a different ballgame, with current input costs pressurising producers’ profit margins as the expected commodity price increases are overshadowed by already-high input costs.
Higher interest rates will also play a more significant role next season as more production capital will be needed due to higher input costs. otha explained that interest has to be paid on old and new debt, so past investments will influence producers’ cash flow more prominently next year. Nico Hawkins, an Agri economist, agreed that next season will be tougher. Predictions are for a large maize carry-over stock, which will probably stabilise the current high prices producers are getting for maize. He added that the increase in wheat production should be seen in perspective as it’s an increase from an all-time low.
According to CEC data, planted 2 million hectares of wheat in 1988, a figure that kept declining until 2007 when only 738 560ha were planted. Hawkins said producers should adhere to pricing signals from the market and be careful when planning for next season. nother Agri source said that with dry land production costs averaging between R6 000/ha and R8 000/ha, and the current SAFEX contract price for maize delivered in June 2009 at between R2 000/t and 100/t, producers should think twice as these prices may not cover costs. otha advised producers to avoid unnecessary debt while interest rates remain high. “If the old tractor is still doing its job, rather keep it than buy a new one now,” said Botha.
“Avoid planting on marginal land, and heed advice from climatologists.” S he predicted crop insurance would become more important as production costs increase. “The risk of crop failure will simply become too high and the cost of insurance will decrease as a percentage of total production cost,” she added. ut according to Dr Dirk Troskie, a specialist agricultural economist for the Department of Agriculture in the Western Cape, people tend to focus on specific inputs that increased drastically and forget those that stayed the same or increased only slightly.
“Labour and capital are significant components of input costs, but increased only slightly compared to the maize price that increased from R800/t to R2 000/t,” he explained. He predicted a new equilibrium would be established next season and that producers that are producing profitably now will be able to adapt to it. – Wouter Kriel
