South Africa’s grain markets have significant growth potential, particularly in oilseeds and wheat, but outlooks vary for separate crops. Speaking at an Agri Free State and Agri North West Young Farmer Associations’ conference at Nampo Park near Bothaville, Sakkie van Zyl, Grain SA’s economist for market research, said rising imports and commodity prices are creating vast opportunities, but producers should be cautious. “The industry should recognise that population growth and rising incomes give SA the opportunity to increase grain production. But bear in mind, expansion possibilities are influenced by profitability and government policy. “In the short-term, the local market is the most profitable.
Evaluate each crop’s production costs versus market price, and base decisions on profitability. A detailed marketing plan should be in place before production starts. Lastly, do as much research as possible.” Replacing imports with local produce SA wheat production has the potential to expand. Currently local demand amounts to 3 million tons yearly. SA has imported over a million tons of wheat yearly since 2003, and it’s estimated the Free State drought will boost this to 1,4 million tons for the 2007/08 season. If SA cultivates 384 000ha more wheat, at 2,6t/ha, we can replace almost 1 million tons of imports. SA can produce wheat profitably, if current prices are maintained and climatic conditions stay favourable.
The national Crop Estimates Committee (CEC), expects this year’s crop to top the 2,1 million tons achieved in 2006 by 1,51%. SA also offers scope for oilseed production. Local sunflower demand peaks at 620 000t a year, soya at 370 000t and groundnuts at 70 000t. In 2006 we imported 711 554t vegetable oil, including 261 203t soya oil and 119 810t sunflower oil. With additional yields of 299 525t sunflower and 130 615t soya, we could produce this ourselves. We imported nearly 55 000t of sunflower oilcake and 790 000t of soya oilcake, equivalent to yields of 136 677t sunflower and 1,3 million tons soya. To replace these imports we could increase local production by 100 000ha of sunflower, at 1,2t/ha, and 700 000ha of soya at 1,8t/ha. Picking profitable commodities I n fact, the CEC’s latest figures anticipate a 18% drop in area planted to soya. At the end of August indications were that 150 000ha might be planted this season. Sunflower cultivation, however, could increase by over 64% to 520 000ha.
Profitability should always be paramount, and significant increases in both sunflower and soya prices boost the profitability of both commodities. The soya Safex price for delivery in May 2008 stands at R2 890/t, while the Safex sunflower price for the same period stabilised at 490/t. Producers should, however, still calculate critical factors such as yield versus price before making their decisions. High soya yields aren’t possible under all conditions. n turn, the local commercial maize market has stabilised at about 8,7 million tons a year, including exports to the BLNS countries (Botswana, Lesotho, Namibia and Swaziland), but excluding informal consumption, such as maize that farmers keep for their own use. Such stable demand may not leave much room for expansion. While SA rice and wheat consumption are steadily increasing, human maize consumption seems to have settled at 4 million tons per year.
Per capita consumption is decreasing, as increased income makes people less dependent on maize as a staple food, and lets them expand their range of food products. But, while the human food market holds little, if any, expansion potential for maize production, the need for maize may rise in the animal feed market, as demand for milk and chicken products increases. As much as 5 million hectares of maize were planted in the past, with 3,19 million hectares cultivated as recently as 2002/03. Factors such as over-production and low prices have taken vast areas out of production. Grain cultivation in SA’s summer rainfall region declined from 5,5 million hectares in 1991 to 3,6 million hectares in 2007. Only 2,8 million hectares were cultivated in 2005/06. Nevertheless, the CEC expects a 4,5% increase in maize cultivation. While white maize area is expected to decline nearly 2%, yellow maize area should increase 15,9%. Groundnut and sorghum cultivation should also increase, boosting 2007/08 commercial summer crop cultivation 9,3%. Exports versus biofuel SA is the primary maize producer in Southern Africa. This makes exports an option, but exporting poses various problems, especially if the local price is close to export parity. Local prices are relative to international prices and markedly influenced by exchange rates.
Uncertain production in potential market countries is also cause for concern – this season’s Zambian and Malawian maize harvests were relatively good. These countries need to import little maize, if any. Ability to pay also poses a serious problem, Zimbabwe being a case in point. Lack of infrastructure, particularly rail links, raise prices as maize has to be shipped by road. What, then, is the solution for SA maize producers? “The creation of additional markets, such as a commercially viable biofuel industry supported by well-thought-out legislation, is probably the best option,” says Van Zyl. “But legislation that should have been tabled in June 2007 is still pending and there’s no chance the biofuel industry will get off the ground without it. “The food versus fuel debate is also flaring up, but SA has the capacity to supply local demand as well as a biofuel industry.” Contact Sakkie Van Zyl on (056) 515 2145. |fw