Summer grain input costs could rule out profits

Price expectations in summer grain production areas are such that profits under the present conditions are virtually impossible said Neels Ferreira the chairperson of Grain SA. “The input cost inflation changed the risk farmers have to carry dramatically and in some cases, input costs per hectare are actually higher than the value of the land,” he explained. “Given the sharp year-on-year increases, it now costs almost 80% more than last year to plant summer crops.
Issue Date: 31 October 2008

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Price expectations in summer grain production areas are such that profits under the present conditions are virtually impossible said Neels Ferreira the chairperson of Grain SA. “The input cost inflation changed the risk farmers have to carry dramatically and in some cases, input costs per hectare are actually higher than the value of the land,” he explained. “Given the sharp year-on-year increases, it now costs almost 80% more than last year to plant summer crops.

Fertiliser went up by as much as 244%, chemicals by 65% on average, diesel by 50% and implements and machinery by 20%. Seen against the various Safex contracts for maize, soya beans and sunflower seed, for delivery in May and July next year, it will be very difficult to recoup production costs even with above-average yield.” G rain SA’s calculations indicate a negative margin above total costs of approximately R110 for maize at an average yield of 4t/ha.

At 1,5t/ha the negative margin will be R369/t and R975/t for sunflower seed and soya beans respectively. Ferreira said in a normal year, the possible scaling down of plantings shouldn’t result in a food crisis. But should weather conditions fall below normal, it could have a negative influence on the availability of grain in the coming season.

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“These extraordinary increases in input costs will, without a doubt, impact on food security and the poorest of the poor will be affected the worst,” said Ben Marais TAU SA president. “I expect significantly less summer grains will be planted this season. Although government will be able to import grain to ward off shortages, consumers will ultimately pay the price. Farmers need at least R2 000/t in their pockets for maize, R4 000/t for wheat and R5 000/t for sunflower to survive the crisis and be able to continue with the production of staple foods for South Africa.”

Johannes Möller, the newly elected Agri president, agreed that input costs will impact on food security. “expect the number of hectares planted to summer grains will decline sharply this season,” he said. ”The effect of high costs will cause land that’s considered to have optimum grain production soil to be regarded as marginal because of deteriorating profit margins. I’m flabbergasted by the price increases and concerned by the fact that the international economic crisis is pushing grain prices down even further.

Farmers will make doubly sure before putting seed in the ground, which will result in a considerably smaller national harvest. Given the fact that we are now a nett importer of agricultural commodities, foresee difficulties in the future.” – Annelie Coleman

Annelie Coleman represents Farmer’s Weekly in the Free State, North West and Northern Cape. Agriculture is in her blood. She grew up on a maize farm in the Wesselsbron district where her brother is still continuing with the family business. Annelie is passionate about the area she works in and calls it ‘God’s own country’. She’s particularly interested in beef cattle farming, especially with the indigenous African breeds. She’s an avid reader and owns a comprehensive collection of Africana covering hunting in colonial Africa, missionary history of same period, as well as Rhodesian literature.