BFAP’s five-year agricultural baseline

The Bureau for Food and Agricultural Policy (BFAP) recently announced its June 2007 to 2012 baseline for SA’s ­agricultural sector. The baseline is not a forecast, but rather a benchmark of what could happen to commodities under a particular set of policies and demographic assumptions over a
five-year period. Wilma den Hartigh reports.

According to the BFAP’S JUNE 2007 to 2012 agricultural baseline, consumption of dairy products, fresh milk in particular, is expected to increase. Ferdi Meyer, BFAP programme leader, said the increase could be attributed to the effect of increased personal disposable income on consumption patterns. He said the utilisation of milk is projected to remain above production by approximately 100 000 tons during the baseline period of 2002 to 2012. “This implies that South Africa will remain a net importer of dairy ­products,” he said.

Hester Vermeulen, a consumer researcher at BFAP, said yoghurt and mineral water are still major growth ­categories in South Africa. The share of the South African population ­consuming mineral water and yoghurt increased from 18,9% to 30% and from 42,6% to 49,1% from 2003 to 2006 respectively.

Vermeulen said growth in these ­products is driven by health and ­convenience trends as South African consumers are more focused on improved health. She said this is mostly applicable to ­middle- and high-income consumers, adding that these increases are linked to greater access to in-home ­refrigeration in certain consumer groups.

Meyer said milk production in 2006 peaked in response to lower feed costs, encouraging farmers to expand their herds. However, high maize prices in 2006 and 2007 and very low milk producer prices ­compelled farmers to cut back ­production. He said since 2003 producer prices have decreased, but this trend changed towards the end of 2006 and prices are projected to increase over the baseline period.

The main reasons for the increasing price trend from 2007 onwards are continued shortages of local milk production and increasing world prices for dairy products. Meyer warns that due to a depreciating exchange rate, imports of dairy products are expected to become more expensive and could cause further price increases.
“It is anticipated that dairy processors will have no choice but to increase the ­producer prices to ensure that farmers stay in ­production,” he said.

Maize and sunflower
BFAP simulations for field crops indicate  that maize prices are expected to decrease in 2008 in response to healthy demand, but will steadily increase over the baseline period. Meyer said the production of biofuels from maize is also taken into consideration in price determination. He said ­sunflower prices are expected to pull back in 2008 as production recovers, but will increase from 2008 onwards due to higher import parity prices of sunflower oil.

The high maize prices in 2007 will cause plantings to increase significantly in the 2007/08 production season, driving down prices. He said during the ­remaining ­baseline period, the area harvested is ­projected to remain relatively stable, with prices ­moving between R1 200/t and R1 500/ t. “We expect a maize crop of over 10 ­million tons and this is a decent crop,” he said.

The per capita consumption of maize meal is projected to decrease over the baseline period. However, Meyer said the per capita consumption of wheat (bread) is projected to increase. “This increase in per capita bread ­consumption can mainly be attributed to urbanisation and the projected increases in disposable income for a larger share of the population,” he said, adding that rice appears to be a strong substitute for maize meal and bread as consumer incomes increase and preferences change.

The area of sunflowers harvested is projected to increase in 2008. which may cause prices to temporarily  decrease to about R2 400/t, but a depreciating exchange rate and high world prices of sunflower oil cake should lead to an increase again. Currently sunflower cake trades at about R1 780/t, which is higher than the projected average price for 2007. Meyer said it is expected that local oil cake prices will be supported by a constant increase in the consumption of cake in the feed market and the projected increase in the soya cake price.

Meyer said although sunflower cake can be utilised in feed rations as a less expensive source of protein, the high fibre content limits the amount used. For example, broiler rations contain less than 7% sunflower cake. “Despite this, cake consumption is projected to increase steadily to reach 349 000 tons in 2012.

Soya

The area harvested for soya increased significantly in 2006. Meyer said the area planted is expected to increase as soya is a good substitute crop for farmers. However, despite the increase in area, prices increased due to the higher demand for soya for animal feed and the big increase in international soya seed and cake prices. Safex prices are projected to increase from R2 256/t in 2008 to R2 810/t in 2012. Meyer said local production of soya cake will increase to about 180 000 tons with the anticipated introduction of biofuels.