Shrinking profits, not land reform, is farmers’ biggest worry

The biggest threat to the agricultural sector is not land reform, but the rapid decline in the profitability of farming, with drought, climate change and infrastructure constraints making farming almost impossible, according to Grain South Africa.

To illustrate this, Grain SA executive director Jannie de Villiers said, an average grain farmer borrowed up to R10 million from the bank each year, planted his crops, and then prayed that it rains.

Speaking at the First National Bank pre-harvest briefing in Johannesburg yesterday, he said this was one of the many risks farmers take to ensure the nation has food.

“… I want to make a controversial statement but when we look at the impact of land reform and we look at the impact of the profitability of the grain sector, I think the profitability is the bigger threat,” he said.

FNB’s Dawie Maree said all emotions around expropriation of land should be set aside and energy focused on overcoming the problem of not being profitable, not producing enough crops and not planting all the available land.

He said South Africa’s expensive and inadequate transport system rendered local farmers uncompetitive, saying, for instance, it was cheaper to import maize from Brazil to the Western Cape than to rail or truck it down from the northern part of the country.

Paul Makube, senior economist at Agribusiness, said agriculture was key to the country’s economy but lamented that the sector’s overall contribution to the gross domestic product (GDP) had declined consistently since the 1970s.

He said in 2017 the value of agricultural production was over R266.6 million, with livestock accounting for the biggest contribution at 47%, followed by field crops (28%) and horticulture (25%).

On the consumer front, Makube said adequate supplies of grain would help limit food price acceleration in the medium term.

“This is good for interest rates. The agriculture GDP is expected to still disappoint in the near term but will rebound marginally in the second half of 2019 and accelerate to 2020,” he said.

To stay afloat, Makube said, farmers needed to adopt new technologies [and] explore new areas of crop suitability and livestock breeding.

Gloomy figures from Grain SA

Grain South Africa’s 2019-20 crop production projection has shown massive declines in almost all crops against the backdrop of the country’s growing consumption rate for 2018-19.

Sorghum is the only crop that showed a positive yield projection, with production expected to increase from 115,000 tons in 2018-19 to 163,000 tons in 2019-20 – a difference of 42%.

The biggest estimated crop decline was observed for groundnuts, with a difference of 65% compared to 2018-19, followed by sunflower seeds at a forecasted yield of 35% below the 2018-19 estimate and then white maize at 20% less yield than in 2018-19.

The good news is that there has been a positive trend in consumption of maize, wheat, sunflower seed and soybeans, all reaching record highs of up to 500%.

Crop supply and demand for 2019-20 is not looking good for yellow maize, with a shortage of 850,000 tons, followed by sunflower seeds on 300,000 tons and groundnuts on 50,000 tons.

The biggest surplus was observed for white maize (755,000- tons surplus), soybeans (214,000 tons) and sorghum (28,000 tons).

According to Agribusiness, the livestock market is expected to recover from the setbacks of listeriosis and foot-and-mouth disease, which resulted in the drop in demand, closure of plants, deaths and threats of lawsuits.

Livestock prices fell sharply by almost 15% from December 2018 levels to around R28/kg live weight, while that of carcasses fell by 13% to R41/kg early in January.

– siphom@citizen.co.za

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