FACT SHEET

STATE OF AGRICULTURE

  • According to the National Development Plan 2030, it is expected that Department of Agriculture, Forestry and Fisheries (DAFF) to create one million decent jobs by 2030.
  • It is worth noting that primary agriculture constitutes 5% of employment in South Africa, which is well above sectors such as mining and almost on par with the transport industry.
  • Agriculture is a game changer when it gets to economic growth, job creation, poverty alleviation and food security.
  • The General Household survey for 2016, done by Stats SA, shows Agriculture plays an important role in the process of economic development and can contribute significantly to household food security. For more than three-quarters, (76,7%) of households that were involved in agriculture were involved in an attempt to secure an additional source of food. Provincially, 92,3% of households in Limpopo, 81,4% of households in Eastern Cape and 76,5% of households in Mpumalanga wanted to augment their existing sources of food.
  • The AFF sector is widely recognized as having significant job creation potential and strategic links to beneficiation opportunities and land reform. Therefor DAFF embarked on Operation Phakisa: Agriculture, Land Reform and Rural development with the Agriculture Policy Action Plan (APAP) and Revitalization of Agro-processing and agricultural Value Chain (RAAVC). These will assist in the multiplier effect of every rand invested in terms of employment, exports, fiscal revenue and economic output. With all conditions favourable agriculture and agro-processing value chain has the potential to:
  • Devise intervention for economic growth of priority commodities,
  • Determine markets and improve access for commercial and emerging farmers’ infrastructure
  • Address fragmented and low impact of financial and non-financial support provided to producers
  • Improve productivity by balancing mechanisation and job creation
  • Stimulate development of rural economies
  • Reduce the environmental impact of Agricultural production
  • Devise improvements in water management in agriculture and rural areas
  • South Africa's economy entered a technical recession in the 1st quarter of 2017, as real GDP contracted by 0.7% on a quarterly basis following a 0.3% decline in the final quarter of 2016.
  • The South African economy, having contracted for a second consecutive quarter during the first quarter of 2017, entered its second technical recession since 2009.
  • This is already reflected in the 22% surge in Agriculture's contribution to the gross domestic product during the first quarter of 2017.
  • During the past quarter (Quarter 2 of 2017) the economy was lifted out of a technical recession, with Agriculture contributing with 0.7% and the outputs of Agriculture lifted for the third consecutive quarter in Q2, 2017 due to favourable weather conditions in the maize producing regions of the country.
  • During 2016, the real growth of Agriculture was negative, but the good rains at end on 2016 resulted in real growth of 23.1% in quarter 1 and 33.6% in quarter 2. This contributed to the that the economy was lifted out of the technical recession. Agriculture is a game changer when it gets to economic growth, job creation, poverty alleviation and food security.
  • Although the contribution of primary agriculture to the GDP is low, the broader agro-food complex contributes about 12% to the GDP.
  • The number of commercial farms in primary agriculture has declined from almost 120 000 in 1950 to around 35 000 at present (Cousins 2016). This decline has been accompanied by a commensurate increase in average farm size and a change in the technology mix on farms. As farms grow larger, they tend to rely less on labour and more on capital and industrial inputs.
  • The second quarter of 2017 shows a reduction in employment of 4.6% from the 1st quarter and a year-on-year positive change of 1.2%, according to the QLFS of Statistics South Africa, 2017.
  • The drought has had a negative effect on employment though in 1st quarter of 2017 it showed a 6% increase of 50000, due to slaughtering and sales of livestock caused by expensive feed and drought stricken areas and dry veldts.
  • Rural unemployment had increased from 47.6% in Q1 to 48% (Stats SA QLFS Q2, 2017. Agriculture lost 40 000 jobs in the second quarter of 2017 (QLFS Q2, Stats SA, 2017).
  • The drought situation has changed dramatically due to the El Nino phenomenon which transformed into a La Nino status since late in 2016.
  • The La Nino weather has rendered large amounts of rain in the past summer season which has brought a lot of improvement in the sector and a positive performance of some of the main commodities such as grains, vegetables and fruits and improvement of the grazing vegetation for animals.
  • There are programmes in the agricultural sector to support job creation like The LandCare programme.
  • The temporary jobs created under this programme are funded through the Expanded Public Works Programme (EPWP) and the LandCare programme adheres to the target of 55% women, 40% youth and 2% disabled persons as specified by EPWP.
  • The Expanded Public Works Programme (EPWP) was introduced as a nation-wide government-led initiative aimed at drawing a significant number of unemployed South Africans into productive work in a manner that will enable them to gain skills and increase their capacity to earn an income. This programme advances the principle of government expenditure, across all three spheres, to provide employment opportunities and skills development to the unemployed.

WHAT IS HAPPENING IN AGRICULTURE PRODUCTION WISE IN SOUTH AFRICA?

  1. FIELD CROPS
  • According to the latest production forecast of 26 July 2017, the South African commercial maize crop for the 2016/17 production season has been set at 15,969 million tons (9,507 million tons of white maize and 6,462 million tons of yellow maize), which is 105,3 % or 8,191 million tons higher than last season (7,778 million tons).
  • The current maize crop makes it the biggest maize crop on record. This means that South Africa will regain its status as a net exporter of maize this season. South Africa experienced one of the worst droughts ever recorded during the previous season.
  • It is, however, clear that notwithstanding substantial increases in field crop production recovery may be slow. High levels of world stocks of grain and oilseeds will negatively impact on producer prices which may delay financial recovery for South African farmers. This means that even though exceptionally good yields may be realized, summer grain producers may experience pressure on their cash flow and debt payment ability.
  • The recovery in agricultural production has already caused a widespread decline in agricultural commodity prices. According to the Reserve Bank ‘Food price inflation is expected to be more subdued, due to a lower starting point and more favorable domestic crop estimates’. White maize spot price currently trades at levels around R1 768 tons, which is 59%, lower than the same period last year. Yellow maize spot price is trading at levels around R1 889 per ton, which is 42% lower than the same period last year. Soybean spot price is at a level around R4 711 / ton, which is a 31% lower.
  • The decline in yellow maize and soybean prices will, however, benefit other sectors, such as the livestock and poultry. The large agricultural output will keep agricultural commodity prices under pressure over the short-to-medium term. This essentially means that food inflation also could remain at relatively lower levels.
  1. FRUITS AND VEGETABLES
  • According to our Quarterly Economic Overview, between 1st quarter 2016 and 1st quarter 2017 quantities of bananas, pears, avocados and apples decreased by 17%, 7%, 3% and 2% respectively between the first quarter of 2016 and the first quarter of 2017 while quantities of oranges, grapes and mangoes increased by 39%, 23% and 13% respectively during the same period. The average prices of oranges, bananas, grapes and pears increased by 20%, 17%, 10%, and 3% respectively. On the average, prices of mangoes and apples declined by 17% and 2% respectively. The average prices of avocados remained unchanged between the first quarter of 2016 and the first quarter of 2017.
  • Between the first quarter of 2016 and the first quarter of 2017, quantities of onions, potatoes, tomatoes and cabbage increased by 98%, 39%, 77% and 63% respectively, while quantities of carrots decreased by 14% in the first quarter of 2017, the decrease was due to higher temperatures making it difficult for seed to germinate. Meanwhile, weather forecasting is promising to be favourable for agricultural production. The average price of carrots, onions and potatoes decreased by, 42%, 78% and 42% respectively, across all fresh produce markets while the prices of cabbage increased by 48% between the first quarter of 2016 and first quarter of 2017. The drop in prices of various selected vegetables can be credited to increased volumes of vegetables on the market floors due to improved levels of production.

3. ANIMAL AND ANIMAL PRODUCTS

  • Globally, beef production is forecast to grow less than 2% in 2017 to nearly 62 million tons, largely from gains in the United States, Brazil, and Argentina. Beef production for 2017 is lowered primarily on lighter carcass weights which more than offsets higher expected slaughter in the later part of 2017. The growth in Brazil is driven by higher exports to Asia and moderate expansion in domestic demand as the Brazilian economy recovers. However, Beef production will decline most in South Africa and Australia as herds are rebuilt after drought-induced liquidation of stocks. On the other hand production in New Zealand will also fall moderately as producers retain cows and heifers for herd rebuilding (USDA, 2017). According to USDA (2017) in 2017 global exports are forecast 2% higher to 9.6 million tons. Shipments from South America, India, and the United States will more than offset declining exports from Australia and New Zealand, both hampered by lower supplies.
  • From the fourth quarter of 2012 up to the first quarter of 2017, number of beef slaughtered has been volatile. Compared to the first quarter of 2016 total beef slaughtering declined by 6% in the first quarter of 2017, and it expected that slaughtering will continue to decline until 2018 as herd rebuilding continues after the recovery of good rains and improved grazing conditions. In the first quarter of 2017 as shown in figure 2, weaner calf purchases, beef carcasses sales and live sales increased by 32.0%, 11.5% and 14.9% compared to the same quarter in 2016. Looking ahead, weaner calf prices are expected to increase substantially as producers are rebuilding herds supported by lower maize prices; also both the demand of and supply for calves tend to be influenced by maize prices; and improved feedlot margins support growing demand for calves.

4. POULTRY ISSUES

  • Poultry production in the 1st quarter of 2017 has declined by 10% compared to the previous quarter, whilst year-on-year production it was 1.8% higher. The price per ton has increased by 9.3% compared to the previous quarter whilst on a year on year basis the price is 18.5% higher.
  • The retail prices of fresh whole and fresh chicken portions are rising slowly whilst the yellow maize price as a proxy for broiler breeder and broiler feed prices continues to fluctuate higher. Maize prices have come down sharply from their current highs of January 2017. In the three months ending in April 2017, they have come down to their lowest trading an average of 2367. The change in the yellow maize prices usually takes an estimated lag period of 4- 5 months before it is fully felt in the market, which translates in to lower poultry feeds prices. The price of poultry is also expected to be affected by suspected cases of avian influenza in a few areas within the country.
  • In the first quarter of 2017, the total production of eggs totaled 207, 5 million dozens, a 2.7% decrease in production compared with 213, 2 million dozens produced in the first quarter of 2016. When comparing the 4th quarter of 2016 with the 1st quarter of 2017, total production of eggs decreased by 1.1%, from 211,8 million dozens to 207,5 million dozens over the period. Local demand for eggs remained weak in the first quarter of 2017 due to the recessionary environment and reduced consumer spending despite the increasing popularity of high protein/high fat diets which has fueled resurgence in the consumption of eggs elsewhere in the world.
  • The average price per dozen of eggs increased by 3.7%, from R 11.68 per dozen in the first quarter of 2016 to R12.11 per dozen in the first quarter of 2017. When comparing the fourth quarter of 2016 with the first quarter of 2017, the average price per dozen of eggs decreased by 1.4%, from R12.28 per dozen in the fourth quarter of 2016 to R12.11 per dozen in the first quarter of 2017. In the meantime, there seems to be dark clouds hanging over the local poultry industry with competition from low cost imports, high feed prices and the return of the US to the export market. Moreover, according to SAPA (2017), the country’s poultry sector is still gradually shedding jobs despite a task team being set up to try and halt the crisis in the sector
  • Total milk production in the first quarter of 2017 came in 6.6% higher than in the first quarter of 2016, increasing from 814.8 million litres in the first quarter of 2016 to 868.9 million litres in the first quarter of 2017. More favorable grain prices are expected in 2017 which may result in faster production growth after winter. However, with the severe drought conditions in the Eastern and Western Cape and the after-effects of the 2015/2016 drought, total milk production may be limited in 2017 (MPO, 2017). The average producer price per litre of milk increased by 1.7%, from R4, 28/ℓ in the first quarter of 2016 to R4, 35/ℓ in the first quarter of 2017. Producer prices increased slightly towards the end of 2016 while some major milk processors have announced price increases from February 2017 and again will announce from June/July 2017 (MPO, 2017).
  • According to ABSA (2017), dairy producers are the ultimate price-takers within the agricultural sector. Owing to the limited amount of milk buyers in the dairy industry, lack of sufficient competition by different stakeholders and the mere fact that a perishable product cannot be stored for long, prices are subject to bearish factors and will likely remain under pressure (Absa, 2017). Exports of milk and cream (not concentrated nor containing added sweetening) were 2.2% lesser in the first quarter of 2017 compared with the first quarter of 2016, exporting a total of 19.55 million litres of milk and cream in the first quarter of 2017 compared with 19.99 million litres exported in the first quarter of 2016.
  • Between fourth quarter of 2016 and the first quarter of 2017, exports of milk and cream (not concentrated or containing added sweetening) decreased by 10% from 21.63 million litres in the fourth quarter of 2016 to 19.55 million litres in the first quarter of 2016. According to Absa (2017), the expected La Niña weather during the 2016/17 season will likely contribute positively to pasture conditions and be beneficial to rebuilding the herd. Furthermore, the weaker currency is expected to bring about opportunities for the growing export market.
  • Imports of milk and cream increased significantly in the first quarter of 2017 compared to first quarter of 2016, increasing from 58 886 litres in the first quarter of 2016 to 7.72 million litres in the first quarter of 2017. Between the fourth quarter of 2016 and the first quarter of 2017, imports of milk and cream decreased by 26%, from 10.38 million litres in the fourth quarter of 2016 to 7.72 million litres in the first quarter of 2017.

5. WHAT ABOUT PESTS AND DISEASES?

  • South African has been affected by the Fall Army Worm (FAW) in the summer season which mainly affected the maize plant. The army worm was originating from Central African countries such as Kenya, Burundi, Tanzania as shown by Grain SA, and affecting SADC countries such as Malawi, Mozambique, Zambia, Zimbabwe, Botswana and Namibia including South Africa. According to Grain Sa the pest has been reported in areas such as Port Shepstone, Port Edward, Port St Johns as well as some areas in KwaZulu-Natal province that lie on the border of the two provinces. Farmers in these and surroundings areas were advised to be especially vigilant and to scout their fields diligently even in the winter months as they may be ideal for the overwintering of the exotic pest.
  • Almost all the provinces such as North West, Free State, Kwa Zulu Natal and Mpumalanga as well as Gauteng and Limpopo were affected and announced areas in which they encountered the FAW infestation. The cost of the damage caused by the infestation within SADC countries alone was estimated to be around approximately $3.06 billion. In South Africa alone the damage was insignificant since 80% of the country’s maize is genetically modified, rendering it unfavorable for consumption by the pest. DAFF had implemented the South African Emergency Plant Pest Response Plan and was fast tracking certification of pesticides, monitoring and dissemination of technical information on control options. Most of the farmers survived the infestation and there has been no concerning impact on production or prices or trade related problems.
  • In June 2017 the Western Cape reported Highly Pathogenic Avian Influenza (HPAI) outbreaks, type H5N8, in two ostrich farms in the Heidelberg area. Since that time about 16 outbreaks have been reported. The other provinces affected are Mpumalanga and Gauteng. The outbreak has warranted South Africa to stop domestic sales and trade live birds and the DAFF has subjected affected farms to quarantine and testing including the surrounding areas.
  • The outbreak has resulted in bans of imports from Zimbabwe where thousands of commercial birds died or had to be culled. Botswana is said to have also banned live chickens from Zimbabwe. Industry has raised concerns that should this outbreak continue and not be controlled it will reduce the supply of chickens and cause the prices to increase. Furthermore the neighboring countries such as Zimbabwe, Namibia and Botswana were foreseeing substantial number of broiler exports, which might not materialise. Domestically the industry is likely to shed 2500 jobs according to Dawie Maree of FNB and approximately 0.13% loss in output and gross added value. The grain industry is likely to makes losses on sales of feed to the poultry industry.
  • At this point it has not been clarified if there is a possibility of further spread of the disease. Government assured that the virus has shown no sign of being infectious to people and that Ostrich and Chicken meat on sale in retail outlets is safe for human consumption. There is a positive outlook on the poultry industry due to the record high crop of maize for feed and soya beans forecast from the past summer season in 2017. The cost of feed is likely to come at a lower cost for the poultry industry compared to last year this time as result of drought.

6. AGRICULTURAL PRODUCTS – EXPORTING AND IMPORTING