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South Africa Agribusiness Report Q4 2009
Business Monitor International, Aug 2009, Pages: 45
Business Monitor International's South Africa Agribusiness service provides proprietary medium term price forecasts for key commodities, including corn, wheat, rice, sugar, cocoa, coffee, soy and milk; in addition to newly-researched competitive intelligence on leading agribusiness producers, traders and suppliers; in-depth analysis of latest industry developments; and essential industry context on South Africa's agribusiness service.
South Africa is a major agricultural producer and increasingly self-sufficient across an array of farmed goods. As the first country in Africa to adopt GM production on a large scale, commercialisation is driving the industry forward, improving farm incomes and export opportunities. In BMI's new South Africa Agribusiness Report they examine industry dynamics in the context of the currently uncertain global climate and the challenges that it brings.
Despite its diminishing contribution to overall GDP, agriculture remains paramount to economic prosperity in South Africa, employing nearly a third of the population. Since the end of apartheid, the government has done its best to build upon the comparative advantages that clearly exist. The industry, once highly regulated, has gradually been replaced by a more market-led sector. Subsidies and other notable price supports have been ousted in order to let this dynamic develop.
Grains are forecast to perform strongly throughout the outlook period, with corn, wheat and sorghum output all notable. Corn is the most widely produced grain with each of the last two harvests producing bumper crops. BMI find it unlikely that they will witness a third consecutive year of output growth in 2009, although beyond this they see solid pick up in both supply and demand contributing to growth of 3.23% to
2013.
The strength of corn production in South Africa in 2008 was boosted by robust exports to neighbouring Zimbabwe, which has emerged as the biggest export market for South African corn. As Zimbabwe deals with chronic food insecurity - brought about by drought, hyper-inflation and mass displacement - it has imported nearly half a million tonnes of corn from its neighbour. Kenya, suffering from its own socioeconomic problems, has also had to import 139,046 tonnes of South African corn since the beginning of the current crop season which began in May 2008; BMI believe such fundamentals will underscore future producer incentives, as well as the strong performance of domestic poultry production.
Despite the gains made in agricultural productivity in recent years, there remain various issues counterproductive to the further development of the industry. Infrastructure is of poor quality and in urgent need of modernisation if South Africa is to alleviate its reliance on food aid to feed the 40% of the population, who are unemployed and living in poverty. There are claims coming from increasingly dissatisfied factions in the predominantly small hold rural community that the government has not invested adequately enough to improve this situation, instead becoming complacent as the food aid rolls in. Subsequently, transportation and water facilities among other things are particularly underdeveloped, to the detriment of the majority.
The industry is classified as exhibiting typical dual economy characteristics; a local subsistence sector juxtaposed with a well developed commercial sector. The fact that large-scale commercial farming is controlled by a white minority will do little to quell the unrest of the majority population who characterise small-scale and subsistence production. Increasingly, capital intensive production is likely to prevail, while the jobs in labour intensive farming become obsolete, potentially resulting in growing unemployment and civil unrest; racial tension is never far from the surface.
However, South Africa's agricultural season runs counter-cyclical to that witnessed in the Northern Hemisphere, allowing it to facilitate timely exports to EU and US markets. In addition to traditional exports, the region's more niche products may prove to be more popular among health conscious consumers at home and abroad. Rooibos red tea, ostrich meat and biltong are examples of local fair that are becoming increasingly desirable throughout the world.
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