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South Africa Agribusiness Report Q2 2010
Business Monitor International, Feb 2010, Pages: 50
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 Agribusiness Report for Q2 2010, we take a close look at the country's livestock sector. Right up to the mid-1990s, South Africa's meat production and consumption was dominated by beef. Despite this, growth in beef production has been decidedly sluggish over the past few decades. This past decade, there has been some improvement after the large fall in production following the end of Apartheid. Despite this, current production levels are fairly similar to the levels seen in much of the 1980s.
We believe South Africa does have the potential to increase beef production. South Africa has large expanses of grazing land suitable for beef cattle production. According to government data, 54% of the country is classed as suitable for grazing. At present, production usually falls short of meeting domestic demand. As per capita incomes rise over the coming decade, we expect demand for beef to grow. If the country is not to become more reliant on imports, the efficiency of domestic production will need to be improved.
The poultry sector has been far more dynamic over the past decade. Poultry production expanded by almost 75% from 1999 to 2009. Growth in demand was even faster. Consumption grew 85% over the period. The rise in production has been driven by the high demand for meat. Poultry is more affordable than other meats for millions of low-income consumers in South Africa. Broiler production is dominated by large, vertically integrated producers. The two largest producers, Rainbow Foods and Astral Foods control more than 50% of the market. As the two companies' smaller competitors aim to increase their scale to be able to compete, we expect to see further consolidation in the years ahead.
In the crop sector, production of South Africa's foremost grain, corn, is set to rise again in 2009/10 owing to an increase in the area planted. Wheat production, however, is set to fall once again. Wheat production is extremely dependent on the levels of duty applied to wheat and flour imports by the government. In the past, when duty has been removed, producers have often struggled to compete with imports from major producers such as the US. As prices were rising in the lead up to the 'food crisis' of 2008, the government removed import tariffs on wheat. Now that world prices have fallen, South African farmers are again struggling to make a profit from the grain. Improvements in yield should see domestic producers better able to compete with imported grain, though we still do not see any major gains in production while tariffs are kept low.
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