I spent the last Saturday of the month in Rayton – a small town located in north-eastern Gauteng. I attended a farmers’ day where I was asked to present on the upcoming 2018-2019 summer crop production season in the context of rising farm input costs, changing climate and land reform.

The overseas citrus season is just about to end and there is a slow shift to products from Spain. A German importer of citrus fruit from overseas reviews the past season: "There are still stocks from South Africa, Argentina and Uruguay and sometimes Chile, but most supermarket supplies will be sold this or next week."

Funding constraints have hobbled Agriculture Research Council plans to manufacture a vaccine for foot and mouth disease, leaving SA reliant on costly imports from Botswana.

Over the past few days, the complex nature of South Africa’s food supply chains has come under the spotlight.

These supply chains are a web of formal and informal interactions between agricultural inputs, logistics, farmers, spazas, bakkie traders, processing plants, shipping, retailing, biosecurity and more. Despite the reference to essential goods and services that need to continue to operate, the announcement by President Ramaphosa of a 21-day lockdown triggered a sharp rise in purchases of food that, according to various retailers, exceeded the volumes that are typically sold over Christmas. Furthermore, the lockdown has caused significant confusion at various nodes in the value chain with regards to what is classified as an essential service and what is not. Initially informal traders were excluded from the list of essential services, which caused a major bottleneck in access to food in many poor neighbourhoods, especially in rural areas. This was rectified in the second amendment to the Regulations on 2 April, when the relevant definition of essential services was changed to include “grocery stores and wholesale produce markets, including spaza shops and informal food traders, with written permission from a municipal authority to operate being required in respect of informal food traders”. This is an important amendment, which allows informal traders such as street hawkers to operate again, but requires a coordinated implementation plan with regard to the issuing of permits and the enforcement of health and safety requirements within essential but informal food trading. On-going cooperation between government and private sector is required to efficiently and effectively remove bottlenecks and enable the continuous operation of all essential goods and service delivery within the food value chain to ensure food security during COVID-19 lockdown.

In its first two briefs on the impact of COVID-19, BFAP provided an overview of the South African food system and food expenditure patterns by consumers respectively. This brief sheds light on the complex nature of the food supply chain and the extent of the essential goods and services required for its effective operation. In his initial speech, the President referred to some of the broader sectors that are exempt from restrictions, but did not provide a comprehensive list of all included sectors at the time. Essential goods or services can generally be defined as those that: • May be bought or acquired primarily for personal, family or household purposes, including but not limited to medicines, food, water or fuel; and • Are necessary for the health, safety, or welfare of consumers. Essential goods and services as defined in Section 213 of the Labour Relations Act (Act No 66 of 1995), and designated in terms of section 71(8) of the Act, are specified as power, health, transport, water and sanitation. For the purpose of the COVID-19 lockdown, an amendment of regulations to the Disaster Management Act (2002) provided increased clarity of food related ‘essential goods’ and these were outlined as: • Any food product, including non-alcoholic beverages; • Animal food; and • Chemicals, packaging and ancillary products used in the production of any food product. April 3, 2020 Bureau for Food and Agricultural Policy (BFAP) 477 Witherite road, Agri hub office park Die Wilgers, 0186 Pretoria www.bfap.co.za This email address is being protected from spambots. You need JavaScript enabled to view it. This email address is being protected from spambots. You need JavaScript enabled to view it. Although the food and related products stated above were included in the amended list of essential goods, the list of “essential services” related to food and food production was less comprehensive.

The essential services classification needs to extend across agriculture and not just food, as agricultural value chains are intertwined and if not managed carefully, will have a direct and negative impact on food security. For instance, cotton and wool are not included as essential products, but they provide cashflow to farmers, and are critical in the sustainability of livelihoods and food security, as, without cash flow, field crops cannot be planted. Both sectors are also critical components of the animal feed industry. It is therefore important that cotton and wool (export) trade be opened in order to support farm incomes. The export of cotton and wool also requires port services in order to facilitate the country’s exports. The foregoing underlines the fact that the “food industry” in South Africa is complex and includes a number of support services which, directly and indirectly, enable the efficient and effective operations of the holistic food value chain, and therefore fits the fundamental definition of essential services. By implication, such services must also be authorised to function normally for the food value chain to continue functioning in an effective manner. From a food supply chain perspective, essential goods and services entail all activities and processes which support the production, processing, distribution, consumption, and waste disposal of food in the system.

The following essential food-related supply chains remain operational: • Agricultural and food-related operations, and all agricultural input suppliers and support services; • Fish operations; • Manufacturing facilities for the processing of food, beverages and essential products; • Warehousing, transport and logistics for food, essential products, and health-related goods; • Ports, roads and rail networks, which will remain open to facilitate the import and export of essential products. It is critical that related inspection and regulatory/ documentation control systems and processes operate efficiently and effectively; • Food outlets – including retail, wholesale, spaza shops, malls for food, and essential products. Figure 1 outlines the broad framework of South Africa’s food supply chain and its various components, including the essential services that ensure the smooth functioning of the country’s food system. It includes multiple cross-cutting services such as electricity, banking, telecommunications, water, security, logistics, sanitary and phyto-sanitary (SPS) functions, and waste disposal, among others. Such services are required across the various components of the food supply chain. Transport, as well as health and safety, are pre-requisites that are essential at each node of the food supply chain; critical additional services at ports include administrative functions that ensure documentation and procedures are adhered to for exported and imported essential goods.

FULL REPORT on the LINK ABOVE

With South Africahaving the most advanced and refined food and beverage market on the African continent, Frost & Sullivan believes in a 4%-7% estimated growth in the sector by 2020. The agricultural, agro-processing and food and beverage industries provide an abundance of opportunity for investors as well as key domestic and new players.

In South Africa, more than 50% of working age adults don’t have jobs. But is the country asking the right questions when it comes to understanding what drives people’s employment-related decisions? Research on unemployment mostly focuses on getting wages right. But there are also many non-monetary reasons that motivate South Africans’ work-related decisions.

Two traditional South African tobacco farms in Limpopo are undergoing significant transformations in becoming sustainable blueberry producing farm businesses under United Export’s premium OZblu brand.

The application of lime is often the most neglected soil maintenance practice in farming. We tend to overlook this crucial aspect of maximising the yield potential of our soil. But, it is not only about short term yields and profit. Soil is the only consistent, natural resource available to a farmer and it must be preserved. It can never be replaced. When abused, it can be very costly to repair. In severe cases, it may be too late and could lead to irreversible conditions – soil erosion and desertification.

The purpose of this article is to provide food for thought, in lay-man’s terms. The finer technical details and scientific formulas can be identified in consultation with the experts – soil analysis and fertiliser recommendations. Consult with them!

The level of acidity/alkalinity in the soil is reflected by the scientific term ph. We often hear the word when we discuss soil samples etc. A high ph has less acid than a low ph (the higher the better). A ph of 5,5 or higher for topsoil, and 4,8 for the subsoil, is desirable for most crops. (Soil with a ph of 4 has 100 times more acid than soil with a ph of 6).

At some stage in our lives, we have all suffered from heart-burn or indigestion. This is usually as a result of excessive stomach acids, created by the type, or combination of food that we have eaten. When this happens, we feel uncomfortable. We lose our appetite and our energy. We are unable to function effectively. So what do we do? We drink an antacid or suck a Rennie, to neutralise the acid. Only when the discomfort subsides, are we able to function at our best again.

Soil is almost like our stomachs – it uses water to break down (digest), all the organic and other fertiliser material available. This enables the plant to absorb the nutrients. If there is too much acid in the soil the plant is unable or unwilling, to extract the nutrients (phosphates).

Over time, the application of chemical fertilisers, together with the extraction of various soil nutrients by the plant, causes the acidity to rise. Technical example: Nitrogen is converted to nitrates and hydrogen ions in the soil. When the plant roots are unable to extract the nitrates as a result of acidity, to keep it in the root zone, the nitrates eventually leach away. This leaves only the hydrogen ions – further increasing acidity.

Tillage practices also play a role in ph levels. When the soil is turned, as in ploughing, the natural processes of the organic elements in the soil are disturbed. This affects natural decomposition, which in turn can have an effect on the acidity. Other factors that could have an effect on ph are: high rainfall, high yields, soil types, insufficient/excessive or incorrect fertiliser, and the type of crop planted.

So, just like our stomachs, when necessary, we need to remedy the situation and apply an antacid to the soil – lime.

There are two different types of lime – agricultural lime, which is more generally used, and dolomitic lime applied to soil with a magnesium deficiency. The experts doing the soil analysis will be able to advise you of what and how much to use on each land. This can vary from 500 kg/ha to 2,5 tons/ha or more.

Lime reacts much slower than fertiliser and should be applied before tillage – worked into the ground. Lime can be applied any time of the year but preferably it should happen long before planting where the lime can be given a chance to react in the soil. However, the optimum benefits are long term and usually only seen in the following seasons.

A light textured soil with an effective cation exchange capacity (CEC) of 5 centi-mole charge per kg (milli-equivalents per 100 gram soil) and with an acid saturation percentage of 20%, will have one milli-equivalent of acid to neutralise in each 100 g of soil.

In a hectare of light textured soil at a depth of 30 cm deep, there are 4,5 million kg of soil. This means that
45 million milli-equivalents (milligram) of acid need to be neutralised. This translates to 45 kg of acid per hectare. As calculated above, 50 g pure calcitic lime is needed to neutralise one mole or equivalent or gram of acid. So 45 kg of acid will require 2 250 kg pure calcite to neutralise. A soil with a CEC of 10 and the same acid saturation, will need double the amount of pure calcite.

If a 100% calcium oxide nano suspension (absolutely pure and reactive) is used, one will still need 2,25 ton/1,78 (higher efficiency) = 1,26 tons lime per ha or 1 260 kg/1,3 kg/litre (reported density) = 969 litres per ha.

Even if pure magnesium oxide is used, one would still need 0,9 tons or 692 litres. Usually, the suspension products contain low concentrations of actual lime and that will elevate the mass requirement dramatically. A 15% calcium oxide suspension will require 100/15 x 969 litres = 6 460 litres per hectare using the same reported density.

The fact remains, that no matter how pure or reactive (fine) one can get any natural liming material, one cannot exceed an efficiency of 2,5 times that of pure calcitic lime. Furthermore, there simply is a huge mass of pure acid in a hectare of acidic soil and one accordingly needs a pro-rata high mass of lime material to neutralise it.

The price of lime, in itself is not that expensive, however transport costs from the mines to the farm are very high. Transport costs vary depending on the farm’s proximity to the mines. Many farmers do not have their own spreaders and have to resort to contractors. Many farmers are inclined to see these expenses, and the additional work, as unnecessary and problematic.

However, the correct soil ph, MUST be the point of departure for any farming operation – it is the FOUNDATION on which we build crops. A weak foundation is a recipe for long term disaster. Without a solid foundation we are throwing our money away – most, if not all of the fertiliser applied, becomes ineffective and wasted.

Without water a plant can’t survive, but nothing survives on water alone – with an acidic foundation the plant is unable to absorb the nutrients, no matter how much water!

The only way to determine the acidity and the remedy required is with soil analysis. If the lime requirement is excessive for a single application, it may be necessary to apply lime over a two year period. Once the required ph is achieved it is essential to ensure that optimum levels are maintained, allowing the farmer to test the soil every alternate year, or after an unusual yield or rainfall season.

Remember, the application of lime is not a quick fix. The benefits are only evident over a long term, provided that the ph levels are maintained at an optimum level each season.

In closing – here is some food for thought – treat the soil with the same respect as you would your own stomach. Be careful that you put the correct food into it, and please, make sure it NEVER suffers from heartburn!

The tough economic conditions in recent months have impacted on the daily lives of all South Africans and have been of great concern to government. The rise in the oil price, change in sentiment towards emerging markets and deteriorating international trade relations have been among the contributing factors. 

The South African Berry Producers’ Association, a voluntary organisation, was brought into being seven years ago to act as a collective body representing the nascent industry, and specifically in addressing the registration of chemicals for use in blueberry production.

Our recent interaction with winter wheat farmers in various parts of the country has been quite encouraging. In the major producing province, Western Cape, the crop has matured and generally in good shape with expectations of good yields in most regions – all thanks to rainfall received in the past couple of weeks.

COVID-19 has wrought havoc on poor households in countries across the world. In South Africa, more and more people are facing hunger resulting from mass job losses and small, poorly implemented supplementary cash grants.

On top of this the pandemic has put in stark relief the country’s poorly understood food system, in which powerful firms operate with little oversight while vulnerable actors in the informal food sector face over-regulation.

When the country went into lockdown on 26 March 2020, government placed the formal food sector at the centre of continued food supply. Informal food vendors were restricted. Yet these vendors provide an important source of food and livelihoods for the majority of South Africa’s population.

The South African constitution recognises the right to food. But the government’s failure to enact specific legislation on food rights has resulted in incoherent food security policies. Even the smallest increases in prices of products in the basic food basket can have a significant impact on poor households and in local markets. Therefore, access to affordable and nutritious food through formal and informal food markets is critical for ensuring people’s right to food.

In this article, we highlight indicators of a distressing rise in the prices of essential food products that is contributing to South Africa’s hunger crisis. We call for the urgent expansion of price controls to items in the basic household food basket, as well as an inquiry into the price-setting of major retailers.

Have food prices increased?

StatsSA recently published the headline urban consumer price index (CPI) as having decreased by 0.5% month-on-month in April 2020. But the statistics body explicitly cautioned that its new price collection strategy had been severely limited by the lockdown regulations. The headline number potentially reflects very different pricing behaviour of major retailers that have an online presence. Moreover, smaller retailers are excluded from this methodology – despite comprising half of poor household food spending based on data from the Income and Expenditure Survey of 2011.

Evidence of large price increases on essential food items is recorded by the NGO Pietermaritzburg Economic Justice and Dignity’s price surveys. They find an 8.2% increase in the price of a household food basket for the three-month period from 2 March to 3 June 2020. This includes large increases in the prices of essential food items at the local level over the period, such as an 18% increase for sugar beans and a 14% increase for brown bread.

Table 1: Month-on-month price increases for essential food items, March to April 2020

Comparisons of the StatsSA and Pietermaritzburg surveys are limited by timing and availability of item specific data. But both sources show that prices of brown bread, eggs, potatoes, salt, and soup increased in March and April. These are essential food items not necessarily monitored under current COVID-19 regulations.

Why is this not a Competition Commission case?

The price hikes have drawn the attention of the country’s Competition Commission. In a recent food price monitoring report it pointed out significant inflation in the prices of various food items. It commented that, in some cases, the increases and high margins were not justified by the changes in the operating costs of the suppliers.

Regulations introduced in March after the government declared a state of disaster to manage the COVID-19 pandemic empowered competition agencies to investigate firms believed to be charging excessive prices for certain essential healthcare and food items. But not a lot has happened. Although 38% of the 320 complaints received by the competition commission by the end of June related to food prices, only one has so far led to an administrative penalty for a firm. This was the Food Lover’s Market case relating to the price of raw ginger.

Cases of excessive pricing of goods and services are among the most difficult to prosecute. This is because of the complexities of determining the extent to which prices are high; relevant cost parameters that have to be considered; the reliability of benchmarks; and the availability of data.

What can be done?

During the most severe part of the lockdown in the country, the government addressed the issue of higher food prices by concluding an agreement with major retailers to limit price increases on key items. But this lapsed immediately after the first easing of the lockdown on 4 May. Since then retailers have increased prices of certain food items in response to higher input prices. We believe a renewed list of price limits should be put in place.

Along with capping price increases for key food items, we propose that the list of items subject to the price monitoring regime be broadened. The Competition Commission’s assessment – and our own – indicate that there has been some positive effect of the food price increase restrictions for food items already included in this list, such as maize meal and frozen chicken. But the published list of 22 critical products and categories, including 11 basic food items that are price-monitored, does not go far enough. The list of 11 food items leaves out brown bread and dried foods such as legumes, for example, which are staple foods for the poor and a major source of nutrition. The inclusion of frozen vegetables, on the other hand, points to poor targeting and a limited understanding of what constitutes the food basket of low-income households. Frozen vegetables are staples among middle-income households.

Table 2: Comparison of essential food baskets

We recommend the urgent expansion of the list to include brown bread, fresh vegetables, eggs and sugar beans, among other products. A failure to do this may well reverse any positive impact of increasing the rand values of social grants. At its core, the right to food is about protecting people’s right to feed themselves.

While the expansion of social protection measures does in part contribute to access to food for poor and vulnerable households, government should play a role in monitoring and regulating the food sector to ensure a more equitable and sustainable food system for consumers and actors in informal food markets. Price limits should be complemented by an inquiry into the price-setting of major retailers. The weaknesses in the StatsSA pricing data highlighted above indicate the need for more comprehensive data to inform ongoing monitoring of food prices.

The effects of COVID-19 will endure for some time to come, including large-scale job losses, and so it is certainly not too late to intervene. Poorer South African households cannot continue to endure both a crisis of joblessness and food price increases.

Livestock farmers and others interested in beef cattle farming can get free advice from experts at the annual Beef Cattle Information Day on Friday 12 October 2018 at Agri-Expo Livestock at Sandringham outside Stellenbosch.

Only about 43% of SA's adults work. In most countries, the figure is 60% or more'

SA's unemployment crisis is the deepest in the world and the forthcoming jobs summit needs to grapple with the scale and horrendous consequences of mass unemployment. This is something that President Cyril Ramaphosa acknowledged earlier this year when he said that the summit "will need to take extraordinary measures to create jobs on a scale that we have never before seen in this country".

The 2018/19 summer crop production season started on a positive footing with forecast showers in most parts of the country in the week of 20 October 2018. This will help improve soil moisture which will be beneficial for the planting activity.

The barley industry is set to face some market demand slump emanating from a COVID-19-induced alcohol ban on the one hand, against a predicted record 2020/21 farm production harvest on the other. South Africa could produce an estimated 505 215 tonnes in 2020/21, which is up by 46% from the previous season. This is a result of increased area plantings and also expected higher yields following favourable rainfall in the Western Cape. Such a harvest means that South Africa could remain a net exporter of barley (Exhibit 1 in the attached file). The key export markets for South Africa’s barley over the past five years were within the African continent, primarily Uganda, Namibia, Zambia, Botswana, Lesotho and Togo, amongst others.

 Meanwhile, the 2020/21 marketing season has also been affected by the COVID-19 lockdown regulations which led to a temporary ban on alcohol sales for an extended period; first between 27 March and 1 June, and again between 12 July and 17 August. These bans could lead to a lower intake of barley by the domestic beer industry. The irony of a historically large barley output amid a predicted fall in demand from processors creates new market uncertainty – where are farmers going to sell their barley? South Africa might have to explore export opportunities for its surplus beyond traditional markets.  It would be worth considering key barley-importing countries in the global market such as China, Iran, Saudi Arabia, Netherlands and Belgium, as illustrated in Exhibit 2 (in the attached file).

 Data trends show that South Africa hasn’t exported barley to any of the world’s largest importing countries illustrated in Exhibit 2 (in the attached file). The country has, nonetheless, exported various agricultural commodities to these countries such as maize, citrus, beef and wine, amongst others. This indicates that there is an existing agricultural trade movement between South Africa and these countries. However, the existence of trade flows of other agricultural products is not a sufficient predictor of whether barley exports could follow a similar path. Hence, barley producers and exporters could consider key additional factors such as tariff and non-tariff barriers associated with exporting to these countries. The full scope of the latter is a matter that requires further analysis and technical support from the Department of Agriculture, Land Reform and Rural Development (DALRRD), who will provide perspectives around plant health regulations that would need to be met to access these markets.

From a tariff perspective, South African barley exports to the EU (i.e. Netherlands, Belgium, Germany, Spain, etc.) remain duty-free under the SADC-EPA preferential trade arrangement. The picture for the rest of the other markets – from the Middle East and Far East markets, is mixed. As illustrated in Table 1, South African barley exporters will face tariffs in Japan (175%), Brazil (10%), Iran (5%) and China (3%). Some Middle East markets like Jordan and Saudi Arabia are duty-free.

To identify the feasibility of accessing these markets, the Department of Trade, Industry and Competition (dtic) should begin to arrange outward-bound trade missions – which should predominantly have private-sector representation – to visit these markets and engage in Business-to-Business sessions to understand the product and client specifications and requirements. 

The dtic, as well as the DALRRD, should work together with industry in a coordinated effort to access these markets. The Public-Private Partnership (PPP) effort of developing a market entry strategy should ideally form part of a longer-term market development strategy designed to provide strategic alternative options in the event of a decline in domestic usage of barley, as many in the market anticipate. It is an opportunity for closer cooperation between the private sector and government, and a model that can be used in other sectors.

 With the domestic barley crop now at advanced stages and set to reach the harvesting stage by end of this year, efforts towards expanding market access in these countries for South Africa’s barley need to begin immediately. We recommend that the top ten countries in Table 1 be prioritized (in the attached file). The competitors that South Africa will potentially face in the various markets are France, Russia, Argentina, Australia, Canada, United Kingdom, Kazakhstan, Germany, Denmark and Estonia. In key markets such as China, which accounted for 21% of global barley imports by volume in 2019, Australia was a major supplier of roughly half of the imports, followed by Canada, France, Ukraine and Argentina.

  However, China has since placed import tariffs of 80.5% on Australia’s barley, which provides a window of opportunity for other competitive suppliers. South Africa could be one such supplier to China, and this is a path South Africa’s government and industry should explore and prioritize in addition to other key markets. We think that Australia might also be looking for markets for its barley, which could present tough competition, to a certain extent, for South Africa. Hence, China should be prioritized.

 Iran, which accounts for 10% of the world’s barley imports typically receives supplies from Russia, the United Kingdom and Germany. In the case of Saudi Arabia, the key suppliers are usually Argentina, Russia, Ukraine and Estonia. These are all suppliers that South Africa will have to compete with in these markets. It will be important to assess the extent of the country’s competitiveness against these suppliers and determine if lower tariffs present a meaningful competitive advantage for South Africa to attempt access to these markets. If this is done with speed, it could prove to be an alternative outlet for the excess barley that South Africa will likely have in the 2020/21 marketing year.

 WEEKLY HIGHLIGHTS

SA agriculture machinery sales on a firm footing in August 2020

 South Africa’s tractor sales maintained the positive path in August 2020, which has been underway since June, although showing a marginal increase of 0.2% y/y, with 430 units sold (Exhibit 3 in the attached file). Meanwhile, the were 13 units sold of combine harvesters compared to no sales in August 2019. This is still boosted, to a certain extent, by improved farmers’ financial position following a large summer grains harvest in 2019/20 production season and combined with relatively higher commodity prices.

 The available data for the first eight months of the year already show that the agricultural machinery sales performance will be much better than we anticipated at the start of the year, in part, because of the aforementioned large harvest. Nevertheless, we are still hesitant about the robustness of the sales in 2021, irrespective of the expected higher rainfall which should help bring another good harvest.

As we have highlighted in our previous notes, we think South Africa’s agricultural machinery industry will be pressured by the weak exogenous macroeconomic fundamentals going into 2021. First, the weaker domestic currency will lead to higher prices for imported agricultural machinery, which will reduce farmers’ ability to acquire tractors and combine harvesters. Second, the further downgrade of South Africa’s sovereign credit rating to the sub-investment grade could negatively influence the financing of agricultural equipment. Lastly, a year of relatively good sales is likely to be followed by a subdued period as the rate of replacement of machinery with new ones would ordinarily be lower than the previous years.

SA wheat import tariff lifted

South Africa’s wheat import tariff was lifted to R832.10 per tonne from R516.60. This is after a prolonged delay in the adjustment of the tariff as it triggered on 24 March 2020, following a decline in global wheat prices on the back of expected large supplies.  The conditions have somewhat changed now, at least from a global wheat price perspective, but for certainty in the market, it was key that the tariff was adjusted as the formula dictates.  Ideally, the government should ensure the tariff is implemented immediately whenever the trigger occurs. The delay is not always good for policy certainty. For background, the adjustment on this rate occurs when the international wheat prices deviate by US$10 per tonne for three consecutive weeks from the base price (which is part of the standard formula).

DATA RELEASES THIS WEEK

Starting from a global calendar, today we have the US weekly crop progress data which will be released by the USDA. The previous report of 30 August 2020 showed that maize and soybeans crop conditions were rated slightly poorer than the previous week, but still in better condition than last year. The weekly deterioration was in part as a result of crop damage in Iowa following the windstorm, and also dryness in some states.

On Thursday, the USDA will release the weekly export sales data, which also helps in tracking the agricultural trade activity between the US and China. The available data shows that China is behind the levels agreed on as part of “phase one” trade agreement between the two countries.  Also, on Thursday, the USDA will release an update of its monthly World Agricultural Supply and Demand Estimates report. In the previous month, the USDA reaffirmed its view that there will be large grains supplies in the global market in 2020/21 season, having revised up its production estimates of maize and soybeans, with a slight decline on wheat and rice.

On the domestic front, on Tuesday, Stats SA will release the Gross Domestic Product (GDP) data for the second quarter of the year. We expect agriculture’s gross value-added to have grown by between 20-25% q/q on a seasonally-adjusted and annualised basis. The key drivers will remain somewhat the same as the previous quarter, which was an uptick in animal products, field crops and horticulture.

On the domestic front, on Wednesday, the South African Grain Information Service (SAGIS) will release the weekly grain producer deliveries data for the week of 04 September 2020. This data covers both summer and winter crops. But the focus is on summer crops which are currently being harvested. In terms of maize, in the week of 28 August 2020, about 82% of the expected 15.5 million tonnes of harvest had already been delivered to commercial silos. While for oilseeds, the harvesting process has been completed.

On Thursday, SAGIS will release the weekly grain trade data for the week of 04 September 2020. In the previous week of 28 August 2020, about 1.26 million tonnes of maize had already been exported, mainly to neighbouring countries, as well as Vietnam, Ethiopia, Japan, Taiwan and South Korea. This equates to 47% of the seasonal export forecast of 2.70 million tonnes, which is up by 89% from the 2019/20 marketing year because of an expected large harvest. In terms of wheat, South Africa is a net importer, and in the week of 28 August 2020, about 89% of the expected 1.80 million tonnes of imports in the 2019/20 season had already landed on domestic shores.

Poachers poisoned five lions and brutally mutilated one at a South African predator park this week. The horrific incident occurred on Monday night at Akwaaba Predator Park near Rustenburg, some 80 miles west of Johannesburg in the northeast of the country. 

South Africans love mangoes and for the past month, they haven't had to wait for the start of the local season because this is the inaugural season of Brazilian mango imports to South Africa.

The first large shipment arrived on 20 September, after initial trial volumes by air on 29 August to finalise phytosanitary arrangements. Retailers are expecting future shipments to start arriving earlier.

More containers are on the way from Brazil’s São Fernando Valley, intended to supply the South African market until domestic production picks up steam, which usually is around the end of November or early December.

Food Lovers’ Market stores were the first to stock the Brazilian Tommy Atkins. They are well-placed as a result of their existing relationship with a Brazilian lime producer with a mango packhouse. Other large retailers will carry the mangoes from next week.

There’s a 35% duty on the imported mangoes, which makes it more expensive than local fruit. To keep unit price down, imports are focusing on count 12 mangoes (which are smaller than consumers’ preference for counts 8 or 9 during peak season). All mangoes are class 1 fruit.

“The exchange rate also plays a large role and coupled with the import duty, it just wouldn’t be economically viable to import mangoes when the local season is running. We’d never import mangoes during the domestic season,” says JP van Tubbergh, import manager for FVC International, international trading arm of Food Lovers’ Market. “Imported mangoes just couldn’t compete with local fruit on price.”

The Brazilian industry finds South Africa a good outlet for its Tommy Atkins, which is losing favour in the Northern Hemisphere to fibre-free varieties. After an average of 5 days transit time within Brazil, shipments across the Atlantic to Cape Town take around 10 days.

The local mango industry has expressed some reservations about the new market access. The chairperson of the South African Mango Growers’ Association, Pieter Buys, says that he was quite surprised when hearing about the new agreement for the first time some weeks ago. “We just hope they don’t import an inferior product that damages the local market right before the start of our season.”

 
Author: Carolize Jansen 
 FreshPlaza.com

A JSE investigation has found that Suidwes Landbou, an approved grain silo storage operator owned by agri company Senwes, breached important silo provisions in March last year.

 
The quality and quantity of a certain grade of white maize, reflected on the silo receipts issued by Suidwes, did not match the physical product stored at its Bloemhof facility. This was according to a market notice issued by the JSE’s Commodity Derivatives Market division in December 2020.

Suidwes indicated 10,800 tons of physical maize was stored, while only 5,853 tons could be accounted for on site.

 
The JSE says in its notice that it is a “serious concern” as the storage operator “transgressed material rules of the JSE’s terms of the agricultural derivative contract”. Despite no losses to the owners of the stock after the discrepancies were exposed, as the shortfall was covered by other Suidwes silos, it did cost the agricultural co-op R550,000 to rectify.

Furthermore, when Senwes, the ZAR X-listed agricultural group, finalised the acquisition of Suidwes in August last year after the Competition Commission approved the transaction, the cost was inherited by the new owners of the establishment.

While all receipts were eventually honoured, the JSE remained of the view that the transgressions were so serious that it necessitated further investigation and action. The exchange levied a fine of R1.5-million against Senwes, with half of the amount left suspended. Senwes agreed that the transgression was serious, and that a warning alone did not represent an appropriate sanction.

The notice states Senwes provided its full cooperation and assistance to ensure investigations were concluded as quickly as possible. Senwes agreed that the penalty was fair and adequate. Francois Strydom, CEO of Senwes, told DM168 that sometimes “you just buy the good with the bad”.

The grading system is predominantly objective, but there is also a level of subjective opinion mixed up in the matter, he said. Strydom agreed, however, that the integrity of price discovery should be protected at all costs.

The role of the JSE’s Commodity Derivatives Division is to provide market participants with a price-determination mechanism and a price-risk management facility, through which they can manage their exposure to adverse price movements in the underlying physical market and where performance by both counterparties to the contract is guaranteed.

Since no formal cash market exists for grains in South Africa, the development of an efficient physical delivery mechanism ensures that the futures contract closing price reflects the situation in the cash market. It therefore ensures price convergence of both the cash and futures markets at expiration. This facility allows for both the buyer and the seller to notify the exchange before allocation that they have reached agreement outside of the exchange and request that the underlying silo receipts be exchanged between the two parties.

That is the stance of the JSE, according to its website. The management team is on leave and questions were not answered at the time of going to print.

It appears the main overarching rule of the JSE commodity futures market – “You may not issue a certificate if the grain is not in the silo” – is being broken, and broken badly. Farmers say this is happening across the board and has been happening for years.
But according to a few large-scale farmers in the Free State and North West, the grain producer’s prosperity is directly dependent on whether he gets a fair price for his product. With transparent and reliable information, the price is determined by each roleplayer – no matter how big or small, they said. The current situation lent itself to potential manipulation, where the watchdog (read JSE) has failed to make sure the rules are not bent.

“Grading is not done by a machine or independent person,” said a maize farmer on the border of KwaZulu-Natal. “On the contrary, profits are made by the approved silos by grading grain as low or poorly as possible. In the current system, producers are not compensated for quality above a certain grading level, which then gives the silos the opportunity to blend subpar with a supergrade white maize standard produce.”

He says it is possible that supergrade maize can be kept separate by silo-holding companies such as Senwes, which also owns mills. They then get a 5% better grinding percentage compared with the competition, while the mill only pays the minimum white maize standard price. This practice has grave consequences for the producers, who not only earn a suppressed price – which can be as low as R2,500 a ton, the floor price of the export parity – while the silo owners can charge up to R4,500 a ton on produce they don’t even have stored at their facilities.

Grading system

‘The grinding quality characteristics will need to be tested in our rating system by independent auditors and by JSE inspectors on a regular basis to prevent unacceptable grinding quality imported white [maize] from being ‘artificially’ delivered on our market,” said another Free State farmer.

There is clearly something wrong with the current grading system.

Where the silos can theoretically make the most money is when they get end-of-season prices for new-season maize that is not yet delivered. End of season is March, while new season or harvest time is May, June and July. In March last year, the difference between new- and old-season prices was more than R3,000 a ton.

The idea is to receive money on a short position on a March contract, but only to deliver as soon as new-season maize arrives in May or July. “It is theoretically possible for the silos to deliver audit certificates to the

JSE for maize that does not yet exist,” the farmer said.

Remember, the office that issues the certificates is part of the same group that makes money from the mixing and also trading futures contracts on the JSE. It is therefore possible for a silo to deliver grade and volume certificates on grain, which was not yet physically present in its silos at the end of March. All the silo operators have to do is delay the unloading of the physical maize.

This behaviour is possible because the JSE does not conduct proper inventory inspections at the silos, DM168 was told. Some silo supervisors said the JSE was not up to date with their audits and, with the “questionable quality” of their audits, it was possible that silo owners could exploit the situation, as was the case at Suidwes. Unfortunately, these inspection reports are confidential.

It appears the main overarching rule of the JSE commodity futures market – “You may not issue a certificate if the grain is not in the silo” – is being broken, and broken badly. Farmers say this is happening across the board and has been happening for years.

This is an essential rule and is the basis of any futures market: you can sell something in the future, but when the day of delivery comes, you either have to deliver the product physically or buy back the stock that does not exist.

If silo certificates that are not backed up with real maize of the right grade are offered on the JSE futures market, it creates the illusion that there is more physical stock available – and this will suppress the white maize price on the exchange to the detriment of the producer. DM/BM

This story first appeared in our weekly Daily Maverick 168 newspaper, which is available for free to Pick n Pay Smart Shoppers at these Pick n Pay stores.

Processing of current land claims could take 200 years and cost more than R600 billion.