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

Unequal access to land in South Africa continues to prevent citizens from enjoying human dignity, rights and security. The ongoing debates and recent public hearings about land reform policy in the country are therefore crucial from a justice and development perspective.

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!

OK, folks, I know this platform is for agricultural economics related notes, but an exception once in a while won’t hurt. Last night I met up with an old schoolmate, Nikkie Korsten, who is in town for a conference.

The People’s Republic of China is, according to many market analysts and commentators, fast becoming the major economic power in the world which is a very important topic almost everywhere. 

South Africa has a globally competitive agribusiness sector and a highly developed value chain with well-established economic institutions and techniques. 

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.

South Africa is divided into a number of farming regions according to climate, natural vegetation, soil type and farming practices.

South African new-truck market has increased overall sales by 2.3% year-on-year for the first nine months of the year, defying a slew of negative economic indicators.

Successful farmers run their operations like a business.

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.

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.

South African farmers believe Russia has great potential in the field of agriculture and are interested in sharing experience with the country, Omri van Zyl, the executive director of federation of South African agricultural organisations AgriSa, told Sputnik. 

This April the dam levels in the Western Cape slumped to a low of just 18% and South Africans were bracing themselves for Day Zero.

South Africa’s pet food industry has in recent months defied constrained economic growth, a volatile local currency, declining but stable grains sector and muted political uncertainty to post growth and even attract investment from key manufacturers in the country.

Humans love honey. We spread it on things. We put it in our tea. The craftiest of us use it to make mead. Human love for honey goes way back – all the way to the ancient Egyptians, Greeks, Babylonians, Assyrians, and so on. One of the earliest names for Pharaohs was “Bee King”. Beekeepers have been moving hives from field to field for pollination for over 5,000 years, but bee culture has been a thing since 4500BC.

When 15 years ago bees started disappearing by the millions, conservationists worldwide began a crusade to save the honeybee.

News of the crisis swarmed mainstream media. Beekeepers and animal rights advocates blamed farming pesticides like neonicotinoids, a nicotine-based insecticide that interferes with a honeybee’s navigation so that it can’t find its way home to the hive. Farmers and the chemical pesticide lobby blamed parasites like the Varroa destructor, a honeybee parasite that spread globally in the late 20th century. Climate change crusaders blamed increasingly volatile weather. But experts like bee researcher Mike Allsop argue that the real problem is the beekeepers themselves.

If pesticides and parasites are responsible, says Allsop, “why is it that Europe has banned pesticides and bee losses have continued? Why are parasites such a major issue there and not elsewhere? Because of the practices of the beekeepers themselves.”

Overworked bees

To understand this, we need to know a bit about bee history. In ancient times, there were only two types of honeybees: the European honeybee and the African honeybee. The Sahara Desert was – and for the most part, remains – a natural barrier between the two. Because of their calm temperament and easy maintenance (according to one local beekeeper, the European bee is a “2” on a scale of 1 to 10 for aggression while the African bee is a “9”), European honeybees became the primary honeybee for beekeeping worldwide. But breeding practices and mismanagement have made these bees very susceptible to disease.

European breeders “have turned their bees into little poodles,” Allsop says. “Bees are being bred for passiveness and against defensive behaviour, stinging, and swarming. They can’t look after themselves.”

When diseases or parasites hit, best practice is that the infected hive should be quarantined or destroyed. But beekeepers in America and Europe, in an attempt to save a buck, are keeping their hives alive rather than burning or destroying them. Keeping these colonies active means the bees aren’t developing a tolerance to pesticides and parasites over time. Allsop says this is like purebred dog breeds versus “street” dogs, who tend to be much hardier.

Disease is still an issue with descendants of the African bee. Outbreaks of honeybee diseases aren’t uncommon, and the Varroa destructor pest has been a consistent problem since entering the Western Cape in the 1990s.

But the reason that death rates are higher elsewhere is the practice of overworking the bees for commercial pollination and honey production.

Many American beekeepers make top dollar sending their hives around the country to pollinate during various growing seasons, so some hives spend their whole lives on truck beds, being hauled thousands of miles. Without time to recuperate, the honeybees are sometimes too weak to pollinate, so the farmers give them sugar water to keep them buzzing about. 

Overworked, stressed out, and with poor nutrition from sugar water and less diverse food sources due to monoculture farming, the bees are more susceptible to diseases, parasites, and the like.

Thankfully, says Allsop, in South Africa beekeepers don’t typically push their bees to the limit. But the local bee industry is still at risk, though for a different reason: forage.

Paul van Rensburg is a beekeeper in Somerset West with 60 hives. He explains, “Because the fynbos flowering season is so restricted, there are no indigenous flowers after November. So we rely a lot on eucalyptus trees and other non-native species.” But, unfortunately for our bees, the government’s Working for Water initiative is actively removing alien foliage countrywide. That includes the eucalyptus, which bees feed on to produce almost 70% of South Africa’s honey.

This is particularly a problem for the country’s many wild bee species. Honeybees are only one in a thousand species of bees we have here. Because honeybees are domesticated and protected by beekeepers, experts like Allsop stress that they’re not at risk. Wild bees, on the other hand, are at risk, as they are being forced to compete with the protected honeybees for forage, which is becoming even more scarce as a result of urbanisation and habitat loss. And with eucalyptus rapidly disappearing, that competition is becoming fierce.

An ageing industry

All around the world, bee culture has taken flight. There are honey festivals, wildly popular Facebook groups, beekeeping classes at many major universities, and even a World Bee Day, 20 May, to celebrate the birthday of Anton Janša, one of the first modern teachers of apiculture. In “apitourism” hotspots like Slovenia, you can get honey massages or visit apitherapy chambers, where you can breathe beehive aromas said to help with asthma and respiratory problems (although there’s no evidence that these treatments work).

Technology is keeping up. Enthusiasts can submit their bee sightings to bee research on an app called Bumble Bee Watch. The Flow Hive, a “honey on tap” beehive system invented by a father-son pair in Australia, broke a record on crowdfunding site Indiegogo for the highest-earning campaign in the site’s history, with over US$10-million raised.

But in South Africa, our beekeeping numbers are on a steady decline. The industry is ageing, and few young commercial beekeepers are entering. Training infrastructure in South Africa is minimal.

Alesha Otto is a graphic designer from Cape Town who started a bee sanctuary on her farm called Bijenbos Bee Sanctuary. Trained by a beekeeper in Malmesbury, Alesha says she has been shocked by the lack of beekeeping resources available from the government. Unlike Ethiopia, Tanzania, and Kenya, all of which are major honey exporters and have extensive government resources for the honeybee industry, resources for people starting out in South Africa are scarce.

“There’s so much to learn and such little resources here,” Otto said. “There’s no formal, standardised education.”

The training that does exist is expensive. Hobbyist Joshua Nel, who has 15 hives on his family’s smallholding in St. Lowry’s Pass, used YouTube. “I’m not going to pay R2,000 for something I can find on YouTube for free,” he said. He even imported his beekeeping suit from China, because the local options were more expensive and harder to come by.

Chris Oosthuizen became interested in the honeybee industry last February and spent over 400 hours on YouTube during the Covid-19 shutdown training himself in beekeeping. He is completely self-taught from YouTube videos and from Beekeeping in South Africa by M. J. Johannesmeier. He has bought more than 450 empty hives and begun using a combination of lemongrass essential oil, beeswax, propolis, and olive oil to attract swarms. He caught his first one in just four days.

Oosthuizen recently started Honey Bee Heroes, an adopt-a-hive programme where patrons can pay R1,500 and have a new hive dedicated to them. Patrons get twelve bottles of pure fynbos honey, cost-price honey when their hive starts producing, and a free beekeeping experience where they can suit up with Oosthuizen on the farm.

For many hobbyists like Oosthuizen, it’s all about conservation, not profit. He has no plans to move his bees for pollination or put any undue stress on them. He will extract honey, but only from strong hives at appropriate times, when it won’t be of detriment to the bees.

“It’s fundamentally financially flawed, but that’s conservation for you,” he says.

Chinese imports

South Africa used to produce enough honey to meet local demand, but as supply fell and demand skyrocketed, cheap imports have filled the gap.

China has been flooding markets worldwide with “natural” honey imports. The problem is that most of the honey coming out of China is filtered, heated, and with many additives – and sometimes, it isn’t even honey at all, but a mix of corn and rice sweeteners. Countries like the United States have put massive tariffs on Chinese honey imports, but Chinese suppliers have found a way to get around this: by shipping through other countries and slapping on a new label with that country’s name on it, in a scheme colloquially called “honey laundering,” or transhipment.

Chinese honey dumping is happening here, too. Some brands will even promote themselves as “a product of South Africa” but, if you read the fine print, the honey actually comes from China. It’s just bottled here. With Chinese honey prices so low, South African farmers can’t compete and many local beekeepers are getting out of the business.

“We’re not protecting our own,” Oosthuizen says.

He says consumers need to be educated about the products they’re buying. Consumers want to pay R55 per bottle, but R200 should still be considered cheap for quality local honey. “Our honey is way undervalued. It’s like bread. You’re paying threefold for artisan bread because it’s better for you and it’s less refined. The same goes for honey.”

READ MORE -  The untapped potential of Africa’s honey bees

Will it all bee all right?

Beekeeping in South Africa is a predominately old, white, and Afrikaner gig. The government has made attempts to capitalise on beekeeping’s potential for income generation in impoverished communities with programmes like its Beekeeping for Poverty Relief Programme. But so far, those attempts have overwhelmingly failed.

Why’s that? Partly, it’s a problem of land, Oosthuizen says. For urban or township populations, you need sites for hives: enough land, and enough greenery on it for the bees to eat. In rural communities, there is the space, but the problem is getting that honey to market. Those are major hurdles, and that’s not taking into account startup costs. It’s relatively cost-effective to start beekeeping, but the challenge is scale. “To generate a decent income, you need ten hives,” says Oosthuizen. “With that, you can make R20,000 a year, but that probably takes about R15,000 to start up including hives and equipment.” He says the owner of 20 hives can earn wages similar to a domestic worker for a full year.

He hopes to solve some of these problems with Honey Bee Heroes, including a sponsorship programme where patrons can front the costs of setting up ten hives for a low-income South African, hosted on long-term sites he’s secured from local farmers. And what do the farmers get in return? Delicious honey and discounted brandy at the pub on Oosthuizen’s farm.

But if Allsop had his way, no more South Africans would become beekeepers. He says there’s no more space for them because forage is disappearing.

“Right now, every hobbyist beekeeper is putting a strain on the industry. Instead of more beekeepers, we need more trees.”

Opening a conversation between honeybee experts like Oosthuizen and the Working for Water team may be the first step in making that happen. DM

SarahBelle Selig is a freelance writer living in Cape Town and a second-year in the Master’s in Creative Writing programme at University of Cape Town. She freelances for Catalyst Press, an independent book publisher in the US, and is the publicity writer for the South African Bone Marrow Registry.

 The Department of Agriculture, Land Reform and Rural Development (DALRRD), agribusinesses and various social partners have been hard at work for months crafting the Agricultural and Agro-processing Master Plan and separately blended finance instruments. These aim to ignite growth and expansion in South Africa's agricultural sector as part of the government's broader Economic Reconstruction and Recovery Plan. Both these initiatives are set to be launched in the coming months whilst the first phase of the blended finance instrument has already started, as evidenced by the launch of the joint Agri-Industrial Fund of R1 billion by the Industrial Development Corporation (IDC), in partnership with the DALRRD. These are constructive programmes with the potential to ignite growth and transformation in the sector. As such, industry bodies such as Agbiz allocate most of their time and resources to pursue these goals. Sadly, much of this good work takes place behind the scenes whilst other significant policy developments that might deter the progress grabs social partners' attention and the media.

 A case in point is the renewed debate about Section 25 of the Constitution and the Expropriation Bill. Last week, the Portfolio Committee on Public Works hosted public hearings on the Expropriation Bill whilst the committee tasked to "make explicit what is implicit" in Section 25 of the Constitution continued with their public hearings. The outcome will have implications on public sentiment. We hope that it will not detract from the two initiatives above to drive growth and expansion in South Africa's agriculture. The success of any of these programmes depends on the private sector and other social partners jointly implementing the government's proposals. As such, policy actions that might be perceived as not aligned with the broader stakeholders' interests present a risk and could lead to a lack of participation and stalling the Master Plan and the blended finance implementation.

Admittedly, the discussion of the potential amendment of Section 25 of the Constitution has gone beyond the realm of agriculture as various stakeholders are engaged with the national debate led by Parliament. Yet, its outcomes will likely have direct implications on the success of the DALRRD work programme. Hence, it is prudent that Parliament decides on the Section 25 matter, mindful of the broader impact on the agricultural sector and other sectors of the economy when South Africa is at an economic reconstruction phase.

We have long argued at Agbiz that land reform is an important policy imperative, and we are in full support of it. Yet, we do not believe that an amendment of the Constitution will lead to the country's desired outcome of prosperity. Likewise, Parliament must finalize the Expropriation Bill. It provides the procedural guarantees required to bring the government and an expropriated owner or bondholder onto an equal footing if expropriation occurs. Unlike the Section 25 amendment, Agbiz is broadly supportive of the need for legislation to regulate expropriation but opposes the provisions relating to 'nil' compensation. Expropriation should always be used as a last resort and cannot substitute for well-formulated and well-implemented programmes to effect transformation in the sector. There are various private-public partnerships (p-p-p) for land reform, some of which were highlighted in the Presidential Advisory Panel on Land Reform and Agriculture and also chapter six of the National Development Plan, which the government could utilize to accelerate land reform. Importantly, there is also an ample land supply that the government has not efficiently distributed or transferred to potential beneficiaries, with estimates placing such land at over 2 million hectares.

 We are also bombarded daily with news headlines of corruption and inefficiencies at local government levels, some of which threaten the same black farmers government intends to support. Hence, the p-p-p approaches have been the desired approach to us for land reform. The ongoing Master Plan is designed in the spirit of the joint-venture or p-p-p. A continuation of this approach to policy implementation would potentially yield positive results for expansion in agricultural production and, after that, job creation in the sector.

 In sum, there is some level of unity in agriculture and agribusiness at the moment, and all stakeholders are working towards ensuring the success of the Master Plan implementation, anchored by blended finance and various regulatory support that DALRRD and multiple departments such as Water Affairs, DTIC, etc. would provide. However, the approach that will be taken in Parliament in as far as the discussions of Section 25 of the Constitution can sway the stakeholder's minds off these necessary economic reconstruction plans.

Weekly highlights

SA's 2020/21 summer grain and oilseeds harvest lifted from February estimates

 Last week, the South African Crop Estimates Committee (CEC) mildly lifted its forecast for 2020/21 summer grain and oilseeds production from the previous month by 1% to 18,7 million tonnes (this compared with 17,6 million tonnes in 2019/20 production season). The upward adjustments were on maize, soybeans and sorghum, whereas sunflower seed, dry bean and groundnut production estimates were revised. If we zoom into significant crops, the 2020/21 maize, soybean and sunflower seed harvests are forecast at 15,9 million tonnes (up 4% y/y, and second-largest harvest on record), 1,9 million tonnes (up 39% y/y, a record harvest), and 712 940 tonnes (down 12% y/y), as illustrated in Exhibit 1 (in the attached file).

The maize production estimate is slightly below our estimated 16,7 million tonnes, and the Bureau for Food and Agricultural Policy's estimated 17,0 million tonnes. Considering the optimistic yield estimates we received from farmers and observations in places we have been in, we are inclined to think that there is still room for the CEC to lift further its maize production estimates in the coming months. Hence, we are not adjusting our view for now from an assessment of 16,7 million tonnes.

The current maize production data essentially mean that South Africa would remain a net exporter in the 2021/22 marketing year, starting in May 2021 (corresponds with the 2020/21 production season). South Africa's annual maize consumption is roughly 11,4 million tonnes, which means there will likely be over 2,0 million tonnes of maize available for export markets, all else being equal.

The expected large harvest could also add downward pressure on maize prices, although marginal as the global maize market remains supportive of prices. This is particularly the case as we forecast an excellent crop in South Africa and across the Southern and East Africa regions, a major importer in the previous year. For example, estimates from the United States Department of Agriculture show that Zambia's maize production could reach 3,4 million tonnes (up 69% y/y). In comparison, Malawi's maize harvest is estimated at 3,8 million tonnes (up 25% y/y), Mozambique's maize crop is estimated at 2,1 million tonnes (up 8% y/y), Kenya's maize is forecast at 4,0 million tonnes (up 5% y/y). There is optimism about the crop in other countries, including Zimbabwe.

Over the past few months, the weaker domestic currency, growing demand for South Africa's maize in the Southern Africa region and the Far East, coupled with generally higher global grain prices, provided support to the domestic maize prices. But we believe that the domestic crop conditions will matter more for price movements in the future than has been the case over the past few months. On 25 March 2021, South Africa's yellow and white maize spot prices were down 18% y/y and 3% y/y, trading at R3 220 per tonnes and R3 123 per tonne, respectively.

 In the soybean case, the price drivers are somewhat similar to maize. Nevertheless, an increase in the soybean harvest will still not change much because South Africa imports around half a million tonnes of soybean meal (although this volume will fall notably this year on the back of the large domestic harvest). The country will most likely continue being dependent on imports, even at these harvest levels, to meet the growing demand for soybean meal by the poultry sector. Hence, global soybean market dynamics will continue to influence local prices. On 25 March 2021, the domestic soybean spot price was up 17% y/y, trading around R7 670 per tonne.

In sum, the broadly large summer grain and oilseeds production estimate this season is on the back of increased area plantings for summer crops and favourable rainfall since the start of the season. We expect the maize production estimate to be adjusted somewhat in the coming month as farmers on the ground continue to express optimism about yield prospects. This will likely add downward pressure on maize prices, which bodes well for South Africa's consumer food price inflation for 2021.

SA consumer food price inflation decelerates further in February 2021

 After softening from 6,2% y/y in December 2020 to 5,6 % y/y in January 2021, South Africa's consumer food price inflation decelerated further to 5,4% y/y in February. The primary products underpinning this deceleration in price inflation are meat, fruit, vegetables, and bread and cereals. Importantly, this is in line with the price trends in agricultural commodity prices, which, while still elevated, are at lower levels than the corresponding period in 2020.

 From now on, we still expect South Africa's consumer food price inflation to remain at slightly elevated levels in the first quarter of the year, partly, because of generally higher grain and imported vegetable oils and fats prices. But from the second quarter of the year, grain prices could soften further and filter through, with a lag, on the "bread and cereals" products prices. The anticipated decline in prices is on the back of the large forecast harvest of 16,7 million tonnes mentioned in the previous section of this note. This product category also has a higher weighting of 21% in the food basket, and changes in its price inflation will be noticeable. In terms of meat, we expect a sideways price movement for the coming months. The cattle slaughtering could slightly improve in 2021, and the base effects on poultry meat, which increased in 2020 partly as a result of an import tariff hike, could also bode well for food price inflation.

Overall, it is still our view that South Africa's consumer food price inflation could remain relatively higher in the first quarter of 2021, primarily underpinned by bread and cereals products (the pass-through of current higher grain prices will persist for the first quarter). But from the second quarter, we could see food price inflation decelerating somewhat. We maintain our baseline view for South Africa's consumer food price inflation to average around 5,0% y/y in 2021. The only upside risk that we continue to monitor and assess inflation's impact is the rising petrol prices. South Africa's agricultural commodities and processed food are primarily transported by road, and the increased transport costs could impact the final product prices. For example, South Africa is transporting roughly 81% of maize, 76% of wheat, and 69% of soybeans. On average, 75% of national grains and oilseeds are transported by road. This is an area worth monitoring over the coming months.

Data releases this week

 This is a quiet week on the agricultural calendar. On Wednesday, the South African Grain Information Service (SAGIS) will release the weekly grain producer deliveries data for 26 March. This data cover summer and winter crops, although the focus is still on winter crops whose harvest has recently been completed. On 19 March, 6 327 tonnes of winter wheat were delivered by farmers to commercial silos. This placed the 2020/21 wheat producer deliveries at 1,99 million tonnes, which equates to 94% of the expected harvest of 2,11 million tonnes. From April onwards, the focus will shift to summer crops as the harvest process will soon be gaining momentum. We already see momentum in 2021/22 soybean producer deliveries. On 19 March, about 31 395 tonnes were delivered to commercial silos. This placed the deliveries for the first three weeks of the new marketing year at 42 090 tonnes. Similarly, about 17 095 tonnes of sunflower seed have already been delivered in the 2021/22 season.

On Thursday, SAGIS will release the weekly grain trade data for the week of 26 March. In the previous week of 19 March, South Africa's 2020/21 total maize exports were at 2,31 million tonnes, which equates to 86% of the seasonal export forecast of 2,69 million tonnes. In terms of wheat, South Africa is a net importer. On 19 March, imports amounted to 705 027 tonnes, which equates to 45% of the seasonal import forecast of 1,58 million tonnes.

 Globally, the notable data release will be the US weekly export sales data released by the United States Department of Agriculture on Thursday. Here, we will continue to monitor China's buying activity of US maize and soybeans.

Water has ranked in the top five risks for seven consecutive years in the World Economic Forum’s Global Risk Report. And if you look at the headline threats to humanity  and the planet over the next decade, as pinpointed by 1,000 experts, all but one are linked to water.

The World Bank’s latest annual report on poverty and shared prosperity has an unsurprisingly positive message that only 10% of the world’s population lived in extreme poverty in 2015, which is the most recent year that available data allows for global poverty estimates to be made.

South African farmers are forecast to plant 7% more hectares of maize in 2018/2019 compared with the current season in anticipation of improved weather, a Reuters poll of four analysts showed on Friday.