Since the start of the Russia-Ukraine war there have been rising concerns about global food security. Both Ukraine and Russia are major agricultural producers and exporters. In 2021, these countries together accounted for nearly 30% of global wheat exports, about 14% of global maize exports, roughly 32% of global barley exports, almost 60% of global sunflower oil exports, and about 14% of global fertilizer exports.[2]

The destruction of economic infrastructure within Ukraine, combined with various shipping lines avoiding the Black Sea region and the extensive sanctions that Western countries have imposed on Moscow, mean there will be limitations on the movement of the agricultural products from these countries. This will be exacerbated by other factors, such as the agreement to exclude some Russian banks from global payment systems such as SWIFT.

Notably, the Russia-Ukraine war occurs at a time when the global agricultural commodity prices were already elevated as a result of relatively lower grains and vegetables oils stocks.[3] The drought in South America, specifically Brazil and Argentina, which together account for 14% of global maize and 50% soybean production, has already pushed up global prices for much of the past two years.

Additionally, the rising demand in China and India for soybeans and other vegetables oil, combined with poor palm oil produce in Indonesia, has added upside pressures to global vegetables oils prices. As the Russia-Ukraine war began, the Food and Agricultural Organization of the United Nations (FAO) Global Food Price Index averaged 141 points in February 2022, which is an all-time high, exceeding the previous peak in February 2011.[4] On a year-on-year basis, the FAO reflected an increase of 21% in February 2022.

Given these realities, it is important that we understand South Africa’s linkages to Russia and Ukraine agricultural trade, and how the unfolding war could potentially impact domestic food supplies.

SA’s agricultural trade with Russia-Ukraine

South Africa has relatively weak agricultural import ties with both Russia and Ukraine. Russia is the 17^th-largest agricultural products supplier to South Africa, and Ukraine the 44^th. In value terms, agricultural imports from these two countries accounted for just 2.4% of South Africa’s total agricultural imports of US$5.9 billion in 2020.The major products both countries export to South Africa are wheat and sunflower oil. Over the past five years (2016-2020), South Africa imported an average of 1,8 million tonnes of wheat per calendar year, roughly half the annual wheat consumption needs. Of this, wheat imports from Russia and Ukraine averaged 34% and 4%, respectively.

The significance of Russia in South Africa’s wheat imports basket may raise concerns about the near-term supplies. And from this perspective, in the current wheat marketing year of 2021/22 that ends in September, South Africa has already imported 40% of its estimated imports of 1,5 million tonnes. However, it will likely be able close the import gap for the remaining balance for the year from various countries such as Germany, Canada, Australia, Latvia, Argentina, and the Czech Republic, amongst others. But this will probably be at higher cost than the volumes already imported because of the upside pressure the war has added in the commodities market.

Moreover, South Africa imported an average 174 138 tonnes[5] of sunflower oil per year from the world market between 2016 and 2020. During this period, imports from Ukraine averaged 4% of the total. Bulgaria supplied 40% of South Africa’s imported sunflower oil, Romania about 22%, and Argentina 15%.

That said, these data do not minimize the importance of these countries for South Africa’s food basket. Russia and Ukraine may not be major supplies of agricultural products to South Africa, but they have strong ties with the global grains and oilseeds market given their large export share contribution and this has an important bearing on commodity prices.

This means the impact of the disruption in trade will, in the near term, be felt through prices rather than through a shortage of products. The FAO Global Food Price Index, which was already at all-time high in February, could register a new high when March 2022 results are released on 07 April 2022, and remain elevated for the months thereafter, depending on the length of the conflict and market uncertainty.

Conversely, from an export perspective, Russia is a notable market – the 13th largest. South Africa's products to Russia and Ukraine are mainly citrus, nuts, vegetables, and tobacco. Importantly, in 2020 Russia accounted for 7% of South Africa’s citrus exports in value terms, and for 12% of apples and pears exports in the same year – the country’s second largest market.

Aside from the Black Sea region, South Africa generally has stronger agricultural export ties with the African continent, Asia, the United Kingdom, and the European Union. In the third quarter of 2021, the African continent and Asia were the largest markets for South Africa's agricultural exports, accounting for 35% and 33% in value terms, respectively. The European Union was the third-largest market, taking up 23% of South Africa's agricultural exports. The balance of 9% value constitutes the Americas and other regions of the world.[6]

Dependence on imported agricultural inputs

Russia is also integrated in global agriculture through inputs market, and here lies a major risk for import dependent countries such as South Africa. Russia is the world's leading exporter of fertilizer materials in value terms, followed by China, Canada, the US, Morocco, and Belarus (see Figure 1). These fertilizer mixtures include a variety of complex minerals and chemicals, including nitrogenous fertilizers, phosphoric fertilizers, and potassic fertilizers.

Figure 1: Share ranking of the world's top fertilizer exporters by value (2016 and 2020)   

Source: Trade Map and Agbiz Research

 Fertilizer prices increased sharply throughout 2021 and have remained elevated since the beginning of this year. For instance, in January 2022, international ammonia, urea, di-ammonium phosphate, and potassium chloride prices were up by 220%, 148%, 90%, and 198% from January 2021, respectively.[7] There are many factors behind these sharp input cost increases, such as the supply constraints in critical fertilizer-producing countries, mainly China, India, the US, Russia, and Canada. Rising shipping costs, and oil and gas prices are also contributing factors to the price increases, along with firmer global demand from growing global agriculture.

The Russia-Ukraine conflict will add upside pressure to these already higher fertilizer prices, particularly if Russia's exports suffer as a result of sanctions. The primary markets for Russia's fertilizer material are Brazil, Estonia, China, India, the US, Finland, Mexico, Poland, Romania, and Latvia, among others (see Figure 2). Still, even countries that have minimal direct fertilizer imports from Russia, such as South Africa, which is the 36th largest fertilizer materials market for Russia, will experience the price pressures from the international market.

Figure 2: Russia's top fertilizer materials markets by share between 2016 to 2020 (value)     

Source: Trade Map and Agbiz Research

 Unlike the US and Canada, with notable domestic fertilizer production capability, South Africa's domestic fertilizer production capacity is weak, in part, because of the lack of some input minerals. South Africa imports about 80% of its annual fertilizer needs and is a minor player globally, accounting for 0.5% of total global consumption. Therefore, local prices tend to be influenced by developments in the major producing and consuming countries, such as Russia and the other major fertilizer players mentioned above.

Much of the fertilizer imported by South Africa is utilized in maize production, accounting for roughly 41% of total consumption. The second-largest consumer is sugar-cane farming, at 18%. Fertilizer constitutes about 35% of grain farmers' input costs and a substantial share in other agricultural commodities and crops.[8] Farmers have already planted the 2021/22 summer crops with these higher input costs. They will not be procuring fertilizers until around mid-year and into the third quarter of the year when they prepare for the next season (i.e the 2022/23 production season).

Depending on the how long the Russia-Ukraine conflict continues, and the extent of the response measures such as sanctions by other countries, fertilizer prices could still be elevated when the next planting season starts.

In the near term, the winter-crop producing areas such as wheat, barley, canola and oats, among others, which have to start the new planting season at the end of April, are most exposed to higher fertilizer prices, along with a range of horticulture (vegetables and fruit) products.

How the war will affect the South African consumer

Aside from the products discussed above, South Africa is generally a net exporter of agricultural products and has sufficient supplies for domestic consumption and exports to the typical markets. Still, given the possible spike in demand for major grains such as maize, South Africa should keep a close eye on its supplies to ensure that while exports continue, the country keeps sufficient supplies for domestic use.

To be clear, this is not a call for policy intervention on the movement of crops per se. Rather, regular monitoring and publication of output and export volumes allows market pricing to adjust accordingly, as is already the usual practice for most major commodities such as grains.[9] The information about the supplies and domestic stocks will be a sufficient signal to the market, which will adjust the export volumes through price. When South Africa's stocks are stretched, the price increases will force buyers to look elsewhere, and thus ensure that there is availability of supplies in the country.

For the South African consumer, the inescapable effect will be higher prices. The rise in agricultural commodity prices, domestically and globally, along with rising fuel costs, presents significant upside risks to consumer food price inflation. However, it should be noted that farmers do not necessarily always produce food products, but rather agricultural commodities that are inputs into manufactured food. This means that the final food-products price consumers pay is a combination of a range of factors, including labour, transport, and processing.[10] This also means that an increase in commodities prices does not necessarily mean an instant rise in retail prices. There is typically a lag, especially for grain-related products, as manufacturers usually keep several months’ worth of inventories for their production processes.

Moreover, we are in an environment of increasing grains and vegetable-oil prices, but fruits and vegetables could come under pressure. With Russia, a key market for some fruits, temporarily disrupted, products that would have been exported there will remain in South Africa or diverted elsewhere. The meat price inflation dynamics are also uncertain, as some farmers could increase slaughtering on the back of higher animal feed costs (maize and soybeans). This means that the food basket products are not all increasing at the same rate, and there is possibility of moderation in some products. But with fuel being an underpinning product for movement of most food products, the risks to overall consumer food-price inflation are generally.to the upside.

At the Agricultural Business Chamber of South Africa (Agbiz), we had initially thought South Africa's consumer food-price inflation would average between 4% to 5% in 2022 (compared with 6.5% in 2021). When we made the current consumer food price inflation estimates, the war was not on our radar, even though the global food prices were already relatively high. However, we now see more upside risks to these numbers, and we are currently reviewing our forecasts, a tough exercise in the current volatile environment.

Conclusion

Much remains unknown about the coming weeks and months. But there is little doubt that local agricultural markets and consumers will be affected by these geopolitical events, primarily through the price transmission of a range of commodities and inputs.

It is always difficult to get a good handle of Zimbabwe’s maize production data. I tend to rely more on the International Grains Council and United States Department of Agriculture for a better picture of crop conditions there, as they have their people on the ground to do the survey.

The widespread rainfall over the past two weeks has improved summer grain and oilseed crop conditions across the country. The outlook for the next couple of weeks is positive, according to a recent report from the South African Weather Service.

Although I use peanut butter almost daily, for some reason I had not looked at its production pipeline in the past couple of months until today when I received a call from a Zambian trader looking to export peanuts (groundnuts) to South Africa. This prompted me to do some back of the envelope calculations on the South African supplies for the 2019/20 marketing year, which starts on 01 March 2019.

South Africa’s agricultural sector has had two consecutive years of strong growth, with expansion in all subsectors, i.e., livestock, field crops and horticulture. This year will be a break from the 2020 and 2021 strong performance. We expect the sector’s gross value added to fall by roughly 3-5% year on year given the high base from 2021. The overall field crops harvest will likely be lower than the previous season, although some crops such as soybeans and sunflower seed promise a large harvest. But this will not be the only source of potential contraction in the sector. The livestock sector, which accounts for roughly half of the sector’s gross value added, continues to face numerous challenges. First, the generally higher grains and oilseed prices, a key feed ingredient, have presented increased cost pressures to livestock and poultry farmers since 2020. For example, yellow maize prices were up by 38% year on year on 23 June 2022, trading at R4 357 per tonne.

 While the farmers were somewhat able to manage the rising feed costs in the past two years, the current season has presented new challenges: a vast outbreak of foot-and-mouth disease as well as continued occurrences of swine flu and avian influenza outbreaks. South Africa has had 91 foot-and-mouth disease outbreaks in previously disease-free zones. The disease has for the first time in history spread outside the demarcated foot-and-mouth disease zone and is now active in five provinces, namely, Limpopo, KwaZulu-Natal, North West, Gauteng and Free State. While the outbreak does not necessarily mean a wide slaughtering of cattle for farmers and has now, encouragingly, been quarantined in various sites or farms, the economic impact still cuts deep. The impact on livestock auctions is huge. Moreover, bans by many countries on exports of South Africa’s livestock products constrain the growth of the sector and harm the potential for black farmers to reap the benefits from an increasingly export-oriented livestock sector. South Africa’s beef industry is aggressively building its export activity, with exports having grown nearly seven-folds over the past two decades, reaching 54 334 tonnes in 2021 (see Exhibit 1 in the attached file). But we are still not able to export our top-quality beef products to the USA, UK and EU markets where the returns will be much higher than exporting to the Middle East and other smaller markets.

 The frequent outbreak of the foot-and-mouth disease risks reversing or slowing the export drive that the beef industry has embarked on. Weaker exports could also translate to softer domestic beef prices at a time when the feed costs – grains and oilseeds – are elevated. This ultimately adds financial strain on farmers. The financial pressure is not limited to the cattle industry but also to sheep, goats, pigs and poultry. For instance, China has temporarily suspended imports of South Africa’s wool for roughly three months due to the foot-and-mouth disease outbreaks. China is a significant market, accounting for roughly 70% of South Africa’s wool exports. The current export ban has a broad negative financial impact on the wool industry and the communities that rely on the industry.

 Livestock is also one of the subsectors with the deep involvement of farmers from the former homelands’ regions of South Africa. For example, the National Agricultural Marketing Council estimates suggest that black farmers account for 18%, 13% and 34% of wool, mohair, and cattle production, respectively. The accuracy of these data is debatable, but the point here is that a sizable share of agricultural output by black farmers is affected by these financial pressures. We highlight this data to note that these new entrant farmers might not have financial buffers to carry them through in a tough livestock market, as we already hear from established commercial farmers about these financial pressures.

 Keeping in mind the focus of the Agriculture and Agro-processing Master Plan on inclusive growth and employment creation in the agricultural sector, efficient prevention and management of animal diseases and maintenance of animal health is critical. Government has a critical role to play here and the legislative, budgetary and coordinating tasks of public veterinary services and animal health services are absolutely vital in protecting our national livestock herd and enabling the growth that the sector desperately needs.

 The Department of Agriculture, Land Reform and Rural Development established an Animal Biosecurity Task Team, which we understand completed its task with crucial recommendations for improving the current challenges. The report should be made public, and its recommendations implemented urgently. This could provide a platform for effective collaboration between the private sector and the government in placing measures in place to curb the spread of diseases and improve the health of all sectors of the livestock sector.

 Importantly, for key markets for the wool industry such as China, the Department of Agriculture, Land Reform and Rural Development should actively engage the Chinese authorities to resume exports, as we believe there was the framework for engagement from the previous episodes of this nature of outbreaks. The engagement is crucial as China has slowly opened its economy from the tough lockdowns. Our government should move with speed on its engagement. In the case of rising feed costs, the potential rains will be a saving grace that natural grazing veld will continue recovering well and assist the livestock, to an extent.

 Overall, South Africa’s agricultural sector faces numerous challenges, which range from network industry, and broad policy matters such as a need for increased export markets. But in the near term, resolving the constraints above facing the livestock industry would bring a slight relief.

Weekly highlights

South Africa’s consumer food price inflation accelerated in May

 We are in a period of elevated prices, and food is at the core of these increases. For example, in May, South Africa’s consumer food price inflation accelerated to 7,8% y/y, from 6,3% in the previous month. This is the quickest pace since March 2017. The increase was broad base on all food products in the inflation basket. This largely mirrors the uptick we have been seeing in the global agricultural commodity prices, and indeed the domestic market.

 Importantly, we are now also starting to see the spillover the Russia-Ukraine war had on agricultural commodity prices transmitted into retail food prices. In fact, for the grain-related and vegetable oils products, we will likely see a continuous mild uptick in the coming month or two, which could push up mildly the headline food consumer price inflation number further. Since the Russia-Ukraine war began and disrupted the global grains market, the global agricultural commodity prices have increased significantly, with the FAO's Global Food Price Index in May averaging 157 points, which is up 22% y/y, coming from a record high seen in March.

 The disruption in the palm oil market, and indeed the entire vegetable oils market, the ban on wheat exports by India, and the expected lower wheat harvest in the 2022/23 production season are added upside risks that could sustain prices at higher levels. We, however, don’t see potential further increases in the global agricultural commodity prices, but that prices could hover at current elevated levels for some time. South Africa, which is interlined with global agricultural markets, has also experienced increased agricultural commodity prices. The result of these developments is the recent uptick in the cereals, and oil and fat products prices in the consumer food price inflation basket. These could remain elevated, in line with our expectations of agricultural commodity prices.

 Nevertheless, we still think the outlook on food product prices will remain mixed, despite the recent broad increase in product prices. In the case of fruits and vegetables, South Africa has a sizable harvest and the disruption in fruit exports within the Black Sea region could add downward pressure on domestic prices; Therefore, we hold a generally favourable view of these product price directions for the coming months.

 The one essential product whose price trend remains uncertain is meat. The recent outbreaks of foot-and-mouth disease have led to the temporary closure of some key export markets for the red meat industry, thus potentially adding downward pressure on prices. Still, this will be dependent on the cattle and sheep slaughtering activity, which for now remains robust, with 197 712 head of cattle slaughtered in April 2022 (-2% y/y), and 318 155 head of sheep slaughtered in the same month (-10% y/y). Conversely, there are fears of a potential increase in poultry product prices, which could lessen the benefit of softer red meat prices.

 Overall, various factors in the food market will likely push in opposing directions in the coming months. Thus, we believe that South Africa's consumer food price inflation could average just above 6,0% y/y in 2022 (from 6,5% in 2021). The base effects, along with meat, fruits and vegetables, will likely provide a constructive price inflation path ahead. With that said, the next month or two will likely show elevated consumer food price inflation, with moderation in much of the second half of the year.        

Data releases this week

 We start the week with a global focus, where, today, the United States Department of Agriculture (USDA) will publish its weekly US Crop Progress The planting activity has been completed, and thus we now focus on the crop-growing conditions. In the previous release, in the week of 19 June 2022, about 70% of the maize crop was rated good/excellent, compared with 65% in the corresponding week in 2021. Moreover, about 68% of the soybean crop was rated good/excellent, compared with 60% in the same week last year. On Thursday, the USDA will release the US Weekly Export Sales data.

 On the domestic front, on Tuesday, the Crop Estimates Committee will release its fifth summer crop production estimates. We don’t expect any major adjustments from the current estimates, aside from a marginal uptick in the soybeans harvest estimates.

 On Wednesday, SAGIS will release the maize Weekly Producer Deliveries data for the week of 24 June 2022. This data will help us get insight into the progress of the maize harvest activity. In the previous release of the week of 17 June, 2,7 million tonnes of maize had already been delivered to commercial silos, out of the expected harvest of 14,7 million tonnes. Moreover, the soybean harvesting process is nearly complete. In the week of 17 June 2022, about 1,9 million tonnes had already been delivered to commercial silos. The data for 24 June 2022 will likely show additional small volumes of deliveries. In terms of sunflower seed, in the week of 17 June 2022, about 594 236 tonnes had already been delivered, against an expected harvest of 963 000 tonnes (second largest on record).

 On Thursday, SAGIS will publish the Weekly Grain Trade data for the week of 24 June 2022. In the previous release on 17 June 2022, which was the seventh week of South Africa's 2022/23 maize marketing year, the weekly exports amounted to 99 019 tonnes. The key markets were Japan, Taiwan, Vietnam and the Southern Africa region. This brought the total 2022/23 exports to 563 796 tonnes out of the seasonal export forecast of 3,2 million tonnes. This is slightly down from 4,1 million tonnes in the past season due to an expected reduction in the harvest.

 South Africa is a net importer of wheat, and 17 June was the 38th week of the 2021/22 marketing year. The total imports are now at 1,17 million tonnes out of the seasonal import forecast of 1,48 million tonnes (slightly below the 2020/21 marketing year imports of 1,51 million tonnes because of a large domestic harvest). About 25% is from Argentina, 23% from Lithuania, 18% from Brazil, 14% from Australia, 13% from Poland, 4% from Latvia and 3% from the US.

 If one looks into South Africa’s wheat imports data for the past five years, Russia was one of the major wheat suppliers, accounting for an average share of 26% a year. This has now been replaced by the above-mentioned suppliers.

 Also on Thursday, Statistics South Africa will release the Producer Price Index (PPI) data for May 2022.     

Last month I painted a bleak picture of SA’s grain and oilseed crop conditions due to the dryness of the central and western parts of the country. So it is only fair that I present an update after good rains in the first two weeks of February.

The suspension of South Africa’s wool imports by the Chinese authorities because of the foot-and-mouth disease outbreak earlier in the year is a key concern. Wool is an important commodity in the South African agricultural sector, ranked the sixth largest exportable commodity after oranges, grapes, wine and apples in 2018. In the same year, wool accounted for 4% of South Africa’s agricultural exports of US$10.6 billion.

One of the less discussed, yet an important agricultural commodity is wool. But it has now surfaced as a key concern following the suspension of South Africa’s all greasy wool imports by the Chinese authorities because of the foot-and-mouth disease outbreak earlier in the year.

The good news of the past week in South Africa's agricultural sector was the resumption of wool exports to China after nearly four months of suspension. China had cited the foot-and-mouth disease outbreak as a reason to suspend South Africa's wool imports.  The suspension happened despite the existence of a unique protocol to handle the wool shipments and avoid any contamination during a foot-and-mouth disease outbreak in South Africa.

South Africa and China agreed on this protocol following the 2019 outbreak, which weighed on exports. China may have faced capacity constraints during the covid-19-related lockdowns in recent months, possibly leading to delays in activating the protocol. Notably, the foot-and-mouth disease outbreak has been specific to cattle farms, not sheep farming. Hence, industry role players were appropriately dismayed when China suspended wool imports from South Africa, citing this reason.

Credit for assisting in the reopening of this critical trade channel for wool must go to the practical and quiet cooperation between the Department of Agriculture, Land Reform and Rural Development, the wool industry and Agbiz, amongst others, over the past few months. The reopening of exports comes at an opportune time as the wool season has recently started. As we stated previously, China is South Africa's primary wool export market, accounting for an average of 70% of exports. Other South African wool industry markets are the Czech Republic, Italy, India, Bulgaria, Germany, the US, Malaysia, Japan, and Mexico. But these are relatively small and thus could not absorb the volume usually destined for China over the past couple of months.

Importantly, wool will likely remain a significant contributor to South Africa's agricultural export revenue and not fall off the top exportable products list as we initially feared. In the first five months of this year, wool was the eighth largest exportable agricultural product, accounting for 3% (or US$152 million) of the US$5,1 billion in total agricultural exports during this period. Germany and Italy's share in exports increased from April as the Chinese exports declined notably. In fact, Germany and Italy accounted for a larger market share than China in May. The hope is that the European market could remain vibrant as the Chinese market also opens up to South African wool.

The wool industry is also amongst the agricultural subsectors with a large share of new entrant black farmers, whom we feared would experience financial pressures if the ban had continued for longer. For example, the National Agricultural Marketing Council estimates suggest that black farmers account for 18%, 13% and 34% of wool, mohair, and cattle production, respectively.

The cooperation between government, industry and organised agriculture during the wool ban challenges is yet another example of the approach that should be used to deal with challenges facing the sector. For example, foot-and-mouth disease, which continues to affect the livestock industry, needs industry and regulators' view on assembling a plan for the sector. On 16 August 2022, the Department of Agriculture, Land Reform and Rural Development aptly decided to restrict the movement of cattle for 21 days, reviewable weekly. The path forward at the end of this period requires the input and support of the cattle industry players while leaving sufficient room or flexibility for the regulators. The industry inputs will help enrich the government's understanding of the financial impact of their decisions on the industry but, importantly, collaborate on the scientific knowledge of helping to curb the spread of this disease. The industry role players might have various ideas, such as the need to issue cattle movement permits rather than a complete ban on movement or vaccination options. These are the kinds of discussion and much richer scientific insights that specialists in the field could exchange for the good of the South African cattle and, indeed, the broader livestock subsector. In the process, the wool industry should be consulted. The wool industry tends to be affected by the cattle industry developments, as has been the case with the China export ban.

Moreover, the "South Africa Inc" or collective approach between the industry and government is vital in the broader international trade terrain. Difficulties remain for long-term access in the EU for the South African citrus industry. The changes in the plant safety regulations for citrus purport to protect the EU from a quarantine organism, "false codling moth", by introducing stringent new cold treatment requirements, particularly on citrus imports from Africa, mainly impacting South Africa, Zimbabwe and the Kingdom of Eswatini. As stated before, South Africa has put rigorous measures to control false codling moth, which the EU uses as a pretext to restrict citrus imports from Africa. This is a cover to protect the EU's citrus-growing countries like Spain and will increase costs to the Southern African citrus growers. Resolving this challenge requires effective collaboration from South Africa in the engagements with the EU. This means that industry will primarily play a supporting role, and the government should take a firm and visible leadership role in engagements with their EU equals.

The same approach should apply within the Southern African region where the vegetable industry is experiencing losing access to its key markets, such as Botswana and Namibia. These countries combined account for roughly 30% of South Africa's annual vegetable exports of an average US$200 million. The majority of these vegetable products are potatoes, onions and tomatoes. The vegetable farmers in the northern regions of South Africa, and indeed, South African food businesses in these countries, generally rely on these high-quality vegetable product exports, which are now at risk. However, the approach to resolving this challenge should again not be an aggressive approach between industry and government, but a collective "South Africa Inc" approach with our neighbouring countries.

Overall, South Africa's export-oriented agricultural sector faces numerous challenges in the export markets. Still, the success of the reopening of the wool exports and the effective collaboration between government industry and organised agribusiness offers a broad approach to the nature of engagements we should have, especially when dealing with foreign stakeholders and other domestic challenges. As we continue to struggle with foot-and-mouth disease, citrus exports in the EU, and vegetable exports challenges in the region, the collaborative approach will be key to finding a productive path for the good of South Africa's agriculture. In this process, government colleagues should take the lead and be more open to exchanging ideas with the industry, and the industry should reciprocate. 

 Weekly highlights

SA agricultural jobs up marginally in Q2, 2022

While the 2021/22 production season started on a rough footing of excessive rains, various subsectors of agriculture managed to recover when the rains slowed. We saw this recovery in the decent yields in horticulture, grains, sunflower seed and even record yields in soybeans. The primary agricultural jobs data also reflect the vibrancy of the sector. In the second quarter of this year, there were 874 000 people in primary agriculture, up by 1% year-on-year (and up 3% quarter-on-quarter). Notably, this is well above the long-term agricultural employment of 780 000. The increased farm activity during the harvesting process of some vegetables, fruits and field crops necessitated increased employment during the quarter. The subsectors that shaved jobs during this period were livestock and aquaculture (fish farms and hatcheries). The decline in employment in the livestock sector is understandable as the subsector faces the spread of foot-and-mouth disease, which has led to a temporary suspension of exports and numerous business activities, thus weighing on farmers' finances. Moreover, the higher feed costs are an additional challenge for the livestock industry.

Most provinces registered job gains from a regional perspective except for KwaZulu-Natal and North West. These are also amongst the regions that suffer from the spread of foot-and-mouth disease. The floods in KwaZulu-Natal in April this year might have also negatively affected the employment prospects in the second quarter of this year. With that said, these job losses were overshadowed by increased employment in other provinces. Hence, primary agriculture employment increased by 1% y/y (and 3% q/q), as stated above.

Looking ahead, data from the third quarter of the year could continue to show robust employment conditions, although possibly lower than the second quarter. The delayed harvest in some subsectors because of a relatively late start of the season will mean that people were in the fields harvesting for a more prolonged period than the previous year; hence we maintain a somewhat favourable view of employment conditions in the sector. Still, the financial pressures from animal disease and trade restrictions facing labour-intensive subsectors like citrus remain the major risks to job prospects. Aside from the subsector-specific issues, South Africa's agriculture faces challenges around the inadequate functioning of network industries – roads, rail, ports, water, and electricity, and poorly functioning municipalities, leading to an increase in the cost of doing business. Moreover, the challenging economic conditions in the country have, in some areas, led to labour unrest, which also requires close monitoring.

SA consumer food price inflation hit the highest level since January 2017

The higher agricultural commodity prices we’ve observed in the months since Russia invaded Ukraine continue to filter into the food price inflation data. Moreover, the higher fuel price inflation since the start of the war is an additional cost driver of food prices. The data released last week by Statistics South Africa show that in July 2022, the consumer food price inflation accelerated by 10,1% y/y, from 9,0% y/y in the previous month. This is the fastest pace since January 2017, which was a drought period in agriculture where costs were driven by higher agricultural commodity prices. The higher global grains and oilseed prices for much of the first half of this year have been the drivers of the costs of “bread and cereals” and “oils and fats” in the consumer food price inflation basket. These are also products with a relatively higher weighting within the food basket. For example, within the food basket, the key products are meat (35%); bread and cereals (21%); milk, cheese and eggs (17%); vegetables (8%); sugar, sweets and desserts (4%); oils and fats (3%); and fruit (2%).

The grains and oilseeds prices, which have been the major drivers of the surge in inflation, are starting to soften and this shows in the global indices. In fact, the FAO’s Global Food Price Index averaged 140.9 points in July 2022, down by 9% from June.  This was the fourth consecutive monthly decline, led by the drop in the prices of grains and oilseeds. These global developments are starting to show also in South Africa, and the lag could also reflect on the consumer food price inflation data in the coming months. Therefore, we suspect this might be a peak in the domestic food consumer price inflation.

In the case of fruits and vegetables, South Africa has a sizable harvest and the disruption in fruit exports within the Black Sea and the EU could add downward pressure on domestic prices. This bodes well for the consumer in the near term (and the opposite is true for the farmers). The one essential product whose price trend remains uncertain is meat. The outbreaks of foot-and-mouth disease have led to the temporary closure of some key export markets for the red meat industry. Ordinarily, this would add downward pressure on prices as it implies that we would see an increase in domestic meat supplies. But this time around, the spread of the outbreak is vast, to an extent that we might see a decline in slaughtering in major feedlots, which would ultimately keep red meat prices at relatively higher levels; the opposite of what we initially anticipated. This remains uncertain and we will closely monitor the monthly slaughtering activity. Positively, the suspension of the anti-dumping duties for poultry products could help contain the potential price increases in this product, at least in the near term. Still, the broad meat price trend will be dependent on the developments in the beef market.

Overall, as in the previous months, various factors in the South African food market will likely push in opposing directions in the coming months. Still, South Africa will likely remain an exception from the world, with food price inflation contained at relatively lower levels than most regions of the world. Importantly, the coming months could show moderation from the level we saw in July. 

 Data releases this week

We start today with a global focus, where the United States Department of Agriculture (USDA) will publish its weekly US Crop Progress data. As always, in these data, our focus is on the US crop-growing conditions as the season progresses. In the previous release, in the week of 21 August 2022, about 55% of the maize crop was rated good/excellent, which is down by 5% from the same week a year ago. Moreover, about 57% of the soybean crop was rated good/excellent, which is up by 1% from the previous year's rating in the same week. The USDA will release the US Weekly Export Sales data on Thursday.

On the domestic front, on Tuesday, the Crop Estimates Committee will release the seventh production forecast for summer field crops for 2022. In addition, the Crop Estimates Committee will release the revised area planted estimate and first production forecast for winter cereals for 2022.

On Wednesday, SAGIS will release the Weekly Producer Deliveries data for 26 August 2022. This data will help us get insight into the progress of the maize harvesting activity. In the previous release of the week of 19 August, about 12,05 million tonnes of maize had already been delivered to commercial silos, out of the expected harvest of 14,71 million tonnes. The soybeans and sunflower seed harvest have also advanced.

On Thursday, SAGIS will publish the Weekly Grain Trade data for 26 August 2022. In the previous release on 19 August 2022, which was the 16th week of South Africa's 2022/23 maize marketing year, the weekly exports amounted to 123 131 tonnes. The key markets were Taiwan, Vietnam, Japan, and the Southern Africa region. This brought the total 2022/23 exports to 1,44 million tonnes out of the seasonal export forecast of 3,20 million. This is slightly down from 4,10 million tonnes in the past season due to an expected reduction in the harvest.

South Africa is a net wheat importer, and 19 August was the 47th week of the 2021/22 marketing year. The total imports are now 1,40 million tonnes out of the seasonal import forecast of 1,48 million tonnes (slightly below the 2020/21 marketing year imports of 1,51 million tonnes because of a large domestic harvest). The major wheat suppliers are Argentina, Lithuania, Brazil, Australia, Poland, Latvia and the US. As we stated in our previous notes, if one looks into South Africa's wheat imports data for the past five years, Russia was one of the major wheat suppliers, accounting for an average share of 26% yearly. The suppliers mentioned above have now replaced this.

Behind some of the policy proposals and discussions on land redistribution in South Africa is a persistent notion that the country should establish 'small-scale farms' so that there could be more participants, and increase in productivity.

The numbers released on February 27 by SA’s crop estimates committee underscores the message of optimism about agricultural conditions carried in my column on February 20.

I see that the Saudis were in town this week, and seemingly had an interesting engagement with South Africa’s Minister of Agriculture, Forestry, and Fisheries.

We spent time this past week engaging with some of our members in the Free State. The conversations focused on broad policy themes such as land reform, agriculture and agro-processing master plan, biosecurity, rural rejuvenation, trade policy and challenges in the network industries (water, electricity, roads, rail, and ports). Generally, the spirit is upbeat about this sector but, as with other provinces, agribusinesses are troubled by the deteriorating infrastructure in the above-mentioned network industries and the poorly functioning municipalities. These are all themes that the Agbiz office continues to focus on, amongst other activities. In terms of agricultural conditions, we shared our downbeat view of the sector for this year, which we will paraphrase in this issue of the Agricultural Market Viewpoint.

South Africa’s agricultural sector was one of the bright spots of our economy during the Covid-19 lockdown period. This was the only sector that showed robust growth as other sectors of the economy were constrained by the lockdown restrictions, various supply chain disruptions and reduced consumer activity due to fear of contagion. But this year, the predominant message South Africans will hear and read regarding the growth performance of the agricultural sector will likely be more downbeat compared with the last two years.

We are already in the camp of those that forecast a mild contraction in South Africa’s agricultural sector this year. There are a number of things that concerns us. For example, the livestock industry, which accounts for roughly half of South African agriculture's gross value added, continues to suffer from foot-and-mouth disease outbreaks and rising feed costs. Meanwhile, some field crops' harvests are not as robust as the 2020/21 season due to heavy rains at the start of the season. It is worth acknowledging that while some of these harvests will be lower than in the previous season, they are well above the long-term harvest levels. That said, these reduced harvests and the challenging in livestock farming will likely overshadow the robust activity we have seen in field crops such as soybeans, sunflower seeds, and various fruits.

These challenges are also mirrored in the sentiment indicators of this sector. For example, the Agbiz/IDC Agribusiness Confidence Index deteriorated further by 7 points to 53 in the third quarter following a 2-point decline in the second quarter of 2022. Moreover, on a slightly more technical note, the exceptionally high base created by two years of solid growth where the sector expanded by 14,9% y/y in 2020 and 8,8% y/y in 2021, will also be a major factor to likely lead to a mild contraction in the sector’s performance this year.

Respondents to the third quarter Agbiz/IDC Agribusiness Confidence Index survey provided more details about some of the challenges the sector is currently experiencing. Aside from the aspects we noted above, the higher input costs, friction in some export markets, rising interest rates, intensified geopolitical risks which disrupted supply chains, and ongoing weaknesses in municipal service delivery and network industries were some of the factors that survey respondents cited as the key concerns.

But as usual, one has to treat these sentiment indicators with care and realize that moderation is something to monitor but does not necessarily signal that the sector is in terrible shape. To this end, a level of the Agbiz/IDC Agribusiness Confidence Index above the neutral 50-point mark implies that agribusinesses remain cautiously optimistic about operating conditions in South Africa. With this line of thought, the third quarter of 2022 results still reflects broadly favourable agricultural conditions, albeit not as strong as the previous seven quarters.

One other aspect worth monitoring is jobs, as many of us view agriculture as a key employer. Here, we are not as concerned as we are about the broad growth numbers. For example, in the second quarter of this year, there were 874 000 people in primary agriculture, up by 1% year-on-year (and up 3% quarter-on-quarter). Notably, this is well above the long-term agricultural employment of 780 000.

When we observe the activity on the ground and chat with farmers and agribusinesses, we do not get a sense that there will be a notable fall in employment despite the downbeat view we hold about the sector’s broad growth performance for this year. In fact, the Agbiz/IDC Agribusiness Confidence Index has a subindex that also assesses the sentiment about employment conditions in the sector. In the third quarter, that subindex was robust, measured at 61 points (performed much better than the overall composite index).

In sum, while we anticipate some moderation in South Africa's overall agriculture growth prospects this year, we are not suggesting that the sector is in bad shape per se. The output in a range of commodities is well above the long-term levels, and the contraction that we project is largely a reflection of the exceptional performance of the past two years rather than the depressed production conditions in the current year. Notably, the sector can return to a positive growth path if the livestock disease is controlled and if we get a favourable rainy season in 2022/23 summer. This means that to get this sector back into a positive growth path, the Department of Agriculture, Land Reform and Rural Development, together with organized agriculture should accelerate the collaborative efforts of resolving the animal disease challenge, as we have previously argued.

We would add to this list the issue of trade, where various agribusinesses and farmers continue to highlight the need for expansion of export markets to markets such as China, South Korea, India, Saudi Arabia, Bangladesh and Japan. These are countries with strong economies and can be key buyers of our high-value products such as beef, wine and fruits. Simultaneously, we need to maintain the existing export markets such as the EU, the African continent and some Asian markets, which are instrumental for our growth path. This is a long-term endeavour that requires active engagement by the South African authorities in consultation with other role-players in the sector.

Regarding the upcoming 2022/23 agricultural season, the prospects of a weak La Niña provide a good foundation for an excellent rainy season. This is notwithstanding the lingering challenges of higher prices of critical farm inputs such as fertilizer, agrochemicals, and fuel, which will put pressure on farmers’ and agribusinesses' finances when the summer crop season starts in October.

From a policy position, South Africa’s agricultural sector recently launched an Agriculture and Agro-processing Master Plan, a social compact development plan, which should help drive long-term inclusive growth and unlock barriers that constrain performance, if implemented fully. Some barriers require collaboration with various line departments and state-owned companies, specifically concerning the efficiency of municipalities and the network industries (mainly roads, rail, ports, water, and electricity). Aspects of agricultural finance such as Blended Finance are also key ingredients of the growth agenda of this important sector of the South African economy.   

Weekly highlights

South Africa’s consumer food price inflation accelerated further in August 2022

South Africa’s consumer food price inflation accelerated further to 11,5% year-on-year (y/y) in August 2022, from 10,1% y/y in the previous month. This is the fastest pace since January 2017, which was a drought period in agriculture where costs were driven by higher agricultural commodity prices. The higher agricultural commodity prices we’ve observed in the months since Russia invaded Ukraine continue to filter into the consumer food price inflation data. Moreover, the higher fuel price inflation since the start of the war is an additional cost driver of food prices.

More specifically, the higher global grain and oilseed prices for much of this year have been the drivers of the costs of “bread and cereals” and “oils and fats” in the consumer food price inflation basket. These were also amongst the key drivers of the price inflation in August, alongside vegetables, sugar, sweets and desserts. Notably, these are also products with a relatively higher weighting within the food basket. For example, within the food basket, the key products are meat (35%); bread and cereals (21%); milk, cheese and eggs (17%); vegetables (8%); sugar, sweets and desserts (4%); oils and fats (3%); and fruit (2%).

 In the case of fruits and vegetables, the uptick registered in August was a monthly blip caused by a temporary decline in volumes in the fresh produce markets across the country. Generally, South Africa has a sizable harvest, and the disruption in fruit exports within the Black Sea and the EU could add downward pressure on domestic prices. This bodes well for the consumer in the near term (and the opposite is true for the farmers).

The one essential product whose price trend remains uncertain is meat, although its prices moderated somewhat in August. The outbreaks of foot-and-mouth disease have led to the temporary closure of some key export markets for the red meat industry. Ordinarily, this would add downward pressure on prices as it implies that we would see an increase in domestic meat supplies. But this time around, the spread of the outbreak is vast, to the extent that we might see a decline in slaughtering in major feedlots, which would ultimately keep red meat prices at relatively higher levels; the opposite of what we initially anticipated.

This remains uncertain, and we will closely monitor the monthly slaughtering activity. Positively, the suspension of the anti-dumping duties for poultry products could help contain the potential price increases in this product, at least in the near term. Still, the broad meat price trend will depend on the developments in the beef market.

In sum, the global grain and oilseed prices, which have been the major drivers of the surge in inflation, are starting to soften, which shows in the global indices. The FAO’s Global Food Price Index was 138 points in August 2022, down by 2% from July and registering its fifth consecutive monthly decline led by a price drop in all products.  These global developments are also showing in South Africa, and this could also reflect on the consumer food price inflation data in the coming months. Therefore, we continue to expect the domestic consumer food price inflation to start moderating towards the end of 2022. 

Agbiz/IDC Agribusiness Confidence Index deteriorates further in Q3, 2022

The Agbiz/IDC Agribusiness Confidence Index (ACI) deteriorated further by 7 points to 53 in the third quarter following a 2-point decline in the second quarter of the year. Higher input costs, friction in some export markets, persistent animal disease challenges, rising interest rates, intensified geopolitical risks which disrupted supply chains, and ongoing weaknesses in municipal service delivery and network industries remained the key factors that survey respondents cited as the key concerns. Still, a level of the ACI above the neutral 50-point mark implies that agribusinesses remain cautiously optimistic about operating conditions in South Africa. Therefore, the third quarter results still reflect broadly favourable agricultural conditions, albeit not as strong as the previous seven quarters. This survey was conducted in the first two weeks of September 2022 and covered agribusinesses operating in all agricultural subsectors across South Africa.

Broadly, the Agbiz/IDC ACI's third-quarter results present a picture of a sector that remains on a sound footing, but one that is also confronted with a range of challenges. This moderation in sentiment suggests that 2022 could show a contraction in South Africa’s agriculture gross value added, as we stated in the opening section. Still, this does not mean the sector is in terrible shape. The base in 2021 is high and we see slightly lower harvests in some field crops this year.

Looking ahead, the prospects of a weak La Niña provide a good foundation for an excellent rainy season. This is notwithstanding the lingering challenges of higher prices of critical farm inputs such as fertilizer, agrochemicals, and fuel, which will put pressure on farmers’ and agribusinesses' finances when the summer crop season starts in October. 

For the long-term growth of this sector, the need to improve the efficiency of ports, electricity supply and water, quality of roads, curbing crime that devastates the rail network, and improve biosecurity should be prioritised by both government and the private sector.

Data releases this week

As always, we start with a global focus. Today, the United States Department of Agriculture (USDA) will publish its Weekly US Crop Progress data. In these data, our focus is on the US crop-growing conditions as the season progresses, and some regions have started with the harvest process. In the previous release, in the week of 18 September 2022, about 52% of the maize crop was rated good/excellent, which is down by 7% from the same week a year ago. This decline is mainly explained by the drier weather conditions over a few couple of weeks. Meanwhile, about 55% of the soybean crop was rated good/excellent, which was down by 3% from the previous year's rating in the same week. Moreover, the USDA will release the US Weekly Export Sales data on Thursday.

On the domestic front, on Wednesday, SAGIS will release the Weekly Producer Deliveries data for 23 September 2022. This data will help us get insight into the size of the crop as harvesting has been recently completed in most regions of the country. In the previous release of the week of 16 September, about 13,4 million tonnes of maize had already been delivered to commercial silos, out of the expected harvest of 15,0 million tonnes. The soybean and sunflower seed harvests have also advanced.

Also on Wednesday, the Crop Estimates Committee will release the eighth production forecast for summer field crops for 2022. On the same day, the CEC will release the second production forecast for winter cereals for 2022. We don’t expect major adjustments on summer crops. However, the winter crops could show mild upward revision as the weather conditions in the winter-producing regions of the Western Cape have generally been favourable over the past couple of weeks.

On Thursday, SAGIS will publish the Weekly Grain Trade data for 23 September 2022. In the previous release on 16 September 2022, which was the 20th week of South Africa's 2022/23 maize marketing year, the weekly exports amounted to 28 166 tonnes. About 53% of this went to Japan, and the rest to the Southern Africa region. This brought the total 2022/23 exports to 1,6 million tonnes out of the seasonal export forecast of 3,4 million. This is slightly down from 4,1 million tonnes in the past season due to an expected reduction in the harvest.

South Africa is a net wheat importer, and 16 September was the 51st week of the 2021/22 marketing year. The total imports are now 1,58 million tonnes, far surpassing the seasonal import forecast of 1,48 million tonnes (and the 2020/21 marketing year imports of 1,51 million tonnes). We will likely see additional imports before the end of this marketing year this month. The major wheat suppliers are Argentina, Lithuania, Brazil, Australia, Poland, Latvia and the US.

As we stated in our previous notes, if one looks into South Africa's wheat imports data for the past five years, Russia was one of the major wheat suppliers, accounting for an average share of 26% yearly. The suppliers mentioned above have now replaced this.

Also, on Thursday, Statistics South Africa will release the Producer Price Index (PPI) data for August 2022. Our focus on these data will be on the food category. The higher agricultural commodity prices we have observed in the months since Russia invaded Ukraine continue to filter into the food producer price inflation data.

The Kingdom of Saudi Arabia is an important player in global agricultural trade, ranked the world’s 20th largest importer of agricultural products in 2017.

Behind some of the policy proposals and discussions on land redistribution in SA is a persistent notion that the country should establish “small-scale farms” so there can be more participants and an increase in productivity. This view was shared by some participants at a conference organised by the Institute for Poverty, Land and Agrarian Studies at the University of the Western Cape on February 4-5.

The World Bank recently released an interesting book titled Agriculture in Africa: Telling Myths from Facts. It covers a wide range of topics from smallholder land access, post-harvest losses, financing of agricultural inputs, agricultural labour productivity and women’s work in agriculture amongst others.

October 16 marked World Food Day, commemorating the founding of the United Nations Food and Agriculture Organization in 1945. Across the world, this day offers an opportunity for countries to assess their food security conditions and efforts to boost agricultural production. One of the measures that some often use to evaluate the food security condition of each country relative to the world is The Economist's Global Food Security Index, which Corteva sponsors. This latest index ranks South Africa at 59 out of 113 countries, an improvement from the 70th position in 2021. This places South Africa as the most food-secure country in the African continent, followed by Tunisia at 62nd.

This improvement is commendable. When looking at the index scoring's technical position, it becomes clear why South Africa's food security ranking has improved. South Africa's scoring came in at 61,4, up from 57,8 in 2021. This shows that South Africa's progress in the Global Food Security Index is not merely because other countries have regressed, particularly since the start of the Russia-Ukraine war, which increased global food prices but that there has been an actual improvement in its own underlying conditions.

The Global Food Security Index comprises four subindices, namely; (1) food affordability, (2) food availability, (3) food quality and safety, and (4) sustainability and adaption. The affordability and availability subindices carry a combined weighting of two-thirds of the total index. The affordability subindex includes the change in average food costs, agricultural trade, food safety net programs, and funding for food safety net programs. Meanwhile, the availability subindex includes the sufficiency of supply, agricultural infrastructure, and political and social barriers to food.

In 2022, South Africa experienced a mild deterioration in the food affordability subindex of 7 points. Meanwhile, the rest of the other subindices improved significantly. This decline in the affordability subindex is unsurprising as the country has witnessed a broad acceleration in consumer food price inflation since the start of the year. South Africa's consumer food price inflation averaged 8,0% y/y in the first eight months of 2022, from 6,5% over the same period in 2021. Still, what is worth emphasizing is that this challenge speaks to the rising cost of food in an environment of generally high unemployment.

Notably, the rise in food prices is a global phenomenon and not unique to South Africa. The dryness in South America, which negatively affected the crops in the 2021/22 production season, combined with growing demand for oilseeds and grains in China, and higher shipping costs, and recently, the Russia-Ukraine war, are some of the factors that have underpinned the global food price inflation surge. This, in turn, lifted prices in South Africa, despite the large domestic agricultural harvests in the past three seasons.

Nevertheless, global food prices have come off the levels we saw in the months immediately after Russia invaded Ukraine. For example, in September 2022, the FAO's Global Food Price Index was down by 1% from the previous month. This marked a sixth monthly decline and was underpinned by the deterioration in the prices of vegetable oils, sugar, meat and dairy products. This means that affordability for all countries has far improved from the third quarter of the year. Still, the current price levels are higher than in 2021. For example, the FAO's Global Food Price Index is still 6% up from September 2021. Another key point to emphasize is that food prices were already elevated in 2021 due to disruptions in the supply chains, drought in South America, and increased demand for grains in China, amongst other factors.

A major issue to keep in mind when observing global agricultural indices, such as the Global Food Security Index, is that subjectivity can never be fully eliminated from the authors' judgment. Resource constraints can hinder objective data collection on the ground in each country, and they sometimes rely on blueprint models that might not be site specific. Sources of bias can stem from inconsistency in data quality, frequency and reliability across all countries. The weightings and rankings are also tricky because they must be tailored to suit different socio-economic contexts.

Still, the key message is that South Africa is in a better place regarding food security and leading the continent. This does not mean there should be complacency. South Africa will need to continue improving food security through expansion in agricultural production and job creation in various sectors of the economy. As we have previously stated, at a technical level, the ideas of expanding agriculture and agro-processing capacity to boost growth and job creation were well established as far back as in the National Development Plan in 2012. They were again highlighted in the 2019 National Treasury paper and, most recently, in the 2022 Agriculture and Agro-processing Master Plan.

These include expanding agricultural activity in the former homelands and government land, enhancing government-commodity organizations' partnerships in extension services, investment in the network industries (water, electricity and road infrastructure), port infrastructure, and state laboratories. Some interventions are more regulation-focused and therefore do not require significant capital spending by the government, although these still need institutional capacity building. Such regulatory interventions include modernizing regulations such as the Fertilizers, Farm Feeds, Seeds and Remedies Act 36 of 1947, with which many role players in agriculture continue to express dissatisfaction. The Agricultural Product Standards Act's enforcement to ensure that the Department of Agriculture, Land Reform, and Rural Development leads the implementation and does not assign it to third parties is another critical intervention that could be explored. Regarding regional focus, Limpopo, KwaZulu-Natal and the Eastern Cape, the most food-insecure provinces, also have vast tracts of underutilized land. These provinces should be a priority in agricultural development plans. With a commercial focus where conditions permit, agriculture improvement would help job creation and household food security in South Africa.

Weekly highlights

Kenya’s decision to open the door to GM maize is a good omen

In the first week of October 2022, Kenya lifted the ban on the cultivation and importing of genetically modified (GM) white maize. This change is in response to growing food insecurity in the country. Kenya has struggled with drought in the recent past and remains a net importer of maize. Still, this adjustment doesn’t mean the borders are automatically open, there will be an assessment of each GM trait by the Kenyan Biosafety Authority before actual imports and cultivation can occur. Assuming some of this scientific legwork has already been done, we could see imports start in the next few months or a year.

If the work can be completed in months, this could save Kenya some trouble. In the 2022/23 season, Kenya needs to import a substantial volume of maize, estimated at about 700 000 tonnes. This is roughly unchanged from the previous season, which also posted poor domestic production. In the 2021/22 season several sub-Saharan African countries, including Zambia, Tanzania, Zimbabwe and South Africa, had ample maize harvests. This made it easy for them to meet Kenya’s import needs, with Tanzania and Zambia leading the way. However, this year things are different. Tanzania’s maize harvest is down roughly 16% year on year to 5.9-million tonnes due to sparse rainfall at the start of the season combined with armyworm infestations and reduced fertiliser usage in some regions because of prohibitively high prices.

The fall in production and firmer domestic consumption mean Tanzania will have less maize to export. Tanzania’s available maize for export is about 100 000 tonnes. This is well below the previous season’s exports of 800 000 tonnes, which saved Kenya when the country was most in need of maize. The country in the region with the most abundant supply of maize at present is South Africa, whose maize exports for the 2022/23 season are forecast at 3,5-million tonnes. South Africa struggled to access the Kenyan market for many years because of its ban on imports of GM products. But this change in regulations offers a new opportunity for South African maize exporters (provided the Kenyan Biosafety Authority gets its ducks in a row soon).

In future, the liberalisation of the Kenyan seed market should benefit its farmers in the same way as in South Africa, Brazil and the US. In fact, the sentiment towards the cultivation and importation of GM crops is changing worldwide, partly because of the global food crisis and countries’ efforts to boost domestic production. For example, at the beginning of June the Chinese National Crop Variety Approval Committee released two standards that clear the path for cultivating GM crops. Now that this hurdle has been cleared, the commercialisation of GM crops in China is a real possibility. The EU is also reviewing its regulations on cultivating and importing GM crops, an essential step in a region that has long had an anti-GM stance.

South Africa was an early adopter of GM technologies. We began planting GM maize seeds in the 2001/2002 season. Before their introduction, average maize yields in South Africa were about 2,4 tonnes per hectare. This has increased to an average of 5,6 tonnes per hectare in the 2020/2021 production season. Meanwhile, the sub-Saharan African maize yields remain low, averaging below 2,0 tonnes per hectare. While yields are also influenced by improved germplasm (enabled by non-GM biotechnology) and improved low and no-till production methods (facilitated through herbicide-tolerant GM technology), other benefits include labour savings and reduced insecticide use, as well as enhanced weed and pest control. With Kenya struggling to meet its annual maize needs, using new technologies, GM seeds and other means should be an avenue to boost production in future.

Data releases this week

We start the week with a global focus, and today the United States Department of Agriculture (USDA) will publish its Weekly US Crop Progress data. In these data, our focus is on the US crop-growing conditions as the season progresses, and the harvest has started. This data also helps us form a view of the crop quality in the US. In the previous release, in the week of 09 October 2022, about 54% of the maize crop was rated good/excellent, which is the same level as the previous week. Importantly, this is down by 6% from the same week a year ago. This general decline is mainly explained by the drier weather conditions in some States over a few couple of months.

Moreover, about 31% of the crop had already been harvested, slightly behind last year's pace of 39% in the same week. Meanwhile, about 57% of the soybean crop was rated good/excellent, also unchanged from the previous week. This is down by 2% from the previous year's rating in the same week. In terms of the harvest, about 44% of the crop had already been harvested, compared with 47% in the same week last year. In addition, the USDA will release the US Weekly Export Sales data on Thursday.

On the domestic front, on Wednesday, SAGIS will release the Weekly Producer Deliveries data for 14 October 2022. This data will help us get insight into the size of the crop as harvesting has been recently completed in most regions of the country. In the previous release of the week of 07 October, about 13,7 million tonnes of maize had already been delivered to commercial silos, out of the expected harvest of 15,3 million tonnes. In the same week, about 2,1 million tonnes of soybeans had already been delivered to commercial silos out of the expected harvest of 2,2 million tonnes. Moreover, 832 610 tonnes of sunflower seed had already been delivered on the same day out of the expected harvest of 845 550 tonnes.

On Thursday, SAGIS will publish the Weekly Grain Trade data for 14 October 2022. In the previous release on 07 October 2022, which was the 23rd week of South Africa's 2022/23 maize marketing year, the weekly exports amounted to 58 514 tonnes. About 42% of this went to Japan, 40% to Taiwan, and the rest to the Southern Africa region. This brought the total 2022/23 exports to 1,9 million tonnes out of the seasonal export forecast of 3,5 million. This is slightly down from 4,1 million tonnes in the past season due to an expected reduction in the harvest.

South Africa is a net wheat importer, and 07 October was the first week of the 2022/23 marketing year. The total imports are now 44 406 tonnes, from Australia, Germany and Poland. The seasonal import forecast is 1,53 million tonnes, slightly down from 1,58 million tonnes in the previous season. In the 2021/22 season, the major wheat suppliers are Argentina, Lithuania, Brazil, Australia, Poland, Latvia and the US. As we stated in our previous notes, if one looks into South Africa's wheat imports data for the past five years, Russia was one of the major wheat suppliers, accounting for an average share of 26% yearly.

Today, I discussed black farmers’ contribution to South Africa’s agricultural production. You can watch the 12-minute-long clip here.  I remarked that South Africans are a very inquisitive nation. Each time I post a tweet about South Africa’s agricultural fortunes, there is always someone who asks about proportions of that particular product in racial terms.

My first blogpost this year was titled — Can South Africa’s sorghum industry be revived? In it, I highlighted the decline in the production of this crop, with area plantings having reached 28 800 hectares in the 2017/18 production season – the smallest area on record in a dataset starting from 1936/37.

If I were to be asked to name one word, I used more extensively than any other this week, it would be – confidence. I participated at the Citrus Growers’ Association Summit held in Port Elizabeth on 13 March, and the South African Feedlot Association’s Cattlemen’s Annual Conference in Bloemfontein on 14 March.