Focus on South Africa
South Africa relies on maize (corn) and wheat to feed its people. It produces enough maize to export a surplus, but wheat has to be imported to supply its highly concentrated milling industry. Oilseeds production is rising to satisfy a growing crushing industry, while increased poultry production absorbs the meal.
According to the International Grains Council (IGC), South Africa’s total grains production is set to fall to 15.5 million tonnes in 2014-15 from 16.2 million the year before. Wheat production is set to fall to 1.9 million tonnes from 2 million the prior year.
The IGC forecasts a fall in South African maize production in 2014-15 to 13 million tonnes from 13.8 million the year before. The country is also forecast to produce 300,000 tonnes, up from 100,000 the previous year.
Its total grain imports are forecast at 2.1 million tonnes in 2014-15 from 2 million the year before. It is forecast to export 2.7 million tonnes of grain, up from 2.1 million the previous year. Imports are overwhelmingly wheat, forecast at an unchanged 1.8 million tonnes in 2014-15. Exports are overwhelmingly maize, forecast at 2.4 million tonnes in 2014-15, up from 1.8 million the year before.
South Africa is also predicted to import an unchanged 1 million tonnes of rice and 900,000 tonnes of soy meal, up from 600,000 in 2013-14.
A study published in 2013 by a team led by Dr. André van der Vyver of the Department of Agricultural Economics, Extension and Rural Development, University of Pretoria, noted the origins. “The main countries from which wheat has been imported over the past 3 years are Argentina, the United States and Australia. Argentina is the main country at 41%, followed by the U.S. at 21% and Australia at 15%,” it said.
“South Africa is a net importer of wheat since we no longer produce enough to satisfy local demand. The local industry is one of the smallest producers in the world, relative to the size of the South African economy. It is thus very vulnerable to changes in the international prices.”
The South African government by and large subscribes to a free market policy with reference to the South African grain and oilseed industries, it said.
“This is not only applicable with regard to the local industry but also to imports and exports,” it said. “A policy of minimum government intervention is enforced.”
There are, however, market management mechanisms and Grain SA described in its annual report how they are working. “ITAC (the International Trade Administration Commission of South Africa) approved the application by Grain SA for a new reference price level of $294 per tonne instead of the previous $215 per tonne on April 23, 2013,” it said. “This means that a wheat tariff will kick in as soon as the fob Gulf HRW No. 2 wheat price decrease to a level of less than $284 per tonne for three consecutive weeks.
“Although the new reference price level is not sufficient to increase the producer price for wheat and production immediately, it enables a more stable environment and certainty for producers to consider increased wheat production. The current applicable domestic reference price for maize is still at a level of $110 per tonne after a period of 14 years. The latter price level is thus completely outdated and needs revision. Grain SA submitted a request to ITAC that the new domestic reference price for maize be calculated by using the same methodology as applicable in the determination of the wheat tariff.”
CONCENTRATED MILLING SECTOR
South African anti-GM campaigners, the African Centre for Biosafety, based in Johannesburg, published a highly critical analysis of the flour milling sector in May, under the title ‘GM Contamination, Cartels and Collusion in South Africa’s Bread Industry.’ It noted that Pioneer Foods, Tiger Brands, Premier Foods and Foodcorp are the four largest millers in the country for maize and wheat, accounting for 98% of milled wheat sales, it said.
“The industry is thus characterized as vertically integrated, as these companies not only control the milling of the flour, but they also make and sell the bread,” it said. “A decade ago, Pioneer was already milling 27% of all flour and Tiger Brands was milling 20%, with the balance taken up by smaller operations.
“The same companies (Tiger Brands, Premier Foods and Pioneer Foods) that control the milling and baking stages of the wheat-to-bread value chain also control 60% of the milling and processing stages of the maize value chain,” the report said. “Just as with wheat, the maize value chain feeds into a highly concentrated food retail sector, dominated by Shoprite/Checkers, Pick n Pay, Woolworths and Spar.”
According to the USDA attaché, the total amount of wheat forecast to be used for human consumption in South Africa in 2014-15 is 3.2 million tonnes, up from 3.1 million in the previous year. “Upwards inflationary pressures and weak economic growth are dimming consumer demand,” the annual attaché report on the sector said.
Grain producers body Grains SA reported on progress with biofuels in South Africa in its annual report. “The Department of Energy announced on Sept. 30, 2013 that the compulsory date when the blending regulations for biofuels into petrol and diesel will be implemented is Oct. 1, 2015,” it said. “This is exciting news for the sorghum industry. The two licensed plants to be constructed that use sorghum as feedstock will need about 620,000 tonnes of sorghum annually.”
It explained that the equivalent amount of bioethanol produced will reach the lower limit of 2% of the national petroleum demand and that the inclusion rate for biodiesel is 5% at national level. “This also poses significant opportunities for oilseeds as soon as the outstanding pricing policy, regulations and incentives for production are finalized,” it said.
The market for barley is set to expand. Last year, South African Breweries (SAB) announced a R700-million investment in a state-of-the-art new maltings plant in Alrode, Gauteng. The company said that the plant will produce 130,000 tonnes of malted barley a year once it is completed in 2015.
“It will allow SAB to reduce the amount of malted barley it imports and to further its program of developing the local agricultural sector by supporting small black farmers,” it said.
WSAB currently sources about 65% of its barley locally, and once the new maltings plant is up and running, this will potentially increase to between 90% and 95%.”
An annual attaché report on the South African oilseeds sector forecasts that South Africa will plant a record area of 1.2 million hectares with oilseeds in 2014-15, which could produce a historical high oilseed crop of 1.8 million tonnes.
“This positive trend in oilseed production is mainly driven by investments of more than $100 million on expanding South Africa’s soybean processing capacity,” it said. “As a result, South Africa will crush a record of 1.6 million tonnes of oilseeds in the 2014-15 marketing year and oilseed meal imports will drop by more than 20% to about 580,000 tonnes.”
“The local demand for soybean meal, as the preferred source of protein for animal feed, has increased in correlation with the increase in poultry production in South Africa and more than doubled over the past decade,” the report said. “As local production of soybean meal was limited in the past, almost all of the local consumption had to be imported. With the expansion of the local soybean crushing industry and soybean production, imports are expected to decrease to less than 30% of local consumption compared to more than 60% two years ago.”
Capital: Pretoria (administrative capital); Cape Town (legislative capital); Bloemfontein (judicial capital).
Population: 48,375,645 note: Statistics South Africa (the national statistical agency of South Africa) estimates the country’s mid-year 2013 total population to be 52,981,991, which takes into account the findings of South Africa’s 2011 census; estimates for this country explicitly take into account the effects of excess mortality due to AIDS; this can result in lower life expectancy, higher infant mortality, higher death rates, lower population growth rates, and changes in the distribution of population by age and sex than would otherwise be expected (July 2014 est.).
Religions: Protestant 36.6% (Zionist Christian 11.1%, Pentecostal/Charismatic 8.2%, Methodist 6.8%, Dutch Reformed 6.7%, Anglican 3.8%), Catholic 7.1%, Muslim 1.5%, other Christian 36%, other 2.3%, unspecified 1.4%, none 15.1% (2001 census).
Location: Southern Africa, at the southern tip of the continent of Africa.
Government: Republic. Chief of state and head of government: President Jacob Zuma (since May 9, 2009).
Economy: South Africa is a middle-income, emerging market with an abundant supply of natural resources, well-developed financial, legal, communications, energy, and transport sectors and a stock exchange that is the 16th largest in the world. Even though the country’s modern infrastructure supports a relatively efficient distribution of goods to major urban centers throughout the region, unstable electricity supplies retard growth. The global financial crisis reduced commodity prices and world demand. GDP fell nearly 2% in 2009 but has recovered since then, albeit slowly with 2014 growth projected at about 2%. Unemployment, poverty, and inequality - among the highest in the world - remain a challenge. Official unemployment is at nearly 25% of the workforce and runs significantly higher among black youth. Eskom, the state-run power company, has built two new power stations and installed new power demand management programs to improve power grid reliability. Construction delays at two additional plants, however, mean South Africa is operating on a razor thin margin; economists judge that growth cannot exceed 3% until those plants come on line. South Africa’s economic policy has focused on controlling inflation; however, the country has had significant budget deficits that restrict its ability to deal with pressing economic problems. The current government faces growing pressure from special interest groups to use state-owned enterprises to deliver basic services to low-income areas and to increase job growth.
GDP per capita: $11,500 (2013 est.); inflation: 5.8% (2013 est.); unemployment: 24.9% (2013 est.).
Currency: Rand (ZAR): 10.604 rands equals 1 U.S. dollar (July 21, 2014).
Exports: $91.05 billion (2013 est.): gold, diamonds, platinum, other metals and minerals, machinery and equipment.
Imports: $99.55 billion (2013 est.): machinery and equipment, chemicals, petroleum products, scientific instruments, foodstuffs.
Major crops/agricultural products: Corn, wheat, sugarcane, fruits, vegetables; beef, poultry, mutton, wool, dairy products.
Agriculture: 2.6% of GDP and 9% of the labor force.
Internet: Code: .za; 4.761 million (2012) hosts and 4.42 million (2009) users.
Source: CIA World Factbook
Chris Lyddon is World Grain’s European editor. He may be contacted at: email@example.com.