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South African Agriculture and Agribusiness: Trends and Challenges
Kwanalu Congress 2011
15 September 2011
John Purchase
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Want to Make More than a Banker? Become a Farmer! By STEPHEN GANDEL July 10, 2011
• If you want to become rich, Jim Rogers,
investment whiz, best-selling author and one of Wall Street's towering personalities, has this advice: Become a farmer. Food prices have been high recently. Some have questioned how long that can continue. Not Rogers. He predicts that farming incomes will rise dramatically in the next few decades, faster than those in most other industries — even Wall Street. The essence of his argument is this: We don't need more bankers. What we need are more farmers. The invisible hand will do its magic. "The world has got a serious food problem," says Rogers. "The only real way to solve it is to draw more people back to agriculture."
Tools of the trade surround John
Willoughby on his 800 ha plot
outside Grand Island, Neb.
Photograph by Danny Wilcox
Frazier/TIME
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A Future of Price Spikes By Michael Schuman July 14, 2011
•
• Thomas Malthus lived in an era much like today's — when emerging technologies made anything seem possible. The 19th century was approaching, the Industrial Revolution was steaming along, and in intellectual circles it was popular to believe that expanding scientific knowledge could create a more enlightened, even utopian, society.
• Malthus, however, was making a more dire calculation. In 1798 he published An Essay on the Principle of Population, whose grim vision of the future haunts mankind to this day. Malthus thought we could never overcome two basic laws of nature: the planet's population grows exponentially, while food production increases arithmetically. Therefore the planet will become short on food.
Red vs. green Rising incomes give more
people a taste for meat, which is costlier
to produce than vegetables
Alexandre Severo for TIME
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ABC Participation in recent Key Events GLOBAL FORUM ON AGRICULTURE
POLICIES FOR AGRICULTURAL DEVELOPMENT, POVERTY REDUCTION AND FOOD SECURITY 29-30 November 2010, Paris OECD Conference Centre, 2 rue André-Pascal, 75016 Paris
Over a billion people in the world live on less than a dollar a day and a similar number suffer from hunger and undernourishment. Indeed most of the world’s hungry are chronically hungry, chiefly because they are poor. Progress has been uneven across countries and a significant number, most notably in Africa, are not on target for achieving the First Millennium Development Goal (MDG1) of halving the incidence of poverty and hunger by 2015.
This Global Forum is concerned with identifying ways in which governments can accelerate agricultural development and tackle the twin problems of poverty and food insecurity. This means looking at common factors that explain the successes of some countries and faltering progress of others, and discerning key ingredients of the necessary policy mix. It also means looking at the specific role to be played by agricultural policy instruments, and how those instruments should be combined with other non-agricultural policies.
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Content
• Introduction
• SA Agriculture
• SA Agribusiness
• Prospects & Challenges
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Introduction • Well developed commercial sector and subsistence
oriented sector – dual economy • Only ~12% of land area arable, of which 22% high
potential • ~1.3 million hectares under irrigation • Water major limiting factor – SA semi-arid • Deregulation & market freedom • Number of competitive advantages - ‘World-class’ infrastructure - Counter-seasonality to Europe - Biodiversity - Trade agreements - Competitive input costs - Access to latest technology & innovation
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Role of Agriculture in
SA Economy • Strategic sector – provides food, fiber, wine & beer,
satisfying two basic needs of man (+ others!)
• Has provided national food security since the start
of the 20th century (Pop: ~4,0 million), right
through to the 21st century (Pop: ~50,0 million,
~60% in urban areas)
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Status and Trends
South Africa
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Contribution of Primary Agriculture to GDP (Source: Statssa)
2
3
4
5
94 95 96 97 98 99 '00 '01 '02 '03 '04 '05 06 07 08 09
%
Graph: ABC
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SA economic growth: Tradable goods sectors lag the non-tradable goods sectors
Source: StatsSA
Graph: ABC
0
50
100
150
200
250
300
20002001200220032004200520062007200820092010
IND
EX
GDP % per Sector of Economy
GDP
Agric
Mining
Manufacturing
Construction
Trade
Transport
Finance
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Source: AMT, 2011
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FAO Food Price Index
Source: FAO
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FAO Commodity Price Indeces
Source: FAO
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Inflation
Source: AMT, 2011
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Exchange rate
Source: AMT, 2010
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SAARF LSM Segments: Proportion of SA adult population and average monthly household
income in 2009
Source: SAARF (2010a) & BFAP, 2010
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LSM class mobility: All adults during the period 2004 to 2010
Source: SAARF AMPS data for the period 2004 to 2010, as quoted by BFAP
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SA Resource Situation • Land issue: sensitive now, Green Paper released.
• Energy crisis and energy security situation
• Electricity price hikes (31% + 25% pa over 3 years)
• Scarce high potential agricultural land to mining, esp. Mpumalanga, and urban development.
• Water management and water quality crisis
• Climate Change effects create uncertainty
• Soil degradation/erosion
• Biosecurity threats (FMD, Avian Flu, etc)
• Resources for sustainable expansion?!
• Greater competition for resources – price effect?
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Global warming: Effect?!
Full effects unknown, but…..
Higher incidence of more extreme weather events
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Content
• Introduction
• SA Agriculture
• SA Agribusiness
• Prospects & Challenges
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Commercial Agric Census 2007
Indicator 1993 2002 2007
Farming units 57 980 45 818 39 982
Gross Farm income (R x1 000 000) 19 620 53 329 79 544
Employees Remuneration (R X1 000 000) 3 637 6 216 8 611
Paid employees 1 093 265 940 820 796 806
Expenditure (R X1 000 000) (Current & Cap) 16 377 45 038 54 072
Market value of assets (R X1 000 000) 66 905 98 428 178 647
Farming debt (R X1 000 000) 15 295 30 857 37 090
Ratio between Farming Debt and GFI (%) 78,0 57,9 46,6
Source: StatsSA
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Performance of Sector Gross Value of Production in R million
0
10000
20000
30000
40000
50000
60000
70000
2001/02 2002/03 2003/04 2004/05 2005/06 2006/07 2007/08 2008/09
Field Crops Horticulture Animal Production
R'm
illio
n
Source: DAFF, 2010.
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Performance of Sector
0
20 000
40 000
60 000
80 000
100 000
120 000
140 000
2000/01 2001/02 2002/03 2003/04 2004/05 2005/06 2006/07 2007/08 2008/09
Ra
nd
X1
00
0 0
00
Seasons
Gross and Nett Farming Income
Gross Farm Income Nett Farm Income
Source: DAFF, 2009.
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Net farm income
Source: AMT, 2011
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Cost price squeeze
Source: AMT, 2011
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0
50000
100000
150000
200000
250000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Value of capital assets on commercial farms
Value of capital assets on commercial farms
X R
1 0
00
00
0
Source: DAFF, 2010.
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Field crops
• Maize – major importance, net exports, GM
• Wheat – also staple food, net imports
• Sugar – net exports, move into Africa
• Soya – growing importance, cake imports, GM
• Sunflower – growing importance, S/D balance
• Groundnuts – net exports, but declining
• Dry beans – net imports, also from China
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0
2 000
4 000
6 000
8 000
10 000
12 000
14 000
ProductionArea (X1000 ha) Production (X1000 tons)
Years
Total RSA Maize Area (X1000 ha) and Production (X1000 tons)
Ha
& T
on
s (X
10
00
)
Data Source: DAFF, 2010 Graph by ABC
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0.00
0.50
1.00
1.50
2.00
2.50
3.00
3.50
4.00
4.50
5.00
19
90
/91
19
91
/92
19
92
/93
19
93
/94
19
94
/95
19
95
/96
19
96
/97
19
97
/98
19
98
/99
19
99
/00
20
00
/01
20
01
/02
20
02
/03
20
03
/04
20
04
/05
20
05
/06
20
06
/07
20
07
/08
20
08
/09
20
09
/10
RSA Maize Yield (Tons/ha)
Yield (Tons/ha)
Years
Ton
s/h
a
Data Source: DAFF, 2010 Graph by ABC
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SA Wheat Production
Source: AMT, 2011
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Wheat production, consumption, trade and price
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0
100
200
300
400
500
600Soya Production area (X1000 ha) Soya Production (X1000 tons)
Soya Production Area (X1000 ha) and Production (X1000 tons)
Years
Ha
& T
on
s (X
10
00
)
Data Source: DAFF, 2010 Graph by ABC
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0.00
0.50
1.00
1.50
2.00
2.50
Soya Yield (tons/ha) Soya Yield (tons/ha)
Years
Yie
ld (
ton
s/h
a)
Data Source: DAFF, 2010 Graph by ABC
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Horticulture
• Totally deregulated market
• Viticulture & Wine – major export industry
• Citrus – 2nd biggest global exports, growing
• Deciduous fruit – major net exports
• Table grapes – major net exports
• Sub-tropical fruit – net exports
• Vegetables – S/D balance, some imports/exports
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Marketing • Fresh Produce Markets (FPM’s) play major
role as basic price discovery mechanism and wholesale market
• However, reduction in trade from 64% to 53% of total production from 1994 to 2004
• Marketing following global trend of retailers (supermarkets), processors and wholesalers procuring directly from producers – shortening/integration of supply chain
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SA Wine Production, Consumption & Exports
Source: BFAP, 2010
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Vegetables
Value of total production in 2009: US$1.2 billion
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0
100
200
300
400
500
600
2000/01 2001/02 2002/03 2003/04 2004/05 2005/06 2006/07 2007/08 2008/09
Tomatoes
Pumpkins
Green mealies
Onions
Cabbage
Carrots
Vegetable Production (X1000 Tons)
Tons (X1000)
Year Source: DAFF Graph: ABC
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0
500
1 000
1 500
2 000
2 500
3 000
3 500
4 000
4 500
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Tomatoes
Cabbages
Onions
Pumpkins
Carrots
Average price of vegetables sold on the major FPM (R/Ton)
Year Source: DAFF Graph: ABC
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Fruit Value of production (2009):
Deciduous fruit: US$0.9 billion Citrus: US$0.7 billion
Viticulture: US$0.4 billion
Exports (2009): Wine: US$728 million Citrus: US$667 million
Table grapes: US$380 million
Apples: US$365 million
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0
200 000
400 000
600 000
800 000
1 000 000
1 200 000
1 400 000
1 600 000
2000/01 2001/02 2002/03 2003/04 2004/05 2005/06 2006/07 2007/08
Ton
s
Year
Oranges: Total Production, Market Sales, Exports, Processing & Other
Other
Processing
Exports
MarketSales
Source: DAFF Graph: ABC Value in 2007/08 = R3 009 610 000
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0
100 000
200 000
300 000
400 000
500 000
600 000
700 000
800 000
900 000
2000/01 2001/02 2002/03 2003/04 2004/05 2005/06 2006/07 2007/08
Ton
s
Year
Apple Production (Tons) Value in 2007/08 = R2 620 339 000
Dried
Processing
Exports
Marketsales
Source: DAFF Graph: ABC
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0.0
100.0
200.0
300.0
400.0
500.0
600.0
2007 2008 2009 2010 2011 2012 2013 2014 2015
Ton
s (X
10
00
)
Year
Table grapes: Production, Domestic Consumption & Exports (x1000 Tons)
Production
DomesticConsumption
Exports
Source: BFAP
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Animal Production
• Value of production in 2009:
- Broilers R22.5 billion
- Beef R13.3 billion
- Fresh milk R9.1 billion
- Eggs R6.6 billion
- Mutton R3.1 billion
- Pork R3.1 billion
- Wool R1.1 billion
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SA Meat consumption
Source: BFAP, 2010
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SA Chicken production, consumption & chicken:maize price ratio
Source: BFAP, 2010
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SA Beef Production, Consumption & price
Source: BFAP, 2010
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SA Fluid milk production & utilization
Source: BFAP, 2010
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SA Consumption of dairy products
Source: BFAP, 2010
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Content
• Introduction
• SA Agriculture
• SA Agribusiness
• Prospects & Challenges
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SA Agribusiness • Strong input sector: Seed, fertilizer, crop
protection and veterinary chemicals, animal feed, packaging, agricultural machinery, fuel, etc.
• Financial sector: Major banks, DFI’s, insurance companies, auditors, agribusinesses, etc.,
• Storage, trade and agro-logistics
• Agro-processing and packaging
• Retail Sector
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Agricultural trade trends
53
Source: DAFF/NAMC, 2009.
Total
-
5
10
15
20
25
2004 2005 2006 2007 2008
R b
illi
on
Year
Primary exports Primary imports Primary trade balance
Primary
-10
-5
-
5
10
15
20
25
30
35
2004 2005 2006 2007 2008
R b
illi
on
Year
Processed exports Processed imports Processed trade balance
Processed
Agricultural trade
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South African Agricultural Trade
(Source WTA & GTA, USDA-FAS)
(US$ billions) 2007 2008 2009
Agricultural exports $4.0 $5.2 $5.2
% of total SA exports 5.7% 6.5% 8.3%
Agricultural imports $4.2 $4.7 $4.2
% of total SA imports 5.3% 5.2% 6.4%
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Major agricultural products exported:
(US$ millions) 2007 2008 2009
Wine $673.6 $753.9 $727.5
Citrus $613.1 $711.4 $667.1
Corn $32.1 $510.3 $444.6
Table grapes $364.5 $387.6 $379.7
Apples $329.5 $367.3 $364.7
Sugar $276.1 $217.9 $386.7
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Major export destinations (2009)
United
Kingdom
Netherlands
Zimbabwe
Kenya
Mozambique
Germany
United States
China
0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0%
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Major agricultural products imported:
(US$ millions) 2007 2008 2009
Rice $302.1 $463.9 $458.8
Wheat $261.6 $444.6 $282.0
Soybean cake $209.8 $311.9 $297.1
Palm oil $195.7 $299.3 $232.1
Soybean oil $212.0 $288.5 $106.9
Whisky $212.5 $202.9 $201.6
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Major countries imported from (2009)
Argentina
Brazil
Thailand
Germany
Malaysia
China
Netherlands
Indonesia
United States
0% 2% 4% 6% 8% 10% 12% 14% 16%
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Content
• Introduction
• SA Agriculture
• SA Agribusiness
• Prospects & Challenges
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South African Agriculture:
Prospects and Challenges
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Challenges • Government: - Food security, both household and national - Access to safe, nutritious and affordable food for all - New Growth Path: Job creation, Shared Growth & Opportunities - Empowerment of PDI’s, e.g. AgriBEE, EE, etc. - Land Reform & Rural Development - Industrial Policy Action Plan II: Agro-processing - Competitive environment (Competition Act) - Sustainable resource management, e.g. CC - African development, etc.
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Challenges
• Private Sector:
- Profitability and competitiveness
- Transparent and reliable markets (Integrity!)
- Engage Govt ito enabling policy environment:
Create confidence for long term investment
- Need for inclusive Strategic Framework/Plan
- Sustainable transformation
- Institutional and value chain support (R&D,
SPS matters, resource base management,
trade facilitation, training & skills development, crop
estimates, agro-logistics, Act 36 of 1947, etc.)
- African opportunities
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Overall Prospects • Much greater food security awareness, both globally and
locally – very positive. Priority for G20, Paris.
• Awareness by government to work closer with Private Sector
• Greater awareness by all of the need to support both commer- cial and developing agriculture. Better implementation NB!
• Substantial markets: locally, regionally, globally, and especially to the East. Need market development, though!
• General commodity and agribusiness infrastructure is good basis – build on this & other institutional capacity.
• New technology/expertise through especially multinationals.
• New global investors looking to Africa for food production –
major development.
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Conclusion • Healthy and robust agro-food industry
• Technologically advanced, globally competitive
• Challenges: ‘Nationalisation talk’, Agro-logistics, climate change, water availability and quality, environmental sustainability, food safety regulations, R&D, etc.
• Opportunities: Growing population, consumer spending trends, new markets (esp to East), etc.
• Major contributor to Food Security, growth and employment in RSA.
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Conclusion • We live in uncertain times – many risks and
variables, some controllable, others not or less so.
• Must fully understand both macro- and micro-environment, and the risks and opportunities posed.
• Develop strategic plan and develop business plan accordingly.
• Must clearly articulate and live the value proposition you bring to the value chain.
• BUT, maintain flexibility and adaptability.
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"Man, despite his artistic pretensions, his sophistication and many accomplishments, owes the fact of his existence
to a six-inch layer of topsoil and
the fact that it rains". - Anonymous -
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THANK YOU
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