People still need to eat
Although 2014 has so far been a zero growth year for the South African economy and, slow growth globally, there are still opportunities for local primary producers and agribusinesses to prosper. According to Nico Groenewald, Head of Agribusiness at Standard Bank, whatever the economic conditions are, doing well in agriculture always comes down to finding a balance.
“Farmers are some of the world’s most adaptable business people because agriculture confronts more variables than most other industries, including increasingly unpredictable weather patterns. For instance, farmers know that when the rand is weak, they will do well with exports, but will pay more for imported inputs and equipment. The opposite applies when the rand is strong. Either way, you must adjust your operations. Agility will be particularly important in 2015 and beyond, because new opportunities wrapped up in entirely new challenges are about to present themselves,” he said.
Speaking at the bank 2015 agricultural outlook forum, Groenewald pointed out that while most of South Africa’s 35 000 commercial farmers make astute use of technology and modern processes and systems, (resulting this year, for instance, in the highest maize yield the country has in 30 years) growing market insistence on green approaches and green outputs will require reassessment of many operations. “Supermarkets and people in middle and upper income brackets want to know what goes into food and are beginning to define the environmental and health impact they want farm production processes to have. That said, the green impetus will drive greater awareness of sustainability in farming practices, including improved water and energy management, and also open up new markets. The bio-fuels industry, for example, will create demand for maize and sorghum that did not exist before. If you are alert to the trends, you can grab market share early,” he explained.
Best performers in gross farm income
Groenewald stressed that it’s long been the bank’s belief that farmers can increase their share of the consumers’ wallet by participating in downstream activities. This he says would also benefit the economy overall if South Africa could reduce its reliance on imported beneficiated products by making them at home. According to the bank agriculture is well-positioned to take advantage of new production and market options, having outperformed the economy with almost five percent growth during 2014. To some extent, this is attributable to the fact that, even in economic downturns, people still need to eat.
The maize bumper crop is a result of maize farmers succeeding in producing 5 tons per hectare versus the 3 tons previously possible. While net farm income throughout agriculture has been under pressure from rising fuel, energy, and labour costs, gross farm income has been on a continuously upward trend.
The best performers in terms of gross farm income have been animal products, where wool and mohair were the top two, and horticulture, where tea and citrus did best. The outlook for fresh fruit including citrus for 2015 is good because of good weather conditions, thus far. Although producers will have to contend with the European Union’s concern about black spot during the 2014 season, and the possible effects of the Russian ban on EU Fruit to global fruit markets.
“Among the fuel crops, sorghum and dry beans had year-on-year growth of 55 percent. Soya and canola also saw significant growth. “There is no doubt that it is more difficult to grow in slow economies, but it is certainly not impossible,” Groenewald concluded.