Field Crops, Vegetable Production, Horticulture, Meat Production, Marketing, Census for commercial agriculture 2007

1. South African Agriculture and
Agribusiness: Trends and Challenges
Kwanalu Congress 2011
15 September 2011
John Purchase

2. 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
Tools of the trade surround John argument is this: We don't need more
Willoughby on his 800 ha plot
bankers. What we need are more farmers.
outside Grand Island, Neb.
Photograph by Danny Wilcox The invisible hand will do its magic. "The
Frazier/TIME world has got a serious food problem," says
Rogers. "The only real way to solve it is to
draw more people back to agriculture."

3. 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
Red vs. green Rising incomes give more
people a taste for meat, which is costlier dire calculation. In 1798 he published An
to produce than vegetables Essay on the Principle of Population,
whose grim vision of the future haunts
Alexandre Severo for TIME 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.

4. 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.

5. Content
• Introduction
• SA Agriculture
• SA Agribusiness
• Prospects & Challenges

6. 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

7. 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)

8. Status and Trends
South Africa

9. Contribution of Primary
Agriculture to GDP (Source: Statssa)
5
4
%
3
2
94 95 96 97 98 99 '00 '01 '02 '03 '04 '05 06 07 08 09
Graph: ABC

10. SA economic growth: Tradable goods
sectors lag the non-tradable goods sectors
GDP % per Sector of Economy
300
250
GDP
200 Agric
Mining
INDEX
150 Manufacturing
Construction
100 Trade
Transport
50
Finance
0
20002001200220032004200520062007200820092010
Source: StatsSA
Graph: ABC

11. Source: AMT, 2011

12. FAO Food Price Index
Source: FAO

13. FAO Commodity Price Indeces
Source: FAO

14. Inflation
Source: AMT, 2011

15. Exchange rate
Source: AMT, 2010

16. SAARF LSM Segments: Proportion of SA adult
population and average monthly household
income in 2009
Source: SAARF (2010a) & BFAP, 2010

17. 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

18. 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?

19. Global warming: Effect?!
Full effects unknown, but…..
Higher incidence of more extreme weather events

21. Content
• Introduction
• SA Agriculture
• SA Agribusiness
• Prospects & Challenges

22. 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

23. Performance of Sector
Gross Value of Production in R million
70000
Field Crops Horticulture Animal Production
60000
50000
R'million
40000
30000
20000
10000
0
2001/02 2002/03 2003/04 2004/05 2005/06 2006/07 2007/08 2008/09
Source: DAFF, 2010.

24. Performance of Sector
Gross and Nett Farming Income
Gross Farm Income Nett Farm Income
140 000
120 000
Rand X1 000 000
100 000
80 000
60 000
40 000
20 000
0
2000/01 2001/02 2002/03 2003/04 2004/05 2005/06 2006/07 2007/08 2008/09
Source: DAFF, 2009.
Seasons

25. Net farm income
Source: AMT, 2011

26. Cost price squeeze
Source: AMT, 2011

27. Value of capital assets on commercial farms
250000
Value of capital assets on commercial farms
200000
X R1 000 000
150000
100000
50000
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Source: DAFF, 2010.

28. 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

29. Total RSA Maize Area (X1000 ha) and Production (X1000 tons)
ProductionArea (X1000 ha) Production (X1000 tons)
14 000
12 000
10 000
Ha & Tons (X1000)
8 000
6 000
4 000
2 000
0
Years Data Source: DAFF, 2010
Graph by ABC

30. Tons/ha
1.00
4.50
0.00
0.50
1.50
2.00
2.50
3.00
3.50
4.00
5.00
1990/91
1991/92
1992/93
1993/94
1994/95
1995/96
1996/97
1997/98
1998/99
Years
1999/00
2000/01
Yield (Tons/ha)
2001/02
2002/03
2003/04
2004/05
RSA Maize Yield (Tons/ha)
2005/06
2006/07
2007/08
2008/09
Graph by ABC
2009/10
Data Source: DAFF, 2010

31. SA Wheat Production
Source: AMT, 2011

32. Wheat production, consumption,
trade and price

33. Soya Production Area (X1000 ha) and Production (X1000 tons)
Soya Production area (X1000 ha) Soya Production (X1000 tons)
600
500
400
Ha & Tons (X1000)
300
200
100
0
Data Source: DAFF, 2010
Years Graph by ABC

34. Soya Yield (tons/ha)
Soya Yield (tons/ha)
2.50
2.00
Yield (tons/ha)
1.50
1.00
0.50
0.00
Data Source: DAFF, 2010
Years Graph by ABC

35. 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

36. 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

37. SA Wine Production, Consumption
& Exports
Source: BFAP, 2010

38. Vegetables
Value of total production in 2009:
US$1.2 billion

39. Vegetable Production (X1000 Tons)
600
500
Tomatoes
Tons 400 Pumpkins
(X1000)
Green mealies
300
Onions
Cabbage
200
Carrots
100
0
2000/01 2001/02 2002/03 2003/04 2004/05 2005/06 2006/07 2007/08 2008/09
Source: DAFF
Year Graph: ABC

40. Average price of vegetables sold on the major FPM (R/Ton)
4 500
4 000
3 500
3 000 Tomatoes
Cabbages
2 500
Onions
2 000 Pumpkins
Carrots
1 500
1 000
500
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Year Source: DAFF
Graph: ABC

41. 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

42. Oranges: Total Production, Market Sales,
Exports, Processing & Other
1 600 000
1 400 000
1 200 000
Other
1 000 000
Tons
800 000 Processing
600 000
Exports
400 000
Market
200 000 Sales
0
2000/01 2001/02 2002/03 2003/04 2004/05 2005/06 2006/07 2007/08
Source: DAFF
Value in 2007/08 = R3 009 610 000 Year Graph: ABC

43. Apple Production (Tons)
Value in 2007/08 = R2 620 339 000
900 000
800 000
700 000
600 000
Dried
500 000
Tons
Processing
400 000
300 000 Exports
200 000
Market
100 000 sales
0
2000/01 2001/02 2002/03 2003/04 2004/05 2005/06 2006/07 2007/08
Source: DAFF
Year Graph: ABC

44. Table grapes: Production, Domestic Consumption &
Exports (x1000 Tons)
600.0
500.0
400.0 Production
Tons (X1000)
300.0
Domestic
200.0 Consumption
Exports
100.0
0.0
2007 2008 2009 2010 2011 2012 2013 2014 2015
Year
Source: BFAP

45. 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

46. SA Meat consumption
Source: BFAP, 2010

47. SA Chicken production, consumption
& chicken:maize price ratio
Source: BFAP, 2010

48. SA Beef Production, Consumption
& price
Source: BFAP, 2010

49. SA Fluid milk production
& utilization
Source: BFAP, 2010

50. SA Consumption of dairy products
Source: BFAP, 2010

51. Content
• Introduction
• SA Agriculture
• SA Agribusiness
• Prospects & Challenges

52. 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

53. Agricultural trade
Agricultural trade trends
Total 25
20
Primary
15
35
R billion
10 30
25
Processed
5
20
15
-
R billion
2004 2005 2006
10 2007 2008
Year
5
Primary exports Primary imports Primary trade balance
-
2004 2005 2006 2007 2008
-5
-10
Year
Processed exports Processed imports Processed trade balance
Source: DAFF/NAMC, 2009.
53

54. 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%

55. 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

56. Major export destinations (2009)
China
United States
Germany
Mozambique
Kenya
Zimbabwe
Netherlands
United
Kingdom
0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0%

57. 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

58. Major countries imported from (2009)
United States
Indonesia
Netherlands
China
Malaysia
Germany
Thailand
Brazil
Argentina
0% 2% 4% 6% 8% 10% 12% 14% 16%

59. Content
• Introduction
• SA Agriculture
• SA Agribusiness
• Prospects & Challenges

60. South African Agriculture:
Prospects and Challenges

64. 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.

65. 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

66. 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.

67. 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.

68. 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.

69. "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 -

70. THANK YOU
www.agbiz.co.za