South African Agriculture andAgribusiness: Trends and Challenges     Kwanalu Congress 2011         15 September 2011      ...
Want to Make More than a Banker?            Become a Farmer!                    By STEPHEN GANDEL   July 10, 2011         ...
A Future of Price Spikes                               By Michael Schuman July 14, 2011                                   ...
ABC Participation in recent Key EventsGLOBAL FORUM ON AGRICULTUREPOLICIES FOR AGRICULTURALDEVELOPMENT, POVERTY REDUCTIONAN...
Content•   Introduction•   SA Agriculture•   SA Agribusiness•   Prospects & Challenges
Introduction• Well developed commercial sector and subsistence  oriented sector – dual economy• Only ~12% of land area ara...
Role of Agriculture in          SA Economy• Strategic sector – provides food, fiber, wine & beer,  satisfying two basic ne...
Status and Trends              South Africa
Contribution of Primary         Agriculture to GDP (Source: Statssa)54%32    94   95   96   97   98   99   00   01   02   ...
SA economic growth: Tradable goodssectors lag the non-tradable goods sectors                           GDP % per Sector of...
Source: AMT, 2011
FAO Food Price Index                 Source: FAO
FAO Commodity Price Indeces                     Source: FAO
InflationSource: AMT, 2011
Exchange rateSource: AMT, 2010
SAARF LSM Segments: Proportion of SA adult population and average monthly household              income in 2009     Source...
LSM class mobility: All adults during the         period 2004 to 2010   Source: SAARF AMPS data for the period 2004 to 201...
SA Resource Situation•   Land issue: sensitive now, Green Paper released.•   Energy crisis and energy security situation• ...
Global warming: Effect?!Full effects unknown, but…..Higher incidence of more extreme weather events
Content• Introduction• SA Agriculture• SA Agribusiness• Prospects & Challenges
Commercial Agric Census 2007Indicator                                    1993        2002      2007Farming units          ...
Performance of Sector             Gross Value of Production in R million            70000                              Fie...
Performance of Sector                                 Gross and Nett Farming Income                                     Gr...
Net farm incomeSource: AMT, 2011
Cost price squeeze Source: AMT, 2011
Value of capital assets on commercial farms               250000                                  Value of capital assets ...
Field crops•   Maize – major importance, net exports, GM•   Wheat – also staple food, net imports•   Sugar – net exports, ...
Total RSA Maize Area (X1000 ha) and Production (X1000 tons)                                     ProductionArea (X1000 ha) ...
Tons/ha                                                  1.00                                                             ...
SA Wheat ProductionSource: AMT, 2011
Wheat production, consumption,        trade and price
Soya Production Area (X1000 ha) and Production (X1000 tons)                           Soya Production area (X1000 ha)     ...
Soya Yield (tons/ha)                          Soya Yield (tons/ha)                  2.50                  2.00Yield (tons/...
Horticulture•   Totally deregulated market•   Viticulture & Wine – major export industry•   Citrus – 2nd biggest global ex...
Marketing• Fresh Produce Markets (FPM’s) play major  role as basic price discovery mechanism and  wholesale market• Howeve...
SA Wine Production, Consumption           & Exports                   Source: BFAP, 2010
VegetablesValue of total production in 2009:          US$1.2 billion
Vegetable Production (X1000 Tons)      600      500                                                                       ...
Average price of vegetables sold on the major FPM (R/Ton)4 5004 0003 5003 000                                             ...
Fruit Value of production (2009):Deciduous fruit: US$0.9 billion    Citrus: US$0.7 billion  Viticulture: US$0.4 billion   ...
Oranges: Total Production, Market Sales,                           Exports, Processing & Other       1 600 000       1 400...
Apple Production (Tons)                                 Value in 2007/08 = R2 620 339 000       900 000       800 000     ...
Table grapes: Production, Domestic Consumption &                                   Exports (x1000 Tons)               600....
Animal Production• Value of production in 2009:   - Broilers R22.5 billion   - Beef R13.3 billion   - Fresh milk R9.1 bill...
SA Meat consumption               Source: BFAP, 2010
SA Chicken production, consumption    & chicken:maize price ratio                      Source: BFAP, 2010
SA Beef Production, Consumption            & price                     Source: BFAP, 2010
SA Fluid milk production      & utilization                Source: BFAP, 2010
SA Consumption of dairy products                      Source: BFAP, 2010
Content• Introduction• SA Agriculture• SA Agribusiness• Prospects & Challenges
SA Agribusiness• Strong input sector: Seed, fertilizer, crop  protection and veterinary chemicals,  animal feed, packaging...
Agricultural tradeAgricultural trade trends  Total                     25                            20                   ...
South African Agricultural Trade(Source WTA & GTA, USDA-FAS)  (US$ billions)          2007   2008   2009Agricultural expor...
Major agricultural products exported:   (US$ millions)   2007     2008      2009Wine                $673.6   $753.9   $727...
Major export destinations (2009)                China                United States                           Germany      ...
Major agricultural products imported:   (US$ millions)    2007    2008     2009Rice                $302.1   $463.9   $458....
Major countries imported from (2009)           United States                Indonesia                 Netherlands         ...
Content•   Introduction•   SA Agriculture•   SA Agribusiness•   Prospects & Challenges
South African Agriculture:Prospects and Challenges
Challenges• Government:  - Food security, both household and national  - Access to safe, nutritious and affordable food fo...
Challenges• Private Sector:  - Profitability and competitiveness  - Transparent and reliable markets (Integrity!)  - Engag...
Overall Prospects• Much greater food security awareness, both globally and  locally – very positive. Priority for G20, Par...
Conclusion• Healthy and robust agro-food industry• Technologically advanced, globally competitive• Challenges: ‘Nationalis...
Conclusion• We live in uncertain times – many risks and  variables, some controllable, others not or less so.• Must fully ...
"Man, despite his artisticpretensions, his sophistication and many accomplishments,owes the fact of his existence         ...
THANK YOUwww.agbiz.co.za
SA Agriculture and Agribusiness
SA Agriculture and Agribusiness
SA Agriculture and Agribusiness
SA Agriculture and Agribusiness
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Field Crops, Vegetable Production, Horticulture, Meat Production, Marketing, Census for commercial agriculture 2007

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SA Agriculture and Agribusiness

  1. 1. South African Agriculture andAgribusiness: Trends and Challenges Kwanalu Congress 2011 15 September 2011 John Purchase
  2. 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 Streets 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 hisTools of the trade surround John argument is this: We dont need moreWilloughby 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. 3. A Future of Price Spikes By Michael Schuman July 14, 2011 • Thomas Malthus lived in an era much like• todays — 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 planets population grows exponentially, while food production increases arithmetically. Therefore the planet will become short on food.
  4. 4. ABC Participation in recent Key EventsGLOBAL FORUM ON AGRICULTUREPOLICIES FOR AGRICULTURALDEVELOPMENT, POVERTY REDUCTIONAND FOOD SECURITY29-30 November 2010, ParisOECD Conference Centre, 2 rue André-Pascal, 75016 ParisOver a billion people in the world live on less than a dollar aday and a similar number suffer from hunger andundernourishment. Indeed most of the world’s hungry arechronically hungry, chiefly because they are poor. Progresshas been uneven across countries and a significant number,most notably in Africa, are not on target for achieving the FirstMillennium Development Goal (MDG1) of halving theincidence of poverty and hunger by 2015.This Global Forum is concerned with identifying ways in whichgovernments can accelerate agricultural development andtackle the twin problems of poverty and food insecurity. Thismeans looking at common factors that explain the successesof some countries and faltering progress of others, anddiscerning key ingredients of the necessary policy mix. It alsomeans looking at the specific role to be played by agriculturalpolicy instruments, and how those instruments should becombined with other non-agricultural policies.
  5. 5. Content• Introduction• SA Agriculture• SA Agribusiness• Prospects & Challenges
  6. 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. 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. 8. Status and Trends South Africa
  9. 9. Contribution of Primary Agriculture to GDP (Source: Statssa)54%32 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 Graph: ABC
  10. 10. SA economic growth: Tradable goodssectors 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. 11. Source: AMT, 2011
  12. 12. FAO Food Price Index Source: FAO
  13. 13. FAO Commodity Price Indeces Source: FAO
  14. 14. InflationSource: AMT, 2011
  15. 15. Exchange rateSource: AMT, 2010
  16. 16. SAARF LSM Segments: Proportion of SA adult population and average monthly household income in 2009 Source: SAARF (2010a) & BFAP, 2010
  17. 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. 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. 19. Global warming: Effect?!Full effects unknown, but…..Higher incidence of more extreme weather events
  20. 20. Content• Introduction• SA Agriculture• SA Agribusiness• Prospects & Challenges
  21. 21. Commercial Agric Census 2007Indicator 1993 2002 2007Farming units 57 980 45 818 39 982Gross Farm income (R x1 000 000) 19 620 53 329 79 544Employees Remuneration (R X1 000 000) 3 637 6 216 8 611Paid employees 1 093 265 940 820 796 806Expenditure (R X1 000 000) (Current & Cap) 16 377 45 038 54 072Market value of assets (R X1 000 000) 66 905 98 428 178 647Farming debt (R X1 000 000) 15 295 30 857 37 090Ratio between Farming Debt and GFI (%) 78,0 57,9 46,6 Source: StatsSA
  22. 22. Performance of Sector Gross Value of Production in R million 70000 Field Crops Horticulture Animal Production 60000 50000Rmillion 40000 30000 20000 10000 0 2001/02 2002/03 2003/04 2004/05 2005/06 2006/07 2007/08 2008/09 Source: DAFF, 2010.
  23. 23. Performance of Sector Gross and Nett Farming Income Gross Farm Income Nett Farm Income 140 000 120 000Rand 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
  24. 24. Net farm incomeSource: AMT, 2011
  25. 25. Cost price squeeze Source: AMT, 2011
  26. 26. Value of capital assets on commercial farms 250000 Value of capital assets on commercial farms 200000X R1 000 000 150000 100000 50000 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Source: DAFF, 2010.
  27. 27. 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
  28. 28. Total RSA Maize Area (X1000 ha) and Production (X1000 tons) ProductionArea (X1000 ha) Production (X1000 tons) 14 000 12 000 10 000Ha & Tons (X1000) 8 000 6 000 4 000 2 000 0 Years Data Source: DAFF, 2010 Graph by ABC
  29. 29. 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 2008/09Graph by ABC 2009/10Data Source: DAFF, 2010
  30. 30. SA Wheat ProductionSource: AMT, 2011
  31. 31. Wheat production, consumption, trade and price
  32. 32. Soya Production Area (X1000 ha) and Production (X1000 tons) Soya Production area (X1000 ha) Soya Production (X1000 tons) 600 500 400Ha & Tons (X1000) 300 200 100 0 Data Source: DAFF, 2010 Years Graph by ABC
  33. 33. Soya Yield (tons/ha) Soya Yield (tons/ha) 2.50 2.00Yield (tons/ha) 1.50 1.00 0.50 0.00 Data Source: DAFF, 2010 Years Graph by ABC
  34. 34. 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
  35. 35. 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
  36. 36. SA Wine Production, Consumption & Exports Source: BFAP, 2010
  37. 37. VegetablesValue of total production in 2009: US$1.2 billion
  38. 38. Vegetable Production (X1000 Tons) 600 500 TomatoesTons 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
  39. 39. Average price of vegetables sold on the major FPM (R/Ton)4 5004 0003 5003 000 Tomatoes Cabbages2 500 Onions2 000 Pumpkins Carrots1 5001 000 500 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Year Source: DAFF Graph: ABC
  40. 40. 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 millionTable grapes: US$380 million Apples: US$365 million
  41. 41. Oranges: Total Production, Market Sales, Exports, Processing & Other 1 600 000 1 400 000 1 200 000 Other 1 000 000Tons 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
  42. 42. Apple Production (Tons) Value in 2007/08 = R2 620 339 000 900 000 800 000 700 000 600 000 Dried 500 000Tons 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
  43. 43. Table grapes: Production, Domestic Consumption & Exports (x1000 Tons) 600.0 500.0 400.0 ProductionTons (X1000) 300.0 Domestic 200.0 Consumption Exports 100.0 0.0 2007 2008 2009 2010 2011 2012 2013 2014 2015 Year Source: BFAP
  44. 44. 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
  45. 45. SA Meat consumption Source: BFAP, 2010
  46. 46. SA Chicken production, consumption & chicken:maize price ratio Source: BFAP, 2010
  47. 47. SA Beef Production, Consumption & price Source: BFAP, 2010
  48. 48. SA Fluid milk production & utilization Source: BFAP, 2010
  49. 49. SA Consumption of dairy products Source: BFAP, 2010
  50. 50. Content• Introduction• SA Agriculture• SA Agribusiness• Prospects & Challenges
  51. 51. 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
  52. 52. Agricultural tradeAgricultural 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
  53. 53. South African Agricultural Trade(Source WTA & GTA, USDA-FAS) (US$ billions) 2007 2008 2009Agricultural exports $4.0 $5.2 $5.2% of total SA exports 5.7% 6.5% 8.3%Agricultural imports $4.2 $4.7 $4.2 % of total SA imports 5.3% 5.2% 6.4%
  54. 54. Major agricultural products exported: (US$ millions) 2007 2008 2009Wine $673.6 $753.9 $727.5Citrus $613.1 $711.4 $667.1Corn $32.1 $510.3 $444.6Table grapes $364.5 $387.6 $379.7Apples $329.5 $367.3 $364.7Sugar $276.1 $217.9 $386.7
  55. 55. Major export destinations (2009) China United States Germany Mozambique Kenya Zimbabwe Netherlands United Kingdom 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0%
  56. 56. Major agricultural products imported: (US$ millions) 2007 2008 2009Rice $302.1 $463.9 $458.8Wheat $261.6 $444.6 $282.0Soybean cake $209.8 $311.9 $297.1Palm oil $195.7 $299.3 $232.1Soybean oil $212.0 $288.5 $106.9Whisky $212.5 $202.9 $201.6
  57. 57. Major countries imported from (2009) United States Indonesia Netherlands China Malaysia Germany Thailand Brazil Argentina 0% 2% 4% 6% 8% 10% 12% 14% 16%
  58. 58. Content• Introduction• SA Agriculture• SA Agribusiness• Prospects & Challenges
  59. 59. South African Agriculture:Prospects and Challenges
  60. 60. 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.
  61. 61. 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
  62. 62. 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.
  63. 63. 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.
  64. 64. 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.
  65. 65. "Man, despite his artisticpretensions, 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 -
  66. 66. THANK YOUwww.agbiz.co.za
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