Agriculture
(a) What are the prospects for the current winter-rain crops in the province and (b) how does this compare with the last five years’ expectations, (c)(i) to what extent do the complaints about sharp increases in input costs in the agricultural sector in the province ring true and (ii) what typical costs can be cited to illustrate this, (d) what do these sharp increases in input costs mean for (i) the future of agriculture and (ii) future food prices in South Africa and (e) how do these increases in costs for South African farmers compare to cost movements in other countries that South African farmers compete against?
a] The 2022 rainfall was well below normal distribution. It varied in areas with some 40 to 50% (Swartland) of their annual rainfall, while others ranged between 65 and 85% (more Southern Cape)
b] Yields are expected to be down from 2021 and 2020 levels. Year 2019 was a wet season for the Southern Cape, while 2018 for the most part was normal across the Cape although strong winds out of season caused severe crop losses in some Swartland areas.
c] [i]The increase in input costs is not a myth. Severe price increases in fertiliser occurred between the end of 2021 and before the 2022 planting season started. If you applied the same amount of the same fertiliser in 2022 as you did in 2021 it would have been at least 60% more expensive. [ii] Other input costs such as herbicides also increased sharply. Prices were impacted by the global Covid pandemic in terms of availability that lead to price increases and were further put under pressure by the war in Ukraine, a significant producer of inorganic fertilizers.
d] [i] Current and future food security should not be under pressure since current practices still use too much fertiliser and that can be countered if farmers trust in their systems and practice conservation agriculture, the same yields can be obtained with less fertiliser. [ii] The future food prices are influenced by macro and microeconomic factors, and some the prices are transitory. The recent BFAP baseline projections for food inflation in 2023 based on several scenarios, projects average food inflation of 3.7% if South African inflation remains firm as the global grain supply shock persists. Whereas, if the prices of global and local grains ease moderately, the projected average food inflation will be at 3.5%. But if the global supply responds to driving prices down, the projected food inflation will be lower at 3%. Other considerations are that the transition between the input costs to retail prices is weak, as consumers buy processed food at manufacturer prices. However, high input costs are a major concern when they led to a reduction in production at the farm level, since this will increase the commodity price resulting in higher prices.
e] The rise in fertiliser prices affected the whole world where these are imported. The slow shipping during Covid has also increased shipping costs which had an impact on the increase in input costs. South Africa imports over 70% of its fertilizers, over 90% of its agrochemicals [e.g. herbicides, fungicides] and also imports all of its fuel, which are all critical inputs in agriculture. However, the differences in cost movement in other countries compared to South African farmers are influenced by currency exchange rates against the US dollar and whether the competitor countries are subsidised or not.
