Quarterly Economic Overview of the Agriculture, Forestry ... … · Mexico & also lack of news over the quality of the non-GMO USA imports. South Africa's agricultural trade balance

Quarterly Economic Overview of the Agriculture, Forestry and Fisheries sector: first quarter 2016

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PREFACE

The core business of the Directorate: Statistics and Economic Analysis is to provide

economic and statistical services to monitor the economic performance of the

agriculture, forestry and fisheries (AFF) sector. To support this important task, the

Economic and Statistical Research Unit conducts economic analyses of the

performance of the AFF sector, as well as the external impact on the AFF sector and

its industries.

This publication, the Quarterly economic overview of the agriculture, forestry and

fisheries sector, was developed because of a need within the Department of

Agriculture, Forestry and Fisheries (DAFF) to be regularly informed on developments

and expected economic trends in the agricultural sector. The quarterly report has

been established as a regular feature in the directorate’s workplan. Since the

beginning of 2004, the report has also been published for outside use to add value to

a number of regular economic publications on the agricultural sector. It is our vision to

maintain it as indispensable reading for everyone interested in developments in the

AFF and the South African AFF sector.

This issue looks at the economic developments in the 1st quarter of 2016, as well as

the expected economic trends in the South African AFF sector as the domestic and

global economies continue to face economic uncertainties.

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Disclaimer: The Department of Agriculture, Forestry and Fisheries did everything to ensure the accuracy of the information reported in this publication. The department will, however, not be liable for the results of actions based on this publication.

Compiled by Heidi Phahlane with inputs from: Mukwevho R., Mthembeka Z.A., Lekganyane M.S., Mofolo K.M. and Chauke H. All correspondence can be addressed to: The Director: Ms Ellen Matsei Directorate: Statistics and Economic Analysis 4th Floor, Sefala Building 503 Belvedere Street, Arcadia, South Africa Tel.: +27(12) 319 8454 E-mail: [email protected]


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CONTENTS

Preface .............................................................................................................................. i List of figures ............................................................................................................... iii

Executive ...................................................................................................................... 1

1. Global overview of the agricultural, forestry and fisheries economy

1.1 Global growth .................................................................................................................3

1.2 Global grain forecast .......................................................................................................5

1.3 Global food prices ..........................................................................................................5

2. The state of the domestic economy in agricultural, forestry and fisheries

2.1 Growth ...........................................................................................................................7

2.2 Inflation ..........................................................................................................................8

2.3 Employment ................................................................................................................. 10

2.4 Expenditure on intermediate goods and services by the agricultural sector .................. 15

2.5 Nominal gross farming income and net farm income from agricultural products ........... 16

2.6 Private consumption expenditure on agricultural products ........................................... 19

3. Review of the primary agricultural markets

3.1 Grain market review ..................................................................................................... 20

3.2 Fruit and vegetable market review ................................................................................ 30

3.3 Meat industry review .................................................................................................... 32

3.4 Poultry industry review ................................................................................................. 33

3.5 Eggs and dairy industry review .................................................................................... 35

3.6 Trade of agricultural, forestry and fisheries products ................................................... 39

4. Conclusion………………………………………………………………………………...50 5. References………………………………………………………………………………..51


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List of figures

Figure 1: Advanced economies’ quarterly GDP rates

Figure 2: Emerging markets and developing economies’ quarterly GDP rates

Figure 3: Quarterly global grain supply forecast

Figure 4: Quarterly Global Food Price Indices Figure 5: Domestic real GDP growth

Figure 6: Agriculture, forestry and fisheries sector growth rates

Figure 7: SA headline CPI and CPI for food

Figure 8: CPI for food and selected food items

Figure 9: Total number of people employed in the agricultural sector between 2014 and 2016

Figure 10: Provincial agriculture employment between 2015 and 2016

Figure 11: Provincial number of people involved in subsistence farming between 2015 and 2016

Figure 4: Trends in the expenditure on fuel, farm feeds, fertiliser, seeds and plants and farm services between 2014 and 2016

Figure 5: Trends in nominal gross farm income between 2014 and 2016

Figure 6: Trends in the net farm income between 2014 and 2016

Figure 7: Trends in private consumption expenditure between 2013 and 2016

Figure 8: White maize price

Figure 9: Supply and demand of white maize

Figure 10: Yellow maize price

Figure 11: Supply and demand of yellow maize

Figure 12: Maize import and export price

Figure 13: Wheat price

Figure 14: Wheat import price

Figure 15: Soybean Price

Figure 16 : Sunflower

Figure 17: Sunflower deliveries

Figure 18: Sorghum


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Figure 19: Average price trends of various fruits traded at Fresh Produce Markets (FPMs)

Figure 28: Average price trends of various vegetables traded at Fresh Produce Markets (FPMs)

Figure 29: Beef production and prices

Figure 30: Poultry production and prices

Figure 31: Trends in total egg production and average price per dozen of eggs

Figure 32: Trends in imports and exports of birds, eggs, in shell, fresh, preserved or cooked

Figure 33: Trends in total production and average price of milk

Figure 34: Trends in imports and exports of milk and cream, not concentrated nor containing added sweetening

Figure 35: Trade balance of agricultural products

Figure 36: Top three markets of agricultural products exported by SA

Figure 37: Top five agricultural products exported by SA

Figure 38: Top three market suppliers of agricultural products to SA

Figure 20: Top five agricultural products imported by SA

Figure 40: Trade balance of fisheries products

Figure 41: SA top five imports of fisheries products

Figure 42: SA top five exports of fisheries products

Figure 43: Trade balance of SA’s forestry products

Figure 44: SA top five exports of forestry products

Figure 45: SA’s top five imports of forestry products


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1 EXECUTIVE SUMMARY

Global economic is forecast to grow by 3% in 2016. Advanced economies GDP of the

following countries: Canada, France, Germany, Italy, United Kingdom and United

State grew by 0,2 percent, 1,3 percent, 1,6 percent, 1,0 percent, 2,0 percent and 2,0

percent respectively, while Japan GDP stayed at zero percent in 2016(Q1) compared

to 2015 (Q1) GDP.

According to IMF (2016) emerging economies are facing serious challenges which

are undermining their economic growth and developments prospects. Such challenges

are often associated with excessive debt, currency traps, and high inflation. Emerging

markets and developing economies in (Q1) of 2016 Compared (Q1) 2015 indicates a

positive growth in GDP for China, India, Indonesia, Malaysia and Philippines by 6,7%,

7,9%, 4,9%, 4,2% and 6,9% respectively. While Brazil and South Africa decreased

further by 5,4% and 1,2%.

SA real GDP decreased by 1,2% in the first quarter of 2016 Stats. This decrease is

contributed largely by the mining sector drop of 18,1 % as results of lower production

of platinum group metals and iron ore, otherwise growth would have been 0,5%. The

agriculture, forestry and fishing industry decelerated for five consecutive quarters with

a decline of 6,5% in (Q1) of 2016. The industry’s decline was mainly the result of a

decrease in the production of field crops and horticultural products contributed by

drought.

The SA headline CPI annual inflation rate averaged 4,7% in the third quarter of 2015,

which is a decline from the 6,2% average in the third quarter of 2014. Headline

consumer price inflation breached the upper limit of the inflation target range in

January 2016 and is expected to stay outside the target throughout the year.

The increase was mainly reflected by the delayed response of food price inflation to

the severe drought conditions and the sharp depreciation in the exchange rate of the

rand towards the end of 2015 when investor confidence retreated.


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South Africa’s unemployment rate climbs to 26,7% of the labour force in the first

quarter of 2016 from 24,5% in the last quarter of 2015. Employment levels declined in

all industries, except community and social services and agriculture which grew by (51

000) and (16 000), respectively. The biggest job losses were observed in trade (119

000), manufacturing (100 000) and construction (77 000).

The total expenditure on intermediate goods and services was reported at R295,5

billion in the first quarter of 2016 compared to R338.1 billion in the previous quarter, a

decrease of 12,6%. The decrease in total expenditure in the first quarter of 2016 may

be attributed to reduced activities in most crop producing areas due to the impact of

drought. The decrease in total expenditure in the first quarter of 2016 was attribute to

the decline in expenditure on seeds and plants (26,6%), fertiliser, fuel fertiliser and

farm services also decreased by 18,3%, 16,7% and 15,2% respectively compared to

the previous quarter.

The price of white maize averaged R/t 4926 in the 1st quarter of 2016 which is 104%

higher than the average price of R/t 2404 in the same period in 2015 and 43% higher

than it was in last quarter of 2015. The sharp rise in the white maize price in the 1st

quarter is a result of various fundamentals; the reduction in local production due to the

drought in 2015, the problems to source white maize worldwide; concerns over young

seedlings due to lack of rain and uncertainty over quality of white maize imports from

Mexico & also lack of news over the quality of the non-GMO USA imports.

South Africa's agricultural trade balance increased by 15% between the first quarter of

2015 and the first quarter of 2016. Exports grew by 23% while imports grew by 26%.

The loss of maize exports and the move to imports results in the widening of SA's

trade account deficit.


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1 GLOBAL OVERVIEW OF THE AGRICULTURE, FORESTRY AND FISHERIES ECONOMY

1.1 Global growth

The world economy is forecast to expand 3 percent in 2016. According to OECD

(2016) slower growth in the advanced economies has also weakened trade flows.

Comprehensive policy action is urgently needed to ensure that countries get off this

disappointing growth path and propel countries' economies to levels that will

safeguard living standards for all. GDP in the advanced economies for the following

countries: Canada, France, Germany, Italy, United Kingdom and United State's GDP

grew by 0.2 percent, 1.3 percent, 1.6 percent, 1,0 percent, 2,0 percent and 2,0 percent

respectively, while Japan GDP stayed at zero percent in 2016(Q1) compared to 2015

(Q1) GDP on figure 1.

Figure 1: Advanced Economies Quarterly GDP Rates

Data Source: Various Sources

According to IMF (2016) emerging economies are facing serious challenges which are

undermining their economic growth and developments prospects. The approach to

solving their challenges it's very important to growth. Emerging economies recognized

the importance of allowing market mechanisms to work, guaranteeing property rights,


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and safeguarding macroeconomic and financial stability. Perhaps most important, they

knew that they had to focus on generating employment, particularly in urban areas

and modernising sectors, and on inclusiveness more broadly.

However, as they pursued this agenda emerging economies experienced stuttering

starts and numerous crises, often associated with excessive debt, currency traps, and

high inflation. And, upon reaching middle-income levels, countries confronted the

policy and structural pitfalls that accompany the transition to high-income status.

Nonetheless, in an increasingly open global environment, characterized by strong

growth (and demand) in the advanced economies, the emerging economies managed

to make huge and rapid progress. In the emerging markets and developing

economies, 2016(Q1) indicates a positive growth in GDP for China, India, Indonesia,

Malaysia and Philippines by 6,7%, 7,9%, 4,9%, 4,2% and 6,9% respectively. While

Brazil and South Africa decreased further by 5,4% and 1,2%. Comparing 2015 (Q1)

see figure 2.

Figure 2: Emerging Markets and Developing Economies Quarterly GDP Rates

Data Source: Various Sources

It is suggested that countries commit to strengthening their economic policy responses

in a cooperative manner and employ a more forceful and balanced policy matrix, in

order to swiftly achieve a strong, sustainable and balanced growth patterns.


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1.2 Global Grain forecast

Global wheat consumption for 2015/16 has been lowered to 2 million tons as major

wheat consuming countries such as India, Egypt, Iraq and Philippines have lowered

their consumption significantly. Global coarse grain consumption for 2015/16 has been

raise to 0,5 million tons higher with an increase in corn demand for South Africa, India

and an increase barley feeding for China. World rice consumption for the same period

is raised to 0,6 million tons as consumption in India, China and Indonesia rises.

Global grain supply forecast indicate a slight total grain increase of 1,72% from

2976,53 million metric tons in 2015(Q1) to 3027,72 million metric tons in 2016(Q1).

Comparing 2016 (Q1) to 2015 (Q1) global supply projection of wheat, coarse grains,

oilseeds, oilmeals and vegetable oils increased by 4,08%, 3,71%, 0,89%, 5,38% and

2,04% respectively. Whereas rice and cotton decreased by 1,34% and 3,51%

respectively.

Figure 3: Quarterly Global Grain supply forecast

Data Source: USDA

1.3 Global Food Prices

According to FAO in Africa adverse weather reduced 2015 cereal output, resulting in a

significant increase in the number of food insecure people in several countries.


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Planting of the 2016 crops has begun in Central, East and West Africa, while in

Southern Africa, with the harvest expected to commence from April, El Niño-

associated drought conditions have significantly dampened production prospects, with

severe negative implications for food security in the sub regions. In North Africa, 2016

production prospects are mixed, with ongoing drought in Morocco and Algeria

lowering production expectations.

Furthermore, FAO also stated that countries where prices of one or more basic food

commodity are at abnormal high levels in main markets which could negatively impact

access to food at national level are :- South Africa, Argentina, Brazil, Colombia, Haiti,

Lesotho, Myanmar, Mozambique, Malawi, Namibia, Nigeria, Nicaragua, Swaziland

and Zambia. Globally in 2016(Q1) some major countries were paying less by 14,50%

on food purchases compared with 2015(Q1) food prices. The following food products

price indices decreased in 2016 (Q1), Meat, dairy, cereals, oils and sugar by 17,60%,

22,80%, 14,30%, 3,20% and 1,20% respectively compared with 2015(Q1) price

indices. For clearer picture see figure 4.

Figure 4: Quarterly Global Food Price Indices

Data Source: FAO


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2 THE STATE OF THE DOMESTIC ECONOMY IN AGRICULTURE, FORESTRY AND FISHERIES

2.1 Growth

According to Stats SA real GDP decreased by 1,2% in the first quarter of 2016, after

an increase of 0,4% in the fourth quarter of 2015. This decrease is contributed largely

by the mining sector drop of 18,1 % as a results of lower production of platinum group

metals and iron ore, otherwise growth would have been 0,5%. According to the

National Development Plan South Africa will need an annual growth rate of 7,2% by

2018 in order to meet its growth target of reducing unemployment rate to 6% by 2030.

If the country continues at the current rate, it will not be able to meet these targets.

Figure 5: Domestic real GDP growth.

Source: Stats SA

The agriculture, forestry and fishing industry decelerated for five consecutive quarters.

The industry’s decline of 6,5% in the first quarter of 2016 was mainly the result of a

decrease in the production of field crops and horticultural products contributed by

drought. However, looking at Figure 6 there is a slow improvement from quarter 2

(2015) quarter on quarter growth and quarter 3 (2015) year on year growth. This


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improvement in the industry might have contributed by policy improvements such as

Agricultural Policy Action Plan (APAP).

Figure 6: Agriculture, forestry and fishing sector growth rates.

Source: Stats SA

2.2 Inflation

According to South African Reserve Bank inflationary pressures have intensified in the

first quarter of 2016. Headline consumer price inflation breached the upper limit of the

inflation target range in January 2016 and is expected to stay outside the target

throughout the year. The increase of rate in headline consumer price inflation mainly

reflected the delayed response of food price inflation to the severe drought conditions

and the sharp depreciation in the exchange rate of the rand towards the end of 2015

when investor confidence retreated. On average in the first quarter of 2016 local

consumers were paying more by 6,5% for goods and services compared to the first

quarter of 2015. On average consumers paid 9,3% more on food items compare to the

same quarter last year. See Figure 7.


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Figure 7: SA headline CPI and CPI for food

Source: Stats SA

Food consumption patterns are an important issue in each and every country as there

is a pressing need for food security globally. In South Africa food makes up more than

40% the poor's overall expenses, a greater portion than any other income group.

Rising inflation rates eats into household income streams. With the labour market

prospect turning depressing, household cash flow is likely to remain under pressure.

In the first quarter of 2016 consumers were paying more on food item compared to the

same quarter in the previous year. For instance, on average civilians paid more on

bread and cereals, meat, fish, milk, eggs and cheese, oils and fats, fruits, and

vegetables by 12,9%, 5,4%, 7,3%, 2,3%, 19,7%, 11,2% and 17,6% respectively.

Domestic severe drought triggered a surge of these food prices.


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Figure 8: CPI for selected food items

Source: Stats SA

2.3 Employment

South Africa’s unemployment rate climbs to 26,7% of the labour force in the first

quarter of 2016 from 24,5% in the last quarter of 2015. This is the highest level since

the labour force survey began in 2008. Data from Statistics South Africa shows that

unemployment has edged up to almost 27%. This amounts to 5,7 million people

without jobs in the first quarter of 2016, compared with 5,2 million previously. The

expanded definition of unemployment which includes people who have stopped

looking for work is at 36,3% in the first three months of this year compared to 33,8% in

the fourth quarter of last year. Employment levels declined in all industries, except

community and social services and agriculture which grew by (51 000) and (16 000),

respectively. The biggest job losses were observed in trade (119 000), manufacturing

(100 000) and construction (77 000). The number of people employed decreased in

seven of the nine provinces between the first quarter of 2016 and the last quarter

2015, with the largest decrease occurred in Gauteng (195 000). Quarterly employment

gains were observed in Limpopo and Northern Cape (62 000 and 1 000 respectively).

The unemployment rate is far away off from the 2030 target set out in the National

Development Plan (NDP) of 6%.The (NDP) says the economy through investment in

infrastructure and labour-intensive programmes can grow more than 5% per annum. It

also targets a 14% unemployment rate by 2020. South Africa faces a challenging


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economic environment, with growth in 2016 expected to be less than 1%. The

numbers show the current macroeconomic policy configuration is off the rails and not

delivering results. With global economic factors not in SA’s favour and the impact of

severe drought, the figures suggest that jobs policies are inadequate. The results

show that there is a need to adjust employment policies. Programmes like the

expanded public works programme have not really made a meaningful impact on the

steady unemployment rate. However, much more in the form of structural reforms is

needed to reduce policy uncertainty, boost confidence, and tackle structural

impediments and lower vulnerabilities to further economic shocks.

With SA’s jobless rate escalated to an eight-year high, it brings into question whether

ambitious targets set in the NDP can be achieved. The economy lost a staggering

355,000 jobs even as thousands of new entrants including those who came of working

age and those who actively started to look for jobs flooded the labour market.

Companies are shedding jobs amid rising labour and other costs and because of low

economic growth and demand, together with dwindling business confidence.

Having nearly six million people out of work creates a massive social problem with

consequences that are difficult to predict and it underlines the poor performance of the

economy. It is important to note that more than 60% of young people are unemployed.

However SA youth and young entrepreneurs continue to benefit through various

programmes offered by government like the Department of Trade and Industry's black

industrialist scheme. There is also the National Youth Development Agency (NYDA)

etc. Though these government schemes are well intended, in some cases the youth

are not reacting fast enough in order to benefit from them. Youth need to be proactive

by being on the lookout for specific schemes rather than waiting for the government to

come and deliver them at their doorsteps. The future of SA youths will be very bright if

they work hard and together with government. The outlook for the South African jobs

market remains poor as the domestic economy continues to offer less confidence to

business. The prospects of a lower GDP growth projected at 0,7% this year will keep

the labour market under sustained pressure. The figure below shows that employment

in agriculture sector increased slightly in the first quarter of 2016 compared to the

previous quarter.


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Figure 9: Total number of people employed in the agriculture sector between 2014 and 2016.

Source: DAFF

The number of people employed in agriculture sector increased by 1,8% in the first

quarter of 2016 from 860 000 persons in the last quarter of 2015 to 876 000 persons

in the first quarter of 2016. The gains in agricultural sector were to some extent a

surprise given that the sector is currently battling the adverse impact of drought. Of

the 16 000 jobs created in agriculture sector in the first quarter of 2016 compared to

the last quarter of 2015, 30 000 jobs were created for men while 14 000 jobs were lost

by women. In total, the agricultural sector comprised of 273 000 women and 603 000

men in the first quarter of 2016 compared to 288 000 women and 572 000 men the

previous quarter. The agriculture sector managed to create about 16 000 jobs though

the country continues to feel the effects of the worst drought. The sector is expected to

be under pressure due to economic challenges the country is facing global and local.

Continued financial intervention and assistance to distressed farmers will really help to

save many job losses.

The agricultural sector is likely to register contraction in the next quarter, due to

reduced activities in most crop producing areas, as an aftershock of the drought. The

National Crop Estimate Committee (NCEC) has lowered the total maize production

outlook for 2015/16 for a third consecutive period during the current production season

to 7,054 million tons which is 0,15% or 10,900 tons lesser than the previous estimate


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of 7,065 million tons. If compared with the 2015 final maize crop, the current total

estimate is lesser by 29,14% or 2,900 million tons than the 9,955 million harvested in

the previous production season (NCEC, 2016).

South Africa’s 2016 total summer crops production is estimated at 8,6 million tons,

down from 11,9 million tons in the previous year.

Figure 10: Provincial agriculture employment between the fourth quarter of 2015 and the first quarter of 2016.

Source: DAFF

The above figure shows that employment increased in five provinces and decreased

in other four provinces in the first quarter of 2016 compared to the previous quarter.

Agriculture employment in Free State increased by 12,3%, while in Gauteng, Western

Cape, Eastern Cape and Mpumalanga employment increased slightly by 8,6%, 6,6%,

5,8% and 2,8% respectively between the two quarters. During the same period the

agriculture employment in Northern Cape, North West, Limpopo and KwaZulu-Natal

decreased by 8,3%, 5,3%, 4,8% and 3,0%. This might be attributed to the effect of

drought the country is experiencing currently. Though employment decreased in the

Western Cape the province remained with the highest agriculture employment

compared to other provinces.


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The 2016 first (QLFS) also indicated that 1,7 million people were involved in

subsistence farming in the first quarter of 2016 compared to 1,6 million in the previous

quarter, an increase of 5,3%.

Figure 11: Provincial number of people involved in subsistence farming between quarter four of 2015 and first

quarter of 2016.

Source: DAFF

Figure 11 above illustrate the number of people involved in subsistence farming in all

provinces in the first quarter of 2016 compared to the previous quarter. KwaZulu-Natal

had the highest number of (757 000) people involved in subsistence farming

compared to (657 000) the previous quarter, an increase of 15,2%. While Eastern

Cape had (423 000) people involved in subsistence farming compared to (413 000) in

the previous quarter, an increase of 2,5%. During the same period Limpopo had (188

000) people involved in subsistence farming compared to (195 000), a decrease of

3,,6%, Mpumalanga had (149 000) people involved in subsistence farming compared

to (142 000). The number of people involved in subsistence farming in North West

also increased from (25 000) in the last quarter of 2015 to (33 000) in the first quarter

of 2016. The number of people involved in subsistence farming in Gauteng decreased

from (44 000) to (23 000) between the two quarters. The number of people involved in


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subsistence farming in Free state decreased from (96 000) in the last quarter of 2015

to (92 000) in the first quarter of 2016. The number of people involved in subsistence

farming in Northern Cape also decreased from (18 000) in the last quarter of 2015 to

(15 000) in the first quarter of 2016. During the same period the number people

involved in subsistence farming in Western Cape decreased from (14 000) to (10 000).

2.4 Expenditure on intermediate goods and services by the agricultural sector

The total expenditure on intermediate goods and services was reported at R295,5

billion in the first quarter of 2016 compared to R338,1 billion in the previous quarter,

an decrease of 12,6%. Compared to a year ago the total expenditure on intermediate

goods and services increased by 7,1% from R275,9 billion in the first quarter of 2015

to R295,5 billion in the first quarter of 2016.

Figure 12: Trends in the expenditure on fuel, farm feeds, fertilisers, seeds and plants and farm services between

2014 and 2016.

Source: DAFF


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The figure above shows the total expenditure on fuel, farm feeds, fertilizers, seeds and

plants as well as farm services. The decrease in total expenditure in the first quarter

of 2016 was attribute to the decline in expenditure on seeds and plants (26,6%),

fertiliser, fuel fertiliser and farm services also decreased by 18,3%, 16,7% and 15,2%

respectively compared to the previous quarter. While the expenditure on farm feed

increased by 3,8% during the same period. The decrease in total expenditure in the

first quarter of 2016 may be attributed to reduced activities in most crop producing

areas due to the impact of drought.

2.5 Nominal gross farm income and net farm income from agricultural products

The figure below shows the gross income from field crops, horticulture and animal

products between 2015 and 2016.

Figure 13: Trends in nominal gross farm income between 2014 and 2016

Source: DAFF


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The nominal real gross income from all agricultural products decrease from R54,7

billion in the last quarter of 2015 to R51,7 billion in the first quarter of 2016, a decline

of 5,6%. This was due to a decrease of 56,3% and 4,4% in income from field crops

and animal products respectively. Field crops and animal products decreased from

R9,7 and R31,3 billion in the last quarter of 2015 to R4,2 and R29,9 billion respectively

in the first quarter of 2016. The significant decrease in income from field crops might

be attributed to the worst drought the country experienced. While the income from

horticulture increased by 27,7% between the two quarters. The huge decline in

income from field crops was largely supported by a significant decline in income from

canola, barley, wheat, sugar cane, oats and dry beans which declined by 99,8%,

99,5%, 92,5%, 89,0%. 88,6% and 77,7% respectively. The income from hay,

groundnuts and grain sorghum also decreased by 41,9%, 37,1% and 30,3%

respectively during the same period. Income from animal product declined slightly by

4,4% in the first quarter of 2016 compared to the last quarter of 2015. The decline was

supported by a decline in income from ostrich feathers and products, sheep

slaughtered, milk and cattle and calves slaughtered which decreased by 31,1%,

16,8%, 11,9% and 11,7% respectively. During the same period income from eggs and

poultry meat also decline slightly by 4,6% and 1,0% respectively. Compared to a year

ago, real gross farm income from all agricultural products increased from R46,0 billion

in the first quarter of 2015 to R51,7 billion reported in the same quarter of 2016, an

increase of 12,4%. During this period the increase was supported by an increase in

income from horticulture, field crops and animal products which increased by 18,0%

16,8% and 8,8% respectively.


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Figure 14: Trends in the net farm income between 2014 and 2016.

Source: DAFF

Figure 14 illustrates the net farm income trends between 2014 and 2016. The net farm

income is estimated at R14,8 billion in the first quarter of 2016 compared to R11,3

billion in the first quarter of 2015, an increase of 30,9%. The increase in net farm

income during this period was supported by an increase in income from horticulture,

field crops and animal products which increased by 18,0% 16,8% and 8,8%

respectively.


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2.6 Private consumption expenditure on agricultural products

Figure 15: Trends in private consumption expenditure between 2013 and 2016.

Source: DAFF

Private consumption expenditure on food decreased in the first quarter of 2016 to

R143,9 billion from R148,6 billion in the previous quarter, a decrease of 3,1%.

Compared to a year ago, total private consumption expenditure on food increased to

R143,9 billion reported in the first quarter of 2016 compared to R131,5 billion in same

quarter of 2015, an increase of 9,4%. During the same period, the main expenditure

items were fruit and vegetables which increased by 18,9%. The expenditure on bread

and grain also increased by 13,3% during this period. The expenditure on meat and

potatoes also increased by 9,6% and 2,7% respectively. While the expenditure on oils

and fats decrease by 9,5% in the first quarter of 2016 compared to the same quarter

of 2015.


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3 Review of agricultural markets

3.1 Grains market review

The price of white maize averaged R/t 4926 in the 1st quarter of 2016 which is 104%

higher than the average price of R/t 2404 in the same period in 2015 and 43% higher

than it was in last quarter of 2015. The retail maize price of 2,5kg and 1kg maize

increased by 28,3% and 53% respectively in the same quarter. The strong rise in

retail prices culminated from a rise in maize price bridging the R/t 3000 from August

2015 from August 2015 as the correlation between the primary maize price and retail

prices is stronger after a period of 4-5 months although there is an immediate relation

between the change in the primary maize price and the retail maize price but the

immediate impact is lower.

In January 2016 the price of primary maize was already trading at 44% higher than it

was in the 4th quarter of 2015, bridging the R/t 4000 meaning the effect of the price

increases in the 1st quarter 2016, is still going to be strongly felt in the 2nd to 3rd

quarter of 2016. The retail maize price already in March 2016 was trading at R24 and

R10,2 for a 2.5kg and 1kg maize which is 45% and 38% than it was in January 2016

and both prices are 50% higher than they were in December 2015. Between January

and March 2016 retail maize prices increased by a monthly average rate of 20,5% and

17,5% respectively for 2,5kg and 1kg maize . The sharp rise in the white maize price

in the 1st quarter is a result of various fundamentals; the reduction in local production

due to the drought in 2015, the problems to source white maize worldwide; concerns

over young seedlings due to lack of rain and uncertainty over quality of white maize

imports from Mexico and also lack of news over the quality of the non-GMO USA

imports.

An improvement in rainfall expected and debt level positions of farmers during the

fourth quarter will detrimental in determining the expected future price.


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Figure 16: White Maize Price

Source: Sagis

Local demand and export declined by 28% and 8% respectively during the quarter,

highlighting the price strain. Local white maize consumption averages 4,2 million tons

a year. SA households spend 22% of their income on food. Bread and grains

consumption accounts to 24% of household consumption on food. White maize

consumption averages 76kg per head and it has been declining by an estimated

annual average rate of 2% since 2009, although it is still a necessity. As shown on the

below chart total white maize supplied in the 1st quarter of 2016 was 16% lower than

the available maize in the market in the same period.


22

Figure 17: Supply and demand of White maize

Source: Sagis

The Crop Estimates Committee estimates local South African production to average

3,097 million tons. White maize exports averaged 1,2 million tons in a year but from

2014 till 2015 they have declined by 39% and 19% respectively.

The price of yellow maize has increased by 60,6% in the 1st quarter of 2016

compared to the same period in 2015 and it is 14% higher than it was in the previous

quarter. The shortage of yellow maize has resulted in maize imports quantities

increasing from 20 450 in quarter 1 of 2015 to 913 225 in quarter 1 2016. First quarter

yellow maize consumption and exports since 2012, usually averages a quarterly figure

of 1,3 million tons and 72 thousand tons respectively in a year. The crop estimates

committee estimates a total maize production of 4 million tons which is 30% below the

2015 yellow maize crop. Annually, South Africa uses 4,9 million tons(including maize

for own use by farmers) of yellow maize, which also includes an average annual

export of 812 thousand tons per year. Yellow maize is mostly used as animal feed with

a mere 10% for human use.

In the 2013/14 season because of the bumper crop South Africa did not import yellow

maize, the low rainfall in 2014/15 resulted in the country importing an annual yellow


23

maize of 79 682, in the 2015/2016 season total maize imports amounted to 1,250

million tons. Yellow maize exports have also increased by 14% leading to a 30%

increase in total demand. The drought in southern Africa and Zambia’s decision to

limit the size of exports, issuing a statement that the country has 600,433 tonnes of

maize enough to last the country until August. This are the major fundamentals that

led to an increase for SA exports even thought the prices were higher.

Figure 18: Yellow Maize Price

Source : Safex

0

1000

2000

3000

4000

5000

6000

7000

Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q12015 Q2 2015 Q3 2015 Q4 2015 Q1 2016

Tho

usand

s T

ons

Producer deliveries Imports Local Demand Exports

Figure 19: Demand & Supply Yellow maize

Source: Sagis


24

The SA white maize price traded at 34% above the import price during the quarter,

whist the yellow maize was 2% below the import price. The rise in the white maize

price is also due to weaker exchange rate that made imports expensive. The price of

yellow maize started to decline as imports of yellow maize filtered through the market;

but the white maize price was affected as news of shortages of the crop and the

shortages of where to source white maize globally increased local prices.

0

1000

2000

3000

4000

5000

6000

R/T

on

SA Maize Export Price SA Maize Import Price(Randfontein)

White Maize Price Yellow Maize Price

Figure 20: Maize Import & Export Price

Source : Sagis

In the 1st quarter of 2016, the price of wheat averaged R/t 4752, which is 22% higher

than it was in the same period last year, the price is 7% than it was it the last quarter.


25

Figure 21: Wheat price

Source: Sagis/Safex

In the past 4 years beginning in 2012, the average annual wheat demand averaged

3,4 million tons including exports of 288 thousand tons, whilst production averaged 1,8

million tons meaning the 1,6 million tons difference had to be imported. Currently due

to the drought a total of 1,440 million tons has been produced locally, which means

over 2 million tons need to be imported for the 2015 season. That is an additional 434

thousand tons shortfall more than the average yearly difference.

The price of wheat bridged the R/t 4000 in August 2015 rising by a monthly average

rate of 2,4% to March 2016; this has resulted in the bread flour rising by 0,8% from

R11,33 to R12,6. The bread price has risen by 0,63% and 0,83 for both 10 gr white

and brown bread respectively; from R11,61 to 12,51(white bread) and 10,68 to

11,33(brown bread) between the same period.

The primary wheat price on the retail bread price is stronger after a period of 5 to 6

months, although the effect is felt immediately as the expectations creates for

speculative buying.

The SA safex price is trading below the import price (Randfontein); the high import

price could be attributed to the 36% increase in the exchange rate compared to the

same period last year. The decline in the world wheat prices led to a rise in the SA

tariff as shown below.


26

Figure 22: Wheat Imports Price (Randfontein)

Source: Sagis/Safex

The fall of the US wheat price led to a tariff increase of 480% in South Africa

compared to the same quarter in 2015. The Minister of finance approved the tariff

adjustment on wheat, resulting in adjusted of the wheat R/ton from 911 to R/ton 1224

subject to review of the of the current variable import duty formula on wheat.

The price of soybean in the first quarter 2016 is 26% higher than it was in the same

period in 2015, the increase in price is due to the expected 31% decline in production

compared to the same period in 2015. Soybean prices started to increase in July 2015

increasing by a monthly average rate of 6% until they reached their peak in January

2016, thus prices started to decline in February and the decline is expected in the 2nd

quarter 2016, as information about the level of imports available filtered through the

market.


27

Figure 23: Soybeans price

Source: Sagis/Safex

Soybeans production in the 2016 season is expected to decline by 31,2% in the 2016

season compared to 2015. The decline in production has resulted in an increase in

imports between January to April 2016 totalling 124 515 which is 0,5% lower than the

total imports in the whole of 2015, with eight month still to go before the end of the

year. Although much of the imports of soybeans seeds will depend on the derived

soymeal and soy oil prices, because if the local cost of crushing soybeans are higher

more imports of soybeans and soy oil will be imported resulting in a decline in local

crushing.

Soymeal and soybeans imports have declined sharply since 2012 declining by an

estimated annual rate of 14% and 4% respectively, due to the 32% rise in crushing

locally, but now with the reduced local production and weak exchange rate the

soybeans seeds, soybean meal and oil imports will become expensive. South African

soybeans, soymeal and soy oil mostly trade at or close to the import price for

soybeans and its by-products.

The price of sunflower in the 1st quarter of 2016 was 50% higher than it was in the

same period in 2015. The rise in the price came due to the drought that induced

decline in yields. The decline in the rand also increased the price of imports whilst


28

South Africa is not self-sufficient in the production of the crop and international prices

for the crop were higher during the quarter. Another factor to the rise in prices is the

fact that the crop was also oversold locally as the crop production in 2016 was higher

than the national production average of 641 000 tons.

Figure 24: Sunflower

Source: Safex

Below is the producer deliveries and total demand within the quarter, the decline in the

deliveries is highlighted in the quarter compared to same quarter in 2015. Producer

deliveries and demand declined by 56% & 46% respectively.


29

Figure 25: Sunflower deliveries

Source: Sagis

The price of sorghum increased by 65% in the quarter compared to the same period in

2015. The price of sorghum has increased due to the expected 36% decrease in

production compared to the previous year. Producer deliveries have declined by 48%

in the quarter compared to the same period in 2016 and they were 44% lower than

they were in quarter 4 of 2015. Sorghum imports totalled 35 647tons compared to zero

imports in 2015 the same period and they increased from a previous quarter 4 2015

figure of 27 199 tons. Sorghum production remained stable in South Africa with

production for the previous five years averaging 164 640 compared to total demand

including export of 219 204 so the shortfall is met by imports.


30

Figure 26: Sorghum

Source: DAFF

3.2 Fruit and vegetable market review

The biggest impact of the drought was seen in December 2015 and January 2016

when excessive heat had adverse effects on the quality, shelf life and availability of

fruits and vegetables around South Africa. The collective fresh produce industry will

continue to be affected while shortages and higher prices are expected during the

next coming months. Furthermore, the RSA Group believe the fresh produce industry

will see the effect more severely from mid February 2016 while buyers of the fresh

produce are aware of the very high purchase prices that await them.


31

Figure 27: Average price trends of various fruits traded at Fresh Produce Markets (FPMs)

Source: Daff

Between the first quarter of 2015 and the first quarter of 2016, the average prices of

apples, avocadoes, bananas, oranges, pears, mangoes and grapes increased by

12%, 41%, 23%, 48%, 14%, 20% and 15% respectively.

A surplus of fruits will no longer be available due to the drought. Local fruit production

is currently under pressure with less fruit available in the coming months. Less fruit

available will translate to an increase in imported fruit products which will likely result

in higher fruit prices.

South Africa produces a variety of vegetables with carrots, onions, potatoes, tomatoes

and cabbage being major vegetables produced locally. Supply and demand influence

prices as the bulk of the produce is sold on the fresh produce markets (ARC, 2015).

Figure 28 shows prices of a number of vegetables traded through the FPMs between

the first quarter of 2015 and the first quarter of 2016.


32

Figure 28: Average price trends of various vegetables traded at Fresh Produce Markets (FPMs)

Source: Daff

Between the first quarter of 2015 and the first quarter of 2016, the average prices of

carrots, onions, potatoes, tomatoes and cabbage increased by 55%, 57%, 105%, 20%

and 85% respectively, as volumes have been severely affected by the drought

conditions. Marketable plantings that were severely affected by the drought from

October onwards are no longer available, resulting in higher vegetable prices. The

only producers planting are those under irrigation while water tables remain low. Due

to reduced planting, marketable produce will be affected while reduced planting in

2015 will affect the marketable produce in May, June or July 2016. In addition, should

there be consistent rain and a fairly warm winter season, the market can expect an

increase in volumes and a reduction in prices.

3.3 Meat industry review

The price of beef per kg has increased by 11,7% compared to the same period in

2015, whilst it was 4% higher than it was in the 4th quarter of 2015. The number of

beef slaughtered in the 1st quarter of 2016 was 3% higher than it was in the same

period in 2015 and it was 18% lower than the forced numbers slaughtered in the 4th

quarter of 2015, with government also giving a directive for livestock farmers to reduce

their herds during the drought. The rise in feed prices also had an effect on the


33

numbers of animal farmers could keep, the below figure shows the total number of

slaughtered beef and their rands and cents value per kg.

Figure 29: Beef production and prices

Source: DAFF

3.4 Poultry industry review

The price of poultry has increased by 4% in the 1st quarter compared to the same

period in 2015 and it is 8% higher than it was in the last quarter of 2015. This is due

to, among other things; the rise in the price of feed. Broiler and broiler breeder feed

prices alone have increased by a monthly average rate of 6% and 9% respectively

between December 2015 to February 2016 as yellow maize and soybeans seeds

increased by 60% and 26% respectively.

Poultry production in the 1st quarter of 2015 declined by 2,6% and 15% compared to

the 1st and 4th quarter of 2015. This was additionally due to a decrease in the number

of parent pullets placed between February and March 2016 and also as the amount of

imports available still filters through market.

Production of poultry is expected to be affected by the change in the brining

regulations. The total brine injection allowed for whole carcasses is now limited to a

maximum of 10%. Total brine injection allowed for individual quick frozen portions is

limited to a maximum of 15% from a general industry level figure of 30%.


34

Brining is a water-based solution that producers inject into a chicken to tenderise and

preserve it, it also adds weight to the chicken. How do the new brining regulations

result in increases in cost to consumers? Scott Pitman of RCL Foods stated that,

”Currently a 2kg packet – containing 10 pieces of chicken of frozen chicken - costs

R39,99. If the brine percentage is capped at 15%‚ the amount of brine in each packet

will come down from an average 30% to 15%‚ and‚ thus‚ the same 10 pieces of

chicken will still be in the packet‚ but the packet will now weigh 1,65kg because there

will be less brine‚ and the new 1,65kg packet will cost the same R39,99‚ for the same

10 pieces.”

Changes in the brining regulations from the producer side: include among other

things; the changes in producer processing systems- which would require additional

costs capital costs to modify the pants. Rising costs of other local inputs and again

while feed costs are at the highest levels amid the rising poultry imports due to lower

international prices.

Figure 30: Poultry Production and Prices

Source: DAFF

Imports have increased by a monthly average rate of 24,5% in the three months

ending in March 2016, a quarter on quarter rise of 30. The sharp rise is due to the

65% increase in imports between February and March 2016, as the shipment of USA

poultry entered the South African market during the periods.


35

3.5 Egg industry review

The local egg industry remains fragile with local maize prices now near 20 year highs.

High commodity prices as a result of drought and the weaker rand has resulted in

rising feed costs, rising input costs and soaring food inflation, constraining consumer

spending. Meanwhile, surviving egg producers are pushed to increase egg prices

while market sentiment is generally negative due to the drought and the weaker rand

(sapa, 2015).

In the first quarter of 2016, the total production of eggs totalled 213,2 million dozens, a

0,8% increase in production compared with 211,5 million dozens produced in the first

quarter of 2015. Despite an increase in the production of eggs between the first

quarter of 2015 and the first quarter of 2016, local production of eggs decreased by

0,98% between the fourth quarter of 2015 and the first quarter of 2016. Moreover,

local demand for eggs remained disappointingly low in the first quarter of 2016.

Between the first quarter of 2015 and the first quarter of 2016, the average price per

dozen of eggs increased by 4,5%, from R11,18 per dozen to R11,68 per dozen.

Meanwhile the average price per dozen of eggs decreased by 3,6% between the

fourth quarter of 2015 and the first quarter of 2016, from R12,12 per dozen to R11,68

per dozen.


36

Figure 31: Trends in total egg production and average price per dozen of eggs.

Source: DAFF

Figure 32: Trends in imports and exports of Birds' Eggs, In Shell, Fresh, Preserved Or Cooked

Source: GTA, 2016

In the first quarter of 2016, South Africa exported 4467,7 tons of birds eggs, 16%

higher than 3854,7 tons exported in the first quarter of 2015. Meanwhile, between the

fourth quarter of 2015 and the first quarter of 2016, exports of birds eggs decreased

by 11,4%, from 5040,2 tons to 4467,7 tons. The South African egg industry is yet to

face major challenges in 2016 while the domestic economy stands the possibility of a

recession coupled with weak export demand.


37

Imports of bird eggs decreased by 95% between the first quarter of 2015 and the first

quarter of 2016. Absa (2016) pointed out that since 2014, both production and

consumption of eggs decreased in South Africa. However, the trend is expected to

increase gradually in the coming years. Additionally, South Africa is largest exporter of

eggs in Africa and imports the least, see figure36.

Production of milk slowed since November 2015 and a negative growth was recorded

in December 2015. Additionally, a negative growth is expected in the first quarter of

2016 while producers are scaling back on output as lower prices and higher feed costs

render production unprofitable. Farmers are under serious pressure and further delays

in increasing producer prices will likely damage production capacity (MPO, 2016).

In the first quarter of 2016, total milk production came in 3,3% less than in the first

quarter of 2015, decreasing from 837,1 million litres to 810,1 million litres. The

average price per litre of milk decreased by 9,3%, from R4,42/ℓ to R4,01/ℓ between the

first quarter of 2015 and the first quarter of 2016. MPO Chief Economist indicated that

a decrease in producer prices in 2015, a sharp increase in grain prices, dry conditions

weather conditions and the projected scarcity of roughage may have been the main

contributors to decreases in the production of milk. Furthermore, a decrease in the

production of milk is expected in coming months.

Figure 33 shows trends in total milk production and the average price of milk.


38

Figure 33: Trends in total production and average price of milk

Source: DAFF

Figure 34: Trends in imports and exports of milk and cream, not concentrated nor containing added sweetening

Source: GTA, 2016

In the first quarter of 2016, South Africa exported 20 million litres of milk and cream,

2% less 20.3 million litres exported in the first quarter of 2015. Meanwhile, between

the fourth quarter of 2015 and the first quarter of 2016, exports of milk and cream

decreased by 25%, from 24.5 million litres to 20 million litres. And imports of milk and

cream decreased by 99% between the first quarter of 2015 and the first quarter of


39

2016. MPO (2015) foresees that imports will become unaffordable due to the

weakening of the rand against other major currencies, see Figure 38.

3.6 Trade of agricultural, forestry and fisheries

The drought severely affected SA's agricultural productivity in 2015 which in turn

negatively affected agriculture's Gross Domestic Product. Reduced domestic

production resulted in significant changes in trade volumes. The loss of maize exports

and the move to imports results in the widening of SA's trade account deficit.

Agriculture's exports contribute about 11% of SA's total annual exports and the

combination of the drought and the weaker exchange rate will likely result in a drop in

agriculture's export revenue in 2016. South Africa will have to import half its grain in

2016 which poses a great challenge, especially with the depreciation of the rand.

While the surge in agricultural commodity prices and the rise in food price inflation is

set to impact consumers, reduced production volumes will impact on South Africa’s

trade balance.

South Africa's agricultural trade balance increased by 15% between the first quarter of

2015 and the first quarter of 2016. Exports grew by 23% while imports grew by 26%.

See Figure 35.


40

Figure 35: Trade balance of agricultural products

Source: GTA, 2016

Figure 36 illustrates South Africa gained most of its agricultural export revenue from

products exported to Netherlands, which was the leading export destination, followed

by the United Kingdom and Namibia.

Figure 36: Top Three markets of agricultural products exported by SA

Source: GTA, 2016

During the same period, the top three agricultural products which contributed a

considerable amount to the total export value include grapes (14%), wine (5%) and

pears (4%) respectively, see Figure 41.


41

Though there has been a slump in the demand for agricultural commodities in South

Africa, SA's winemakers have a different story to tell. Exports of wine went up by 5%

in 2015 and the industry is predicting more growth in 2016. Furthermore, Hortgro

indicated that South Africa won quarantine approval to sell more deciduous fruits and

nuts to Indonesia, increasing the export potential for SA's produce in Indonesia.

Moreover, South Africa is working on getting access to China for its pears and plums,

and wants to send pears and plums as well as apples to Thailand.

Figure 37: Top five agricultural products exported by SA

Source: GTA, 2016

Prospects for South Africa’s economy in 2016 remain unsatisfactory; however,

concerted efforts are being made to revive the growth momentum. Adverse climatic

conditions are still affecting agricultural production while import growth continues to

remain stubbornly high. Supplying industries continue to face difficult operating and

trade conditions while business remains challenging across various segments of the

economy.

In the first quarter of 2016, the total import value of agricultural products increased by

26% between the first quarter of 2015 and the first quarter of 2016. The top three

suppliers of agricultural products were Argentina, Brazil and Indonesia, each


42

accounting for a percentage share of 14%, 6% and 4% respectively, to the total import

value during the first quarter of 2016, see Figure 38.

Figure 38: Top three market suppliers of agricultural products to SA

Source: GTA, 2016

The top three agricultural products which contributed a considerable amount to the

total import value include maize (11%), wheat (7%) and rice (5%), see Figure 39.

South Africa is feeling the effects of the drought as maize harvests are expected to be

7,16 million tons, which is 46,7% below the annual consumption of 10.5 million tons.

South Africa is set to import 3.650 million tons of maize in the 2016/17 season, of

which 82 233 tons have already been imported between 30 April and 13 May 2016.

Meanwhile, University of the Free State Head of agricultural economics department,

Johan Willemse, noted that South Africa imported about 60% of its wheat

requirements in the 2015/2016 season and due to the drought, would have to import

an estimated 2,2 million tons end of October 2016 of which the Crop Estimate

Committee estimated to be about 1,5 million tons. In addition, projections from the

Bureau for Food and Agricultural Policy indicate that maize meal prices have already

increased by 20% and are expected to increase by 10% more before the producer

price increase is taken into account. Consequently, consumers will have to cut back


43

on maize meal and switch to rice, wheat and potatoes, leading to a greater import

dependence on rice and wheat.

Figure 39: Top five agricultural products imported by SA

Source: GTA, 2016

3.6.1 Fisheries trade

During the first quarter of 2016, South Africa produced more fisheries products with

the increasingly dominant aquaculture sector. More fisheries products were traded,

both in volume and value terms. Consumer demand for fish remains brisk with more

people worldwide appreciating the health benefits of regular fish consumption (FAO,

2015).

Figure 40 illustrates that between the first quarter of 2015 and the first quarter of 2016,

exports grew by 30% while imports increased by 4%. Trade volumes of fishery

products continues to expand.


44

Figure 40: Trade balance of SA fisheries products

Source: GTA, 2016

The top three imported fisheries products in the first quarter of 2016 were

sardines/sardinella, tunas and jack and horse mackerel. Major suppliers of the

fisheries products, were Namibia, Thailand and China each accounting for a

percentage share 24%, 21% and 9% respectively of total imports. When comparing

imports of sardines/sardinella, tunas and jack and horse mackerel in the first quarter of

2015 with the first quarter of 2016, imports of sardines/sardinella, tunas and jack and

horse mackerel were lower in the first quarter of 2016 compared to the first quarter of

2015, see Figure 41.

The recent steep increase in the Southeast Asian fresh tuna export price might have

negatively impacted consumer demand for tuna. Meanwhile, there was a slight

reduction in landings of horse mackerel in 2015 and prices seem to have increased

(FAO, 2015)


45

Figure 41: SA top five imported fisheries products

Source: GTA, 2016

Figure 42 presents the top three fisheries products exported by SA in the first quarter

of 2016. Hake fillets were the main exported products, followed by rock lobster and

cuttle fish and squid. The main destination for SA's fisheries products are Italy, Spain

and Hong Kong. Furthermore, exports of hake fillets and cuttle fish and squid

increased by 25% and 47% respectively, between the first quarter of 2015 and the first

quarter of 2016 while global supplies of cuttlefish and squid were somewhat tight in

2015 (FAO, 2015).


46

Figure 42: SA top five exports of fisheries products Source: GTA, 2016

3.6.2 Forestry trade The drought had serious implications for the timber industry which employs 170 000

people in the entire value chain and 66 000 in forestry alone. The situation was,

however, not as devastating as other rain-fed crops due to trees being more resilient

to drought. Some mitigation measures are already under way, providing the timber

industry with a level of reassurance.

According to Forestry SA's Environmental Consultant, Dr John Scotcher, the location

of a plantation will determine the extent of the drought on the forestry sector. Pines

were shown to be relatively more robust than eucalyptus and wattle, and the hybrids

of both eucalyptus and pines were more robust to potentially higher temperatures and

partly lesser rainfall than the commonly grown species.

In parts of the country that are currently best-suited for forestry production and on a

normal year receive at least 750mm of rain, the effect of the drought will be less

severe. These areas include parts of Mpumalanga where most of South Africa's timber

is grown. Furthermore, an estimation of about 10% to 15% of tree growth is expected

to be lost in areas where soils are shallow. Additionally, even though there has been a


47

slow rate of tree growth due to drought, it is still expected that timber production will

continue to be viable.

In areas that are sub-optimal for forestry, those that on a normal year receive 650mm

to 750mm of rainfall, the impact of drought may result in forestry plantation no longer

sustainable and plantation will mostly likely decrease. These include areas within

KwaZulu-Natal while areas within the Eastern Cape and Mpumalanga will most likely

offer some opportunities for expansion as increasing temperatures make conditions

favourable.

Meanwhile, SA's forestry sector faces a number of challenges including low

afforestation rate because of cumbersome licensing processes, under-investment in

long-rotation timber such as saw-logs and risk associated with climate change, just to

mention a few. Furthermore, sale of adequate volumes still remains a challenge while

the country is likely to see a boom in the exportation of pulp products in 2016 due to

the weaker rand dollar exchange rate (DAFF, 2015).

Figure 43 shows the trade balance of South African forestry products. Between the

first quarter of 2015 and the first quarter of 2016, exports increased by 30%, while

imports grew by 22%.

Figure 43: Trade balance of SA forestry products

Source: GTA, 2016


48

The top three exported forestry products during the first quarter of 2015 were chemical

woodpulp (dissolving grades), kraftliner (uncoated, bleached, in rolls or sheets) and

wood in chips or particles (non-coniferous), see figure 44.

Figure 44: SA top five exports of forestry products

Source: GTA, 2016

The total import value of forestry products increased by 22% between the first quarter

of 2015 and the first quarter of 2016, from R 4,9 billion in 2015 to R 6,0 billion in 2016.

SA’s major forestry import suppliers include China, Germany, and United States. The

three most important forestry products imported in the first quarter of 2016 include

printed books etc, casks, barrels, vats etc and paper or paperboard coat, see Figure

45.


49

Figure 45: SA top five imports of forestry products

Source: GTA, 2016


50

4. CONCLUSION

The global economic growth remains slower as advanced economies continues to

face a weakened trade flows. Comprehensive policy action is urgently needed to

ensure that countries get off this disappointing growth path and propel countries'

economies to levels that will safeguard living standards for all.

Emerging economies are facing serious challenges which are undermining their

economic growth and developments prospects. Such challenges are often associated

with excessive debt, currency traps, and high inflation. Emerging markets and

developing economies in (Q1) of 2016 Compared (Q1) 2015 indicates a positive

growth in GDP for China, India, Indonesia, Malaysia and Philippines by 6,7%, 7,9%,

4,9%, 4,2% and 6.9% respectively. While Brazil and South Africa decreased further by

5,4% and 1,2%.

SA real GDP decreased by 1,2% in the first quarter of 2016 Stats. This decrease is

contributed largely by the mining sector drop of 18,1 % as results of lower production

of platinum group metals and iron ore, otherwise growth would have been 0,5%. South

Africa’s unemployment rate climbs to 26,7%.

The agriculture, forestry and fishing industry decelerated for five consecutive quarters

with a decline of 6,5% in (Q1) of 2016.The industry’s decline was mainly the result of a

decrease in the production of field crops (56.3%), animal products 4,4% and

horticultural products contributed by drought. The nominal real gross income from all

agricultural products decrease 5,6% and total expenditure on intermediate goods and

services reported a decrease of 12,6%. South Africa's agricultural trade balance

increased by 15% between the first quarter of 2015 and the first quarter of 2016.

Exports grew by 23% while imports grew by 26%.


51

References

Absa, (2015 & 2016): Agricultural Outlook 2016: Available online:

http://www.agrisa.co.za

Absa, (2016): Agri trends: Implementation of budget promises crucial. Available

online: http://www.absa.co.za

Agricultural Research Council (ARC), (2015): Economic Outlook Report XVII.

Available online http://www.arc.agric.za

Department of Agriculture Forestry and Fisheries, (2015) Available online:

http://www.daff.gov.za

Department of Agriculture Forestry and Fisheries (DAFF), (2016): Commercial forestry

trends in South Africa: 2007- 2014.

Fin24 News (14 April 2016): SA wins Indonesia quarantine fruit export approval:

Available online:

http://www.fin24.com/Companies/Agribusiness/sa-wins-indonesia-quarantine-fruit-

export-approval-20160414

Food and Agricultural Organization (FAO), October 2015: Food outlook: Bi annual

report on global food markets. Available online: http://www.fao.org

Fresh plaza News (12 February 2016): South Africa: Fruit and veg price up 30% due

to drought: Available online: http://www.freshplaze.com/article/153276/South-Africa-

Fruit-and-veg-price-up-30-procent-due-to-drought.

Global Trade Atlas information service (2016): Available online:

http://www.worldtradestatistics.com/gta/

http://www.daff.gov.za/


52

Milk Producers’ Organisation, (2016): Dairy Market Trends, January & April 2016.

Available online: http://www.mpo.co.za

South African Poultry Association (SAPA), 2015: Key Market Signals in the egg

industry: 4th quarter 2015. Available online: http://www.sapoultry.co.za

Statistics South Africa (Stats SA), (2015): Quarterly Labour Force Survey, Quarter 1,

2016: Available at http://www.statssa.gov.za

TMG Digital.(2016). Chicken producer challenges ‘myth’ that new brining will drive up

prices. Available online:http://www.timeslive.co.za/local/2016/05/18/Chicken-producer-

challenges-%E2%80%98myth%E2%80%99-that-new-brining-will-drive-up-prices

http://www.mpo.co.za/newsletter.html

http://www.statssa.gov.za/

http://www.timeslive.co.za/local/2016/05/18/Chicken-producer-challenges-%E2%80%98myth%E2%80%99-that-new-brining-will-drive-up-prices

http://www.timeslive.co.za/local/2016/05/18/Chicken-producer-challenges-%E2%80%98myth%E2%80%99-that-new-brining-will-drive-up-prices


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Quarterly Economic Overview of the Agriculture, Forestry ... … · Mexico & also lack of news over the quality of the non-GMO USA imports. South Africa's agricultural trade balance