by Wessel Lemmer – Wessel.Lemmer@absa.co.za
Absa bank het al die afgelope 100 jaar in landbou belê en sien uit na die volgende 100 jaar saam met ons boere. Bekende name in die landboubedryf gaan verskillende vooruitsigte soos die ekonomie, die weer, gewasse, groente, vee ens vir 2017 bespreek. Hou ons webblad dop om almal te lees.
Although South Africa was in the middle of one of the worst droughts on record in 2016, it is important to note that the drought has, except for potatoes, not severely affected the total sales and export values of vegetables. Due to price increases for staple commodities such as maize, coupled with a decline in maize production, there is a greater demand for vegetables. As a consequence, this has led to price increases for vegetables. The trade data suggest an increase in the value of imports and exports. However, it should be noted that the rand weakened by 29,4% from R11,92 to R15,42 in the first and second quarters of 2015 and 2016. Note also that the average white maize price increased by 88,1% from R2 568/t for the first semester (or six months) of 2015 to R4 831/t in the corresponding period in 2016. Yellow maize prices increased by 48,9%, trading at an average of R2 348/t, which increased to R3 498/t in the first semester of 2016.
White maize was at a premium compared to yellow maize, and increased from 9,4% in 2015 to 38,1% in 2016. In the first semester of 2016, white maize traded at a premium of R1 333/t or 38,1% above the yellow maize price, which traded near import parity. The increase in the value of vegetables exported is therefore mainly attributed to the weakening rand. This situation led to an increase in the demand for vegetable exports such as onions. Consequently, the product prices on the fresh produce markets enjoy underlying support and prices increased because of an increase in demand, stimulated by the additional vegetable volumes exported.
The potatoes traded on the fresh produce market for the 2015/16 (September/August) marketing year amounted to R3,38 billion. In value potatoes are the largest traded vegetable on the five large fresh produce markets in South Africa. From September 2015 to August 2016 a total of 797 924 tonnes of potatoes were sold on the five largest fresh produce markets, compared to 851 839 tonnes during the previous 12 months. Because of the impact of the drought the production of potatoes declined by 6,4 %. The production of potatoes has been lagging behind the three-year average production since January 2016. After prices reached a low of R2 683/t (R26,83/10kg bag), they increased by 135% to reach R6 303/t in March 2016. Prices then declined sharply by 30% to reach R4 422/t in April 2016. Prices continued to decline until August to reach R4 072/t compared to R2 321/t a year earlier.
The total import value of potatoes for the first and second quarter of 2016 totalled R5 411 992 compared to R354 406 year on year. The total export value of potatoes for the first and second quarter of 2016 totalled R418 512 544 compared to R314 746 732 year on year. This is an increase in the value of exports of 33%. The rand weakened over the same period by 29,4%. The average domestic price for potatoes delivered on the fresh produce market increased by 87,9% over the same time period from R2 787/t to R5 238/t. The correlation between the potato price and the white maize prices for the past 12 months until August 2016 is an astonishing 88%, compared to that of the potato price to the rand of 81%.
Given the strong correlation between the white maize price and the potato price, the planting decisions of maize producers are expected to have a significant impact on the production of potatoes. The prices for white maize in the new season have already declined significantly compared to the maize prices in the previous season. Consequently, the price for potatoes may follow suit from May onwards to trade lower on the domestic fresh produce markets. Export prices for potatoes will continue to find underlying support from the weakening rand in 2017. Weather conditions are expected to favour production in 2017, leading to increased production volumes which may add to price pressure. The potato is the vegetable with the largest turnover on the fresh produce markets. Lower potato prices that coincide with lower green mealie prices and prices for sweet corn will support food inflation to reach singledigit levels from the second quarter of 2016 onwards.
The value of the tomatoes traded on the fresh produce market for the 2015/16 (September/August) marketing year amounted to R1,47 billion. In value tomatoes are the second-largest traded vegetable on the five large fresh produce markets. From September 2015 to August 2016 a total of 233 701 tonnes of tomatoes were sold on the five largest fresh produce markets compared to 232 097 tonnes during the previous 12 months. The drought did not have a significant impact on the production of tomatoes compared to potatoes, which declined by 6,4 % in volume. The production of tomatoes has increased since February 2016 so that consistently greater volumes have been produced than the three-year average production. Production increased substantially, namely by 48%, from May 2016 from 17 706 tonnes to 26 143 tonnes in August 2016. After declining from R8 106/t in April 2016 prices reached a low of R3 488/t in August 2016 compared to R5 875/t in August 2015.
The total import value of tomatoes for the first and second quarter of 2016 totalled R1 427 655 compared to R1 061 876 year on year. The total export value of tomatoes for the first and second quarters of 2016 totalled R68 736 354 compared to R55 801 791 year on year. The export value of tomatoes increased by 23%. Given the weakening of the rand by 29% over the same period the volume of exported tomatoes may not have increased. It is mainly their value, supported by the weak rand that has increased.
It should be noted that the warm, dry winter favoured the production of tomatoes under irrigation, leading to higher inventories of this perishable product. The volumes produced increased significantly from April 2016 onwards to exceed the average production levels over three years. The subsequent increase in the production of tomatoes impacted directly on prices, causing them to head south. Tomatoes are a perishable product with limited opportunities for increasing exports. The South African economy is not robust enough to support higher consumption levels of tomatoes to clear the surplus stock of July and August. The weakening rand did not provide underlying support to tomato prices but impacted negatively on the cost of input and tomato seed. This may have added to the cost squeeze experienced by producers.
The onions traded on the fresh produce market for the 2015/16 (September/ August) marketing year amounted to R1,44 billion. Next to tomatoes, onions are in value the third largest traded vegetable on the five large fresh produce markets. Onion prices continued to increase from September 2015 from R2 317/t to reach R6 162/t in June 2016, after which prices fell to R5 542/t in August. From September 2015 to August 2016 a total amount of 326 824 tonnes of onions were sold on the five largest fresh produce markets, compared to 324 422 tonnes during the previous 12 months. As in the case of tomatoes the drought did not impact negatively on the production of onions. With the exception of a significant increase in the sales of onions in December, the volume of onions traded followed the three-year average cycle.
The total import value of onions for the first and second quarters of 2016 totalled R41 645 951 compared to R24 813 353 year on year. The value of imports increased by 67,8% year on year. The total export value of onions for the first and second quarters of 2016 totalled R354 959 672, compared to R235 119 552 year on year. The export value of onions increased by 51% year on year. The rand depreciated during the same period by 29,4%, year on year. The volumes sold on the major fresh produce markets remained similar to those sold during the previous six months. Onions are bought for export from the fresh produce markets. The export value increased more than the rand weakened and the volumes traded were similar to those in the previous year. This indicates that the export of onions directly from the farm and warehouses increased significantly in 2016.
The increased export numbers for onions support onion prices as the rand continues to weaken. Other than in the case of potato prices, the prices for onions do not correlate closely with those of white maize prices, as it is not a vegetable rich in starch. Onion price movements do not correlate strongly with the value of the rand. However, the demand for onion exports to SA DC countries and the rest of Africa has grown substantially over the past seven years. From 2005 to 2009 onion exports never exceeded 45 000 tonnes. But since 2010 exports have increased to reach a high of 264 767 tonnes in 2014. Onion production in Africa is limited due to excessive rain, heat and days that are too short for the formation of bulbs. Increased demand from SADC countries will continue to support the domestic prices for onions. South Africa exported 236 390 tonnes of onions in 2015, of which 78% were exported to SADC countries other than SACU member countries.
The value of peppers traded on the fresh produce market for the 2015/16 (September/August) marketing year amounted to R453 141 120. In value peppers are the fourth largest traded vegetable on the five large fresh produce markets. In contrast with potatoes, tomatoes and onions the prices for peppers declined from December 2015 from R12 961/t to reach a low of R7 733/t in June 2016. Prices increased to R10 370/t in August. From September 2015 to August 2016 a total amount of 43 449 tonnes of peppers were sold on the five largest fresh produce markets compared to 42 529 tonnes during the previous 12 months. As in the case of tomatoes and onions, the drought and heat did not impact too negatively on the production of peppers. Except for a decrease in the sales of peppers in January and February, the volume of peppers traded increased from March to exceed the three-year average cycle month on month.
The value of the carrots traded on the fresh produce market for the 2015/16 (September/August) marketing year amounted to R398 242 228. In value carrots are the fifth largest traded vegetable on the five large fresh produce markets. In the same way as potatoes, carrot prices reached a seasonal high in March and April. Carrot prices followed the three-year average trend closely except for prices trading higher from February 2016 to July 2016. In contrast to tomatoes and onions, the prices for carrots increased from September 2015 from R2 452/t to reach a high of R6 218/t in April 2016. From September 2015 to August 2016 a total amount of 105 516 tonnes of carrots were sold on the five largest fresh produce markets compared to 101 191 tonnes during the previous 12 months. Although higher than the three-year average, the drought and heat may have impacted negatively on the production of carrots compared to production in the previous year. The sales volume of carrots followed the three-year average cycle month on month.
The total import value of carrots for the first and second quarters of 2016 totalled R76 080 compared to R583 360 year on year. The total export value of carrots for the first and second quarters of 2016 totalled R101 449 060 compared to R63 710 188 year on year. The export value of carrots increased by 59% in 2016.
Vegetable exports into Africa are supported by the relatively higher GDP growth in the sub-Saharan region, coupled by the boldness of retail supermarkets that have expanded into Africa over the past two decades. These countries are still forecast to grow their GDP significantly faster than South Africa and the trends of urbanisation and the inevitable switch from informal to formal retail means that supermarkets not in South Africa should continue to deliver growth in excess of what can be achieved in South Africa. The trade in vegetables such as carrots and onions with the rest of Africa will continue to develop and presents opportunities for producers.
Source: ABSA agricultural outlook 2017