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SA lucerne prices soar as drought intensifies

Jan 20 2016 20:27
André Janse van Vuuren

Johannesburg - Lucerne growers in South Africa are among the winners from the nation’s worst drought on record as animal- feed shortages and surging exports fuel prices for the hay.

Prices for lucerne, also known as alfafa, have surged by a third in a year, said Bester Feed & Grain, a Stellenbosch agricultural trading company. Higher demand risks depleting stocks before the onset of the winter, when local farmers need to supplement grazing, said Johan Strydom, a regional co-ordinator for the milk producers’ organisation lobby group.

The price gains come even as farmers increase plantings this season by as much as 30% Pieter Spies, the managing director of agribusiness at GWK, which markets, stores and trades agricultural products, said in Douglas in the Northern Cape.  The country cultivates an estimated 50 000h/a of lucerne, GWK said and produces 1.2 million metric tons annually, according to the National Lucerne Trust.

Milk shortages

“Prices are at record levels,” said Bester Feed. “We’re moving to a point where lucerne simply won’t be available regardless of what you pay.”

The worst drought since records started in 1904 has decimated livestock farmers’ fields and fueled prices for other feed such as yellow corn, which has rallied 70% since the start of last year. This has sparked a sell-off in cattle, risking meat and milk shortages, while contributing to food inflation that’s forecast to exceed 10% by the middle of 2016, from 4.8% in November.

Prices for lucerne are currently averaging R2 500 a metric ton, 32% more than last season, Bester Feed said. They may increase to as much as R3 800 when transport costs are included, said the MPO’s Strydom, who is also a milk farmer near Lichtenburg. The hay isn’t traded on a commodities exchange.

“Sometimes we park our trucks for two or three days at the depot in the hope to get some stock,” Strydom said. “It gets sold the moment it gets there.”

A lucerne shortage in the United Arab Emirates, where farmers’ access to underground water sources are restricted, has boosted demand for South Africa-grown hay, Bester Feed said. Prices have increased by as much as 60% since large-scale exports to the UAE started in 2012, Spies said.

New market

“The overseas market has become a factor,” Spies said. “It has lifted the price of lucerne to a global level, hence it had quite an inflationary impact on especially milk farmers.”

Some traders are currently in talks with Chinese buyers as a potential new market, Derick Engelbrecht, manager of the National Lucerne Trust, said by phone.

Lucerne demand is only expected to subside should rainfall patterns return to normal at the end of winter in September, said Strydom.

“There is no fodder left on the farms and that places a lot of pressure on lucerne,” he said. “We’ll be facing a crisis for the next six to seven months.”’

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agribusiness  |  drought

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