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If rain doesn’t fall in the next few weeks, the crop and livestock prospects for many commodities will be decidedly bleak, with direct and material impact on the earnings of farmers and the companies that support them, and on food price inflation.
Coupled with sweltering heat, the prolonged drought is a major source of anxiety to the farming sector, which contributes about 2.5% annually to SA’s GDP through primary agricultural production.
The main commodities affected by the drought are maize, wheat, sugar cane and citrus, although all commodities and livestock in drought-stricken areas are affected.
Unlike more common localised droughts, SA is currently in the grip of a national drought.
“The only areas where there are not problems are the Eastern and Southern Cape. There are severe problems in Mpumalanga, KZN, most of the Free State, parts of Limpopo and parts of North West,” says Johan van den Berg, Santam agriculture manager: specialised crop insurance. “The northern parts of the Northern Cape are also suffering severely and in some parts of the Kalahari, north of Upington, rain last occurred more than 18 months ago.”
In KZN, which accounts for 24.4% of SA’s agricultural activity according to Stats SA, dam water levels were sitting at 57.9% of capacity as at 2 November (compared with 70.5% a year earlier), with Hazelmere Dam at 26.3% (43.5%), Midmar Dam at 53.1% (68.7%), Hluhluwe Dam at 30.2% (70%) and Pongolapoort Dam at 52.8% (63.1%). The North West’s 25 dams are at 45.9% capacity (68.7%), while Free State dams are at 66.4% (78%).
“While large dam water levels are still respectable, medium and smaller dams are in most cases empty or very close to empty,” explains Van den Berg. “This will affect irrigation in smaller irrigation areas. Borehole water is also becoming a problem and supply to animals and for human consumption is becoming a serious concern.”
Net importer of maize
The next few weeks are crucial for the maize industry, which grows 91% of its crop without irrigation. Maize planting takes place from mid-October to late December.
“Maize tonnage has decreased from a record bumper crop of 14.2m tons in 2013/14 to just under 10m tons in 2014/15. For the first time in seven years, we will become a net importer, importing white maize from Mexico and Zambia and yellow maize from Argentina and Brazil,” says Agri SA senior economist Thabi Nkosi. “We need to import an estimated 770 000 tons of maize this season, of which almost 60% has already been imported. This will cost the economy about R2.2bn at current prices and tonnages.”
Of the 770 000 tons of imports, 700 000 tons are yellow maize, which is mainly used for livestock feed. “The situation is more desperate on the livestock side but we are also concerned about supply of white maize, which is used for consumer consumption. Not a lot of countries produce white maize,” Nkosi says.
Poultry double whammy
Astral Foods CEO Chris Schutte says conditions in maize producing areas would have a dramatic effect on the poultry sector. “If maize farmers, especially in the eastern areas like Mpumalanga, don’t get good rain soon, they will be unable to plant. It will lead to reduced acreage and probably also a reduced yield. Coming on the back of the previously poor crop, it will severely upset the maize balance sheet and will most probably push the price to record highs,” he says.
This is an excerpt from an article that originally appeared in the 19 November 2015 edition offinweek. Buy and download the magazine here.
