This year's bumper wheat harvest will give SA's grain farmers a financial boost - but they will need another season before they find their financial footing.
The 2020 wheat harvest is expected to be over 2.1-million tons, the largest since 2002, which yielded 2.45-million tons of the grain, says Dawie Maree, head of agriculture information & marketing at FNB. Jannie Strydom, CEO of Agri Western Cape, the largest wheat-growing region in the country, cites good rain at the right intervals this year as being the reason for the good crop. The Western Cape will contribute 1.1-million tons to this year's harvest.
Paul Makube, a senior agricultural economist at FNB, says technology and the use of new cultivars have produced this large crop on 50% of the land that was previously required. The balance of the land is being used to grow canola and soya beans as farmers diversify to mitigate the risk of focusing on only one source of income, he says.
In addition to the extra volume, farmers will be earning more a ton, with prices at a current average of R5,000 a ton, a sharp increase on last year's prices that averaged at R4,400 a ton. SA consumes about 3.4-million tons of wheat a year and usually imports between 1.5-million tons and 1.9-million tons a year.
Imports are more expensive as they are purchased in foreign currency and also attract import tariffs. Since March 2020 import tariffs have increased by 61% to R832.10 a ton. Makube says even if international prices drop, local farmers are protected because import tariffs prevent importers from undercutting local prices.
He says the rand plays a huge role in the import bill. A weaker rand may increase the import bill, which for wheat for 2019 was R5.70bn, up 6% year on year, while the corresponding quantity was down 7% year on year at 1.84-million tons.
3.4 million tons -The amount of wheat SA consumes a year
The rand value of projected imports for 2020 have not yet been calculated as it depends on the value of the rand. SA imports wheat from Russia, Poland, Canada and the Ukraine, and some imported wheat is sold to neighbouring countries.
But Maree warns that one flush harvest will not be sufficient to pull farmers, especially single-crop farmers, out of financial dire straits. "Farmers have come out of three pretty tough seasons," he says. Ruan Schutte, agricultural economist at Grain SA, says the current good prices give producers support, which will help them recover from the previous three years of drought conditions.
"The damage done during those droughts is going to take more than one good year like this year to get out of the system and recover the cash flows of producers," he says. Makube is optimistic about next year's harvest. The moisture content in the soil is better than last year and will carry over.
A 90% chance of above-normal rainfall is also expected. Another good crop will get the farmers out of dire straits, Makube says. But larger harvests also have challenges. The greater the yields per hectare, the lower the quality, says Schutte.
Rain during the harvesting process delays the harvesting schedule and impacts on the quality of the wheat. A reduction in quality reduces the farmer's earnings per ton of grain. In dry areas fires are a concern.
Schutte says combine harvesters can cause fires if a spark hits the wheat but he has only heard of two small fires in the Western Cape this season.
Both fires were contained with minimal crop damage.
The government's resources are on standby. Strydom applauds the government's decision to advance the 2020 Western Cape fire season declaration to ensure that resources are available with immediate effect to protect the harvest.
This includes firefighters, firefighting equipment and trucks, monitoring of water resources to fight fires, 30 aircraft on standby - both helicopters as well as fixed-wing aircraft - as well as satellite surveillance to track potential hotspots.
Maree "is not worried" about fires because of precautionary measures such as fire breaks that prevent the spread of blazes that farmers ensure border their crops.
Wheat is not the only commodity that has seen a price increase. Grade A beef, lamb and pork will cost consumers about 15% more than last year.
Grade A beef is now just over R50/kg, lamb prices are up 28% and mutton has spiked 40%. Pork is now at R30/kg, 37% higher than the three-year average.
But Makube says all intensive livestock producers are making less because the price of yellow maize, used for animal feed, costs 25% more than last year - for the last three months the price has been R3,342 a ton.
He says that despite a huge harvest-increased demand from countries such as China, the destination of 28% of SA's maize, animal feed pushed the price up.
Gerhard Schutte, CEO of the Red Meat Producers Association, says the price increases for meat will benefit farmers.
The farmgate price - the amount farmers get paid - is about 50% of the consumer price. He says this is more than many other agricultural activities, such as wheat and maize.
