Agrilogics
  • The wait for El Niño is on. Most computer forecast models continue to suggest an El Niño event will begin evolving in September and it may be a significant event for a few months during the heart of the Northern Hemisphere winter. This year already has been an interesting year for crop weather with drought still lingering in Europe, and dryness from eastern Ukraine into Russia’s Volga River Basin and in Canada’s Prairies.

  • At a land indaba on 3 October City Press and Rapport will bring decision-makers together in Johannesburg to critically evaluate land reform since 1994 and examine solutions to the political and economic challenges that we as a nation face.

  • The world was formally introduced to the concept of “drones” through the use of unmanned, remote-control airplanes used in tactical military missions around the turn of the 21st Century. It seemed like science fiction, and much of how they worked was shrouded in controversial secrecy.

    It wasn’t long until the first consumer drones hit the market, replacing spy photography gear or weapons with consumer-grade cameras that fit on tiny helicopter-looking contraptions that fly using a standalone remote control or a connected app via smartphones.

    In the years since, Jeff Bezos has boldly claimed that Amazon will one day use an army of drones to deliver packages even faster than it already does, while virtually every Instagram photographer has started using drones to achieve a unique perspective on otherwise-common images.

    In addition to the far-flung and the trivial, drones are already transforming many jobs and industries, with more to come in the near future.

    How Drones Work

    Almost everyone who looks at a consumer-grade drone will sum it up as something along the lines of “a remote control helicopter.” Drones and helicopters both use rotating blades to generate vertical lift, but the four diminutive blades on most drones act to provide a more stable flight with more potential for micro adjustments than a single blade would provide.

    Plus, a set of two or three inch blades can’t inflict nearly as much damage as a single 12-inch blade might!

    Like helicopters, the rotating blades generate lift through thrust. The faster the blades spin, the more thrust a drone generates. Thanks to the incredible amount of computing power packed into even the most entry-level drones, users can pilot a drone using a simple joystick interface while the software behind the scenes makes a staggering amount of calculations.

    Want to tilt the whole drone a few degrees to change the camera angle, while still flying slowly forward? Two joysticks handle pitch, horizontal travel, and vertical climb or descent. But the four propellers are all playing off each other in incredibly complex ways, acting to generate differing amounts of lift fore and aft to create a suitable angle for the camera, then holding that angle while adhering to the user’s desired control inputs.

    If you go to YouTube and watch any videos made by the latest round of drones, the stability is staggering; the videos often have an almost eerie quality to them because of drones’ unique ability to fly lower and maneuver more quickly than helicopters, all while the drone operator previews video footage in real time.

    The four blades offer a surreal, stable, silent flight pattern that means drones have replaced helicopters for even the majority of professional and high budget film projects.

    Uses for Drones

    Aside from putting amateur photographers in the sky to capture shots that just a decade ago would have required an expensive helicopter charter, drones are enjoying  widespread adoption across a wide array of industries.

    Here’s a look at a few of the ways drones are already transforming our world by placing cameras in the sky.

    Safety
    Security cameras have been in use for decades, but now cameras can be operated beyond the realm of traditional mounting points on buildings or pillars.

    For special events, tough-to-secure areas, and even tactical search and rescue missions, drones allow all different types of first responders to monitor situations using livestreaming of video or infrared cameras.

    From border patrol to seeking out missing persons to simply monitoring large crowds, drones are making the world more secure and providing a tool that dramatically cuts down on costs and the environmental impacts associated with helicopter flights, all while minimizing the disturbance created by choppers at low altitudes.

    Firefighting
    Infrared camera-equipped drones are especially useful for identifying and fighting forest fires in remote areas. Drones are augmenting or replacing traditional fire watch towers across forest districts, allowing small, centralized teams to monitor massive amounts of forest for hot spots or emerging fires.

    Infrared technology paired with the flight abilities of drones allows firefighters to identify blazes the moment they ignite, long before smoke may be visible on the horizon. And some fire agencies are now testing unmanned firefighting drones which actually can deliver flame retardant like today’s firefighting planes and helicopters.

    Farming

    Farmers have made impressive use of drone technology. There are early versions of drone crop dusters and specialized fertilizers, and these applications are poised to grow as commercially available drones grow in size and power.

    And instead of walking the rows to monitor crop health and yield, drones allow farmers to survey massive amounts of land in minutes instead of hours–or even days. The increased efficiency of crop monitoring will lead to more efficient farming, while infrared technology again allows yield and health to be monitored at more precise levels than ever before, thus minimizing waste and maximizing crop production.

    Scientific Exploration
    From massive drones that glide high above where most airplanes fly and can circumnavigate the globe without stopping to tiny drones that ride wind and oceanic currents to study how they work, scientists are using drones to study wildlife, identify weather patterns, monitor the ozone layer, and plenty of other amazing uses.

    From minimally-invasive photography and videography to massive surveying and mapping projects, drones are capable of going places that humans cannot; and are much cheaper and safer to operate in hazardous conditions like hurricanes or remote environments with no developed landing strip.

    Revolutionize Photography and Inspection Procedures
    Aside from the consumer-facing uses that remote-control flying cameras provide, drones have revolutionized industry applications like real estate photography and inspections and even hazardous industrial inspection procedures.

    Whether it’s providing an aerial video tour, inspecting buildings for structural damage, or providing routine inspections to risky structures like power plants or offshore oil rigs, the ability to get a camera up close and personal while maintaining a safe distance is potentially a life-saver in more ways than one.

    Plus, who doesn’t like seeing a bird’s eye view when shopping for new houses?

    Future Drone Applications

    Perhaps the most notorious futuristic drone application is Jeff Bezos’ bold vision to deliver Amazon packages via a fleet of drones. His plan was immediately met with huge amounts of skepticism and naysayers who envision the logistical and safety nightmares associated with automated drones zipping all over urban areas while hoisting boxes full of who-knows-what. 

  • About one in ten rookie drone pilots are destroying their craft on the very first flight, numbers from a repair specialist suggest – and many are doing so in stupid and preventable ways, while not being covered by insurance.


    By current best estimates there are now between 40,000 and 50,000 drones in South Africa, as entry-level prices continue to drop. Almost all those drones are flown by amateurs; there are just 663 Remote Piloted Aircraft Systems in the country, according to the 2018 State of the Drone Report.

     
    It’s not a legal requirement for hobby drone pilots to obtain licenses, but it can help to reduce the number of costly crashes. And as Business Insider South Africa discovered in 2018, many insurance companies are unwilling to cover these.


    Unskilled part-time pilots, the high cost of repairs, the equipment’s relative fragility, the potential risk of injury and damage to property, and the complex legal framework surrounding the informal flying of drones, have lead many mainstream insurance companies to shut the door on policies - and the costs of repair, or liability, often rests solely with the hobby pilot.

    1,200 drone accidents in 2019 – so far – at one repair shop.
    According to Fixology, a drone repair company based in Cape Town, drones are falling out of the sky regularly. 

    In the first eight months of 2019, Fixology booked in around 1,200 damaged drones.

    The company’s Nathan Appel says as many as 75% of the accidents they see are due to pilot error.

    This includes owners testing out their drones indoors without a stable GPS signal, and not doing a proper preflight check before take off.

    “It’s not uncommon for hobbyists to forget to ensure propellers and batteries are properly fitted before flying off,” says Appel. 

    Although most hobby drones now come equipped with technology to avoid the most basic of accidents, amateur pilots often inadvertently override these, or fail to activate them correctly.

    One key feature built into most good quality consumer drones is a return to home functionality, that returns the device to its starting point in the event of low battery, loss of signal, or other difficulties. 

    But even this isn’t foolproof. Some drone pilots set the return GPS location to a moving object, such as a boat - which means that when the drone returns to home, the pilot has moved on.

    “Many accidents happen because pilots don’t wait for a full satellite signal on the drone before takeoff, resulting in no return to home location being logged on the device,” says Appel.

    And many rookie crashes are due to battery issues.

    “Some also fly a drone out with the wind, without taking into account the return time, given the force of the wind holding it back on the return home,” says Appel. “And some pilots simply forget to check their battery levels.”

    A high volume of cellphone network towers and satellite dishes will confuse their drones, which is another leading cause of accidents that Appel sees at Fixology. And some inadvertently deactivate object avoidance sensors by flying their drones in sport mode - causing them to crash unexpectedly into fixed objects.

    And being in the Cape, Fixology repairs drones used for more than just photography. “In-experienced fishermen flying with bait droppers sometimes cause the line to be tangled in the propellers,” says Appel, “causing the drone to crash in the ocean.”

    According to Fixology the number of accidents on the very first flight has dropped in recent years, thanks to the increase in accident avoidance technology. But even so, they estimate that as many as 10% of users crash their drones fresh out of the box.

    Not all drone accidents are the fault of the pilot, though.

    “Manufacturing faults, electronic parts malfunctioning, and faulty batteries can cause the props to stop in mid-air,” says Appel. “And using a non-recommended smart device to fly the drone, and getting a bad feed, can also result in blank screens and crashing”. 

    When drones do fall out of the sky, repairs aren’t cheap.

    The parts that Fixology repairs the most - things like gimbals, sensors, propellers, legs and arms - can cost thousands to fix or replace. And if the crash is directly into the ocean or a body of water, you can write the drone off altogether. 

    Basic repairs to gimbal ribbons, landing gear, and remotes on entry level drones like the DJI Mavic start at R1,500, says Appel. But if you manage to destroy the gimbal on your DJI Phantom - one of the most popular drones in South Africa - you’ll be at least R14,500 out of pocket.

    More insurers now cover drones – but it doesn’t come cheap.
    Insuring drones in South Africa is difficult, in part because of the high rate of accidents, cost of repairs, and potential liability to third parties.

    But according to Drone Covered’s Ryno Du Toit, the uptake for insurance from hobby pilots has also been slow. Drone Covered is one of the few companies in South Africa to insure non-commercial pilots and hobbyists, both on the ground and inflight.

    Given the expensive repairs, and potential liability, Du Toit is unsure why more drone hobbyists aren’t taking up insurance, but he suspects because many fly so occasionally, and just for fun, they’re willing to take the risk of not insuring.

    Drone Covered, like most insurers, are also particularly strict about claims - any breach of Civil Aviation Authority rules will lead to the claim being repudiated. And before any claim is processed, they will check the flight logs. Still, Du Toit says that about 10% of their current client base has logged claims, and of those, roughly 75% were successful.

    Some larger insurance companies are also starting to insure non-commercial drones, though somewhat reluctantly. Hollard and Santam Aviation now offer full and comprehensive cover for private and commercial operators. And AlexanderForbes has a similar policy - they’ll cover the drone for loss and damage, though premiums go up significantly if this occurs while the drone is in use.

    Most larger insurance companies require that pilots first attain official licenses to fly, though. This process, which runs through the Civil Aviation Authority, is arduous - particularly for the occasional weekend warrior.

    As a compromise, Drone Covered offers incentives to those hobby pilots who undergo private proficiency training - both online and in-person. They will halve excess, from 20% to 10%, and increase liability cover, from R500,000 to R2.5 million.

    But drone insurance isn’t cheap - it will likely cost around 12% of the retail cost of the drone.

    Insurance requirement or not, most experts recommend that users do some proficiency course, and are well versed in CAA laws. Flying a drone in South Africa is governed by several laws, and it’s a hobby that can have severe legal consequences, including fines and possible jail time for those who break them.

  • Soil is the material found on the surface of the earth that is composed of organic and inorganic material. Soil varies due to its structure and composition. Learn about the different types of soil and soil structures in this video lesson.

  • In 1993, President Cyril Ramaphosa, who was then secretary-general of the ANC, spoke at the Land Redistribution Options Conference in Johannesburg, where a future plan for land reform was being thrashed out. He said in his opening remarks:

    "The massively unequal distribution of land is not merely an unfortunate legacy of apartheid; it is the totally unacceptable continuation of apartheid."

  • You may have seen robotic dairies where cows approach a machine to be milked when they want. You likely have seen "rotary" parlors that put more than 100 cows on a merry-go-round to be milked by people.
    In April, the family installed a "robotic, rotary" dairy parlor — only the fourth in North America and the 15th in the world.

  • This week, we will commemorate World Food Day on Wednesday, 16 October 2019. This event also presents an opportunity to review South Africa’s standing in the food security ladder. 

    Food security is achieved when three objectives are met: when food is available, accessible in the right quantities and at the appropriate nutritional levels for all citizens at all times. In 2018, South Africa was ranked 45th most food-secure country out of 133 countries measured in The Economist Global Food Security Index. This was relatively good, compared to other BRICS countries. For example, although South Africa’s average income was 25 spots behind Russia, 23 behind China and 19 behind Brazil, the county’s food security status was a relatively closer match-up, ranking just six spots behind Brazil, three spots behind Russia and one spot ahead of China (see Table 1 in the attached file).

    What is worth reiterating is the fact that despite South Africa’s relatively lower average income, the country still manages to punch above its weight in terms of food security. This is a testament to the country’s competitive agricultural sector, and its ability to supply food at a relatively low cost.

    Although the Food Security Index indicates South Africa is food-secure, there are pockets of food insecurity within the country when you consider a household-level perspective. This speaks to the general inequality in the country, where some households are food secure, and a sizable portion of other low-income households are not, primarily due to affordability. This scenario is more prevalent in Limpopo, KwaZulu-Natal and the Eastern Cape.

    While there are a number of interventions that can assist in supporting households’ access to nutritious food, one form of intervention that can boost rural households’ income is through job creation in the agricultural sector. There is anecdotal evidence that in areas where government and private sector have collaborated in agricultural development, some level of success in terms of job creation could be achieved.

    With agriculture having gained prominence as one of the sectors that could bring about rural economic development and job creation in South Africa, the government’s approach to realising this vision should be regionally focused. Meaning, the aforementioned provinces should be the key priority in resource allocation, as the frontiers of agricultural expansion. Such an approach not only makes sense in terms of reducing poverty but also in exploiting the potential of underutilised land. Limpopo, KwaZulu-Natal and the Eastern Cape arguably have about 1.6 million to 1.8 million hectares of underutilised land which can be sustainably farmed for increased food security over the long term. This is according to a 2015 study by McKinsey Global Institute.

    Admittedly, the current land governance system -- communal land -- has been cited as one of the hindrances in agricultural development in these provinces, as it limits investment. But, solving such matters can take a long time and land reform policy is still being debated across the country.

    The near-term practical approach that can make a difference is structuring an innovative agricultural finance instrument -- such as blended-finance -- which pulls in the capital and human capital from both private and public sectors. In parts of the Eastern Cape, agribusinesses such as The Co-op, are currently engaged in such arrangements with the provincial government and in areas where projects have been implemented there has been some level of success. These are some of the approaches that are needed for boosting households’ income so they can have access to nutritious foods in the near term, while broad development policies are yet to be operationalised or implemented.

    Large global grains supplies

    The United States Department of Agriculture (USDA) reaffirmed the view that the world has relatively large grains supplies this year. In its October 2019 update, the agency maintained its 2019/20 global wheat production estimate at 765 million tonnes, which is 5% higher than the previous season. As a consequence of this, the stocks could increase by 4% y/y to 287 million tonnes. This will essentially keep global wheat prices are relatively lower levels, which is beneficial for consumers in importing countries such as South Africa.

    Moreover, the USDA left its 2019/20 global maize production estimate roughly unchanged from September 2019, at 1.1 billion tonnes. Admittedly, this is 2% less than the previous season because of a poor harvest in parts of the US and Argentina amongst other countries, but these are still comfortable levels in covering the world’s maize needs. The reduction in production, while consumption is relatively strong, means that the stocks could fall by 7% y/y in 2019/20 season.

    Unlike the aforementioned grains, the 2019/20 global soybean production was revised down by 1% from levels seen in September 2019 to 324 million tonnes. This was largely on the back of anticipated poor yields in the US and Paraguay. The current estimate is now 6% less compared to 2018/19 production season. The poor harvest in the US because of wet weather conditions at the start of the season is central to this anticipated reduction in global soybean harvest.

    Another important factor that we continue to monitor in the soybeans space is its consumption, specifically because of fears that African swine fever could have a negative impact. So far, however, global soybean demand remains solid. The consumption trend and a decline in production could be supportive of soybeans and its by-products prices in the near term. Similar to wheat, South Africa is a net importer of soybeans and a notable importer of soybean oilcake (see Figure 1 in the attached file), then an uptick in global prices could influence the domestic market and business.

    Harvest activity picking up momentum in parts of the Western Cape winter crop regions Not much has changed in the Western Cape weather conditions since our previous note. But rainfall at this point would rather cause damage in some winter crop growing areas rather than help boost yields as we would have liked to see in the past couple of weeks. Farmers in parts of the Southern Cape and Overberg are in full swing with canola harvesting and at initial stages of wheat and barley harvesting. This means drier weather conditions will be ideal for the next couple of weeks, which is precisely what the forecasts for the next two weeks show – see Figure 2 in the attached file.

    With that said, the drier weather conditions and heat experienced over the past couple of weeks within the Western Cape has caused yield losses. As previously highlighted, the Western Cape is a major producer of winter crops, accounting for 61% of area plantings in winter wheat and nearly all canola, hence we placed greater emphasis on crop conditions within this province.

    Other major winter crop producing provinces -- Northern Cape, Free State and Limpopo, amongst others -- are mainly under irrigation and can, therefore, withstand harsh conditions as dams are at levels over 50% on average as of 07 October 2019. Farmers’ reports out of the Free State suggest that the wheat crop in the province generally appear very good. The same is true for the Northern Cape.

    South Africa’s Crop Estimates Committee (CEC) currently forecasts the 2019/20 wheat, barley and canola production at 1.81 million tonnes, 389 260 tonnes and 88 800 tonnes, which is 3%, 8% and 15% down from the previous season.

    Looking ahead, we see a risk that the CEC might revise down further its winter crop production estimates when the next update comes out on 24 October 2019 given that weather conditions have been harsh in parts of the Western Cape, and in turn, resulted into yield losses.

    From a data front

    The data calendar is quite light this week. On Monday, the US Department of Agriculture will release its weekly update of the US crop conditions data. This will give us a sense of the US crop-growing conditions, and thereafter the potential size of the harvest.

    On Wednesday, SAGIS will release the grain producer deliveries data for the week of 11 October 2019. This covers both summer and winter crops. In the coming weeks, the deliveries data will give us a sense of the pace of the winter crops harvest activity.

    On Thursday, we will get the weekly grain trade data (wheat and maize) for the week of 11 October 2019. In brief, maize exports for the 2019/20 marketing year have thus far amounted to 495 645 tonnes. Looking ahead, we expect South Africa to remain a net exporter of maize this marketing year, although the volume will most likely fall by half from 2018/19 to about 1.1 million tonnes. At the same time, we expect maize imports of about 450 000 tonnes, all yellow maize, mainly for the coastal provinces of the country. This is up from an estimated 171 500 tonnes in the 2018/19 marketing year. The country has thus far imported 251 708 tonnes of yellow maize, all from Argentina.

    In terms of wheat, South Africa remained a net importer in the 2018/19 marketing year, although the recovery in the country’s domestic wheat production led to a decline in the volume of imports. South Africa’s 2018/19 wheat imports fell by 36% from the previous season to about 1.4 million tonnes. Looking ahead, South Africa’s 2019/20 wheat imports could increase to 1.6 million tonnes because of expected lower harvest on the back of unfavourable weather conditions in the Western Cape. The first import consignment of the 2019/20 marketing year was 32 841 tonnes, from Germany, Russia and Poland. This week we will receive data for activity in the week of 11 October 2019, which is the second week of this marketing year.

  • In the midst of the latest merry-go-round with China, once more foreign aid takes centre stage with a bouquet of loan offers, cancellations and grants concocted for the continent. This helps, but is far from the answer to our medium- and long-term development goals. The answer lies with fairer trade and with the continent looking within itself for products and markets. 

  • A first in the world: a legally binding employment contract that uses images with minimal text South African berry and citrus farms introduce comic contracts Creative Contracts is a Cape Town-based firm that serves the relationship between the employer and employee on a growing number of South African citrus, berry and vegetable farms, where the temporary labour force is often vulnerable and semi-literate.

  • KUHN Farm Machinery has upgraded its range of PROFILE trailed mixer wagons with the addition of a telescoping and tilting distribution conveyor belt.

  • A stable, predictable and conducive policy environment is crucial for developing any sector and the economy at large. The expansion in South Africa's agricultural output, which since 1994 has now more than doubled in real terms, has mainly been achieved despite the lack of substantive support to commercial agriculture and various inconsistencies in policies. We have witnessed sustained output growth across South Africa's agricultural subsectors at a more micro level – horticulture, field crops and livestock. The improved production has been supported by technological innovation to improve seed yield and agrochemicals and post-harvest technologies. South Africa's open trade policy approach since 1995 has connected the country's value chains to the global economy, which subsequently boosted global demand for agricultural products and incentivized domestic farmers to increase production. 

     

     The start of every year presents an opportunity for business to review strategies, and some government departments to review policies. In 2020, the Department of Agriculture, Land Reform and Rural Development focused on four broad policy-guiding themes for driving agricultural expansion, inclusive growth, job creation, an integrated rural area and eradicating hunger, namely;

     

    1.    Transformation and redistribution;

    2.    Addressing inefficiencies;

    3.    Growth and expansion; and

    4.    Coordinating policies and investments for the integrated rural economy.

     

     First, the transformation and redistribution pillar encompassed the land reform programmes, with notable progress in 2020 being the announcement of 700 000 hectares of state-owned land available for use by the public. While this is not all new land, some already occupied by beneficiaries, the decision nevertheless shows progress in releasing the land on government hands using clear and transparent policies such as the recently adopted Beneficiary Selection and Land Allocation Policy. Our criticism of this has been that the government should have released the land with tradable leases or offer the beneficiaries an option to buy the land after a minimum of five years of working the land. Moreover, the land release should simultaneously go with a farmer support programme to ensure newly settled farmers have access to working capital.

     

     Another significant development on the land reform front was the new Expropriation Bill which was gazetted towards the end 2020, outlining a uniform process for all expropriations to take place and a uniform means to calculate just and equitable compensation. Moreover, the National Policy on Comprehensive Producer Development Support and Blended Finance programmes also saw some progress in 2020 and should be completed and launched early this year. Lastly, the development of the Land Donation Policy, which encourages private landowners to participate in the redistribution of land voluntarily, is one of the policy changes that could accelerate the transformation process and redistribution of agricultural land. The process will require incentives to be aligned appropriately as detailed in the Presidential Advisory Panel report on Land Reform and Agriculture.

     

    This "transformation and redistribution" pillar is likely to gain momentum in 2021 as the majority of these land policies will be introduced to Parliament for endorsement. We are likely to see progress on the release of the land, and this will be an important area to watch as it promised transparency this time around and that there will be bias towards the youth, women and other vulnerable groups; unlike the past where a disproportionally higher number of older men benefited on land reform. Another critical area worth keeping an eye on is the broader discussion about the amendment of Section 25 of the Constitution to enable land expropriation without compensation. There was little discussion on this point in 2020 as the work of the committee that was tasked to "make explicit what is implicit" in the current wording of the Constitution was interrupted by the pandemic. This year there will likely be momentum on this discussion. Our view has always been that the concept of 'expropriation without compensation' is not the desired path for agricultural development because of various economic risks outlined in the past. As an organization, we are not in support of it.

    Second, the government promised to address the inefficiencies that exist in both legislation and infrastructure. Addressing the legislative inefficiencies will mean increasing human capital within the Department of Agriculture, Land Reform and Rural Development, and working closely with the private sector and broader social partners. This will entail leveraging the social partners' networks, capital, know-how, and good will to bring about the sector's growth and transformation. The interventions to address the inefficiencies will differ from subsector to subsector. For example, some subsectors might require improvements on export-related and water-efficiency matters, while others might need increased efficiencies on the registration of certain input products to increase productivity. An essential requirement here will be for government to be proactive in engaging with the private sector and broader social partners about their specific needs. On the infrastructural matters, we are less optimistic that there will be notable progress in the near term given the fiscal constraints and continued pressure to contain the spread of the pandemic and secure the vaccines. Importantly, this is not a task carried out by the Department of Agriculture, Land Reform and Rural Development per se, but by other line departments. Perhaps, a better barometer on this will be through monitoring progress on the national infrastructure programme headed by the Infrastructure Office in the Presidency.

     Lastly, the government's growth and expansion policy focus is a positive step. While there were no tangible results on this point in 2020, the government and social partners' progress on the Agricultural Master Plan thus far is positive. We expect the Master Plan's launch in the first quarter of the year. After the launch, the material work on growth and expansion in the sector will begin. The two points mentioned above are also the key pillars of change in the industry. The general Master Plan theme will likely dominate and provide direction to the Department of Agriculture, Land Reform and Rural Development's approach on broader farmer development initiatives this year.

    Trade will also continue to be a part of the policy discussions as the South African agricultural sector will seek access to additional markets and attempt to improve access to the new markets. Moreover, an increase in production will need to be anchored on increased export potential and domestic agro-processing capacity to replace food imports, where it is feasible. Aside from the recently launched African Continental Free Trade Area, other South African markets should seek increased access to India, China and others, including Eastern Europe.

    Other essential points that did not dominate the policy discussion in 2020, but will likely be on the agenda in 2021 are; agricultural finance and commercialization of black farmers and the development of rural areas. The agricultural finance discussion will probably build from the Land Bank’s liquidity challenges and broaden in search of new and efficient financing methods. In terms of the commercialization of black farmers, this could gain momentum, but not necessarily at the expense of smallholder farmers’ support and initiatives. The government could support commercialization of the land released to various individuals as part of the 700 000 hectares announced in 2020. The microfinance, targeting the most vulnerable subsistence and household farmers, announced by the department at the end of 2020, is fresh thinking. This will build a group of new smallholder farmers that can later be financed by private financial institutions and agribusinesses. The progress or success in this point, however, will hinge on the improvement in the financing discussion and mechanisms put in place to distribute these funds in an efficient and corruption-free manner, especially at provincial and district levels. Perhaps the Land Reform Fund raised in the Presidential Advisory Panel for Land Reform and Agriculture could offer a solution in creating affordable blended finance instrument.

     In summary, South Africa's agricultural policy focus will likely not deviate much from the path set out in various speeches by the Minister of Agriculture, Land Reform and Rural Development, Ms Thoko Didiza, which is what we have outlined above. Financing, which is the lifeblood of any success in the policy priorities and programmes mentioned above, could become a prominent issue of the policy discussion, in a broader sense than the narrow focus of the blended finance instrument discussions of the past year.

    The above text benefited from discussions with Prof Johann Kirsten and Dr Sifiso Ntombela. Any errors, are however, exclusively my responsibility.

     

    Weekly highlights

     

    After a solid performance in 2020, SA agricultural machinery sales to cool off in 2021

    Higher agricultural output gains in 2020, coupled with relatively higher commodity prices, improved farmers' finances, which subsequently benefited the allied industries. A case in point is South Africa's agricultural machinery market which registered a notable improvement from the previous year. Tractor sales amounted to 5 738 units, up by 9% from 2019, with combine harvester sales up by 23% from the same year, amounting to 184 units. These sales are nearly as high as in 2018, which was also supported by higher grains output in the 2016/17 production season.

    As recorded in the 2020 fourth quarter results of the Agbiz/IDC Agribusiness Confidence Index (ACI), the agricultural market sentiment remained positive. The ACI rallied to 61 from 51 points in the third quarter, which is its highest level since the third quarter of 2014. A level above the neutral 50-point mark implies that agribusinesses are optimistic about business conditions in South Africa. The optimism is on the back of both the above-mentioned higher agricultural output in 2019/20 production season, coupled with higher commodity prices and optimism about the production conditions in 2020/21 production season.

    Ordinarily, in a year of higher agricultural output, commodity prices would soften. But in 2020 and into the beginning of this year, the rising demand for grains in China provided support to global prices, which influenced the domestic market. Most recently, an added factor is the persistent dryness in parts of Argentina and Brazil, which has also supported the rally in grains prices. The rising demand for South Africa's grains in Southern Africa and the Far East markets, coupled with the relatively weaker domestic currency, also supported domestic grain prices. Farmers were on the right side of having supplies, in an environment with favourable prices, and thus the slight improvement in the finances that supported the increased machinery sales.

    The higher sales were also a sign of confidence about the 2020/21 production season's planting conditions. As early as October 2020, farmers already intended to increase the area plantings for summer crops by 5% year on year to 4.15 million hectares. These planting data comprise yellow and white maize, sunflower seed, soybeans, groundnuts and dry beans. There is an expected increase in area plantings of most of these crops, except for sunflower seed, where the area plantings were set to decline by 4% y/y to 480 500 hectares, which would be the smallest area planted in nine years. This likely decline in sunflower seed planting is mainly on the expected shift in some hectares to white maize, in part, due to attractive prices.

    As best as we can tell, farmers have followed through with these planting intentions, and the crops are in good shape across South Africa. The preliminary indications suggest that the 2020/21 season might be better than the previous season, at least for certain crops such as maize. At the end of February, the Crop Estimates Committee will release its first production estimates which will provide insights to this view.

    However, the large harvest in 2020/21 production season might not lead to another year of higher agricultural machinery sales. Typically, a relatively good sales year is likely to be followed by a somewhat lower sales period as the replacement rate of machinery with new ones would ordinarily be down from the previous years. Moreover, there will likely be pressure from weak exogenous macroeconomic fundamentals such as the weaker domestic currency, which will lead to higher prices for imported agricultural machinery.

     In sum, while a sizeable agricultural output supported the allied industries such as farm machinery in 2020, another essential factor is that it followed a year of reasonably low sales, which meant that a need for replacement of some machinery was slightly higher. These fundamentals are different this year. We also think that stock of machinery imported at a weak exchange rate will be more available this year, pushing prices higher and discouraging buying by some farmers. We are therefore not optimistic about the near-term agricultural machinery sales. However, the agricultural output promises to be a good harvest, and the sentiment in the sector is generally positive as illustrated in the ACI results.

     

    Recent developments in the global grains market

     The key feature of the global agricultural markets, particularly grains, at the end of 2020 and into the beginning of 2021 are the rising prices. The FAO Global Cereals Price Index reached 116 points in December 2020, which is the highest level since June 2014. The higher prices were evident across major commodities and underpinned by various factors. In the wheat case, the unfavourable weather conditions in parts of the US and Russia were the primary drivers. In sorghum and maize, China's rising demand was the main driver of prices, along with dryness that threatened growing conditions in Argentina and Brazil.  In the rice market, the tight supplies in Thailand and Vietnam led to higher prices which spilt over to January 2021.

     Nevertheless, while there are various regional specific production challenges, the global grains supplies are still in fairly good shape on aggregate. For example, the latest estimates from the United States Department of Agriculture (USDA) placed the 2020/21 global wheat production at 772 million tonnes, up by 1% from the previous season. The ending stocks are estimated at 313 million tonnes, up by 4% from the 2019/20 season in the same season. The relatively higher ending stocks suggest that increases in wheat prices could be temporary as there are sufficient supplies in the global market. The 2020/21 maize production estimate has been revised down notably from estimates released at the start of the marketing year, but the expected harvest is still sizable. The 2020/21 global maize harvest could amount to 1.13 billion tonnes, which is a 2% annual increase. An uptick has compensated for the expected decline in Argentina's maize production in supplies in other geographies. The growing demand, specifically from China, which boosts global maize consumption means that the stocks could be lower than in the previous seasons. The USDA estimates a 6% year-on-year decline in global maize stocks to 283 million tonnes in 2020/21. The relatively lower ending stocks mean that global maize prices could remain slightly elevated in the near term.

    In rice, the 2020/21 production could amount to 501 million tonnes, up marginally by 1% from the previous season. The stocks are also set to lift by 1% from the 2020/21 season to 180 million tonnes, which means the recent price rally could be temporary, as there are expectations of large supplies. These developments are essential for South Africa, both as an importer of some products such as wheat and rice and exporter of maize. The global effects influence the domestic price trends.

    DATA RELEASES THIS WEEK

    We start the year with a fairly quite week on the agricultural calendar. On the global front, on Thursday, the USDA will release the US weekly export sales data. In recent weeks, China has been buying large volumes of both maize and soybeans, and the demand is expected to hold as the country continues to rebuild its pig herd which was devastated by African swine fever in 2019.

    On the domestic front, on Wednesday, the South African Grain Information Service (SAGIS) will release the weekly grain producer deliveries data for the week of 15 January 2021. This data cover both summer and winter crops. But the focus has shifted towards winter crops whose harvest is under way. In the week of 08 January 2021, about 9 042 tonnes of winter wheat were delivered to commercial silos. This placed the 2020/21 wheat producer deliveries at 1.83 million tonnes, which equates to 85% of the expected harvest of 2.15 million tonnes. Also, on Wednesday, Statistics South Africa will release the Consumer Price Index (CPI) data for December 2020. For background, South Africa’s food price inflation accelerated to 5.9% y/y in November 2020 from 5.6% in the previous month.

    On Thursday, SAGIS will release the weekly grain trade data also for the week of 15 January 2021. In the previous week of 08 January 2021, South Africa’s 2020/21 total maize exports were at 1.92 million tonnes, which equates to 77% of the seasonal export forecast (2.50 million tonnes). In terms of wheat, South Africa is a net importer, and in the week of 08 January 2021, imports amounted to 429 964 tonnes. This equates to 28% of the seasonal import forecast of 1.54 million tonnes.

     

  • The economy will not recover as long as the ANC continues with its socialist and communist political and economic systems that destroy economic growth and prosperity. Therefore, a short-term stimulus and recovery package will not make any difference because economic growth is a long-term process that must be based on economic principles, "says independent economist, Fanie Brink.

  • This morning President Cyril Ramaphosa tabled the government’s economic stimulus and recovery plan. The plan entails a range of measures covering a number of sectors, which will be implemented immediately. This is aimed at igniting economic activity, restoring investor confidence, preventing further job losses and creating new jobs.

  • On September 19, the International Research Institute for Climate and Society at Columbia University presented an update of its seasonal weather outlook, which remained somewhat unchanged from the previous month’s outlook. By this, I mean there is over 60% chance of El Niño developing over the 2018-2019 summer season. This corroborated the message shared on September 11 by the Australian Bureau of Meteorology which indicated a 50% chance of El Niño developing. 

  • The presence of the polyphagous shot hole borer (PSHB) had not been detected in South Africa until researcher, Dr Trudy Paap, noticed in February last year that it had infected the historic plane trees in the Pietermaritzburg Botanical Gardens. 

  • The 2018-19 summer crop production season will, in a few weeks’ time, start on a bad note. This is not only because of anexpected El Niño weather event, but rising input costs such as fertilizer, agrochemical and fuel, amongst others.

  • Agriculture that appears to be more eco-friendly but uses more land may actually have greater environmental costs per unit of food than “high-yield” farming that uses less land, a new study has found.

  • Scores of Heads of State and Government from Africa and other representatives convened in China’s capital Beijing for the Forum on China-Africa Cooperation (FOCAC) summit. 

Agrilogics

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