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Economical Impact of drought & disasters on agriculture
Drought Dialogue – Western Cape Government
Prof Ferdi Meyer
Bureau for Food and Agricultural Policy (BFAP)
23 June 2016
When talking about the impact of the drought on the
Agriculture, Food and Beverage sector…
• People matter
• The Environment matters
• Profits matter
Are we on track with NDP 2030 goals??
2 |
Example of Monitoring Drought Oct 2015 Nov 2015 Dec 2015
The Region and the drought
Impact of drought: 3 Thresholds
• Area planted summer crops • Pastures – first summer
growth • Impact on irrigation
agriculture still limited
• Critical for yields • Pastures-late summer
growth • Heat affecting fruits .. • Smaller dams and
boreholes affected
• Critical for all dams and boreholes etc
• Long-term damage on pastures
• All three industries affected
Oct Jan Feb Mrch
Dams levels
0
20
40
60
80
100
120
% F
ull
Last Year (%Full) This Week (%Full)
Source: DWS, 2016
White maize prices
0
500
1000
1500
2000
2500
0
1000
2000
3000
4000
5000
6000
7000
1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 2021 2023
Th
ou
sa
nd
to
ns
R/t
on
White maize
White maize imports White maize exports
White Maize - Import parity Randfontein SAFEX White Maize
White Maize Export parity africa
Livestock numbers
0
100
200
300
400
500
600
700
2013 2014 2015 2016
No
. An
imal
s
Cow herd
National Average
Eastern Cape
Free State
KwaZulu-Natal
Northern Cape
Limpopo
North West
Western Cape
Source: UFS survey for RPO
Livestock numbers
Source: UFS survey for RPO, BFAP calculations
75
80
85
90
95
100
105
110
2013 2014 2015 2016
Ind
ex
Herd Size: National
Cow herd Replacement Heifer Steer: 7-36 Months
Drought impact on food inflation
Food Inflation in the context of total inflation
% Share of CPI Basket % Share of CPI Food Basket
14.20
16.43
24.52
44.85
Food Transport Housing and utilities Other
25
32
3
12
4 2
11
5 7
Bread and Cereals Meat
Fish Milk, eggs and cheese
Oils and Fats Fruit
Vegetables Sugar and Confectionary
Other foodsSource: StatsSA, CPI Brief (2015)
What are we producing & consuming?
-100
-80
-60
-40
-20
0
20
40
60
80
100
0 1 2 3 4 5 6 7 8 9 10 11
Ne
t tr
ad
e/S
A c
on
su
mp
tio
n (
%)
Share of food expenditure (%)
2005
-100
-80
-60
-40
-20
0
20
40
60
80
100
0 1 2 3 4 5 6 7 8 9 10 11
Share of food expenditure (%)
2010 2024
Average Projected Increase 2016 with mitigating factors
January 2015
R282 per household per
month
R350 per household per
month
↑24%
Drought impact on staple basket Inflation
R364 per household per
month
↑29%
Average Projected
Increase 2016
Imports of GMO White Maize – 10% reduction in White Maize Price
Low-income households = R82 more per month
Drought impact on trade
Agri Net Trade: R12 billion - R15 billion
Source: Van der Burgh, AGIS 2014
Historic overview of drought impact
0
5000
10000
15000
20000
25000
30000
35000
40000
45000
500001
97
5
19
78
19
81
19
84
19
87
19
90
19
93
19
96
19
99
20
02
20
05
20
08
20
11
20
14
Mill
ion
Ran
ds
Real Gross Income
Horticulture
Field crops
Livestock
Agricultural growth
17 |
-20%
-15%
-10%
-5%
0%
5%
10%
15%
20%
25%
30%
Q1
/05
Q3
/05
Q1
/06
Q3
/06
Q1
/07
Q3
/07
Q1
/08
Q3
/08
Q1
/09
Q3
/09
Q1
/10
Q3
/10
Q1
/11
Q3
/11
Q1
/12
Q3
/12
Q1
/13
Q3
/13
Q1
/14
Q3
/14
Q1
/15
Q3
/15P
erc
en
tage
Year on year quarterly change in Agriculture, Forestry and Fisheries GDP
Agricultural production growth: 2011-2015
18 |
Mixed results & overall growth not fast enough – more can be done! Total growth over past 4 years = 7.6% on average across industries
-25%
-20%
-15%
-10%
-5%
0%
5%
10%
15%
20%
-100%
-80%
-60%
-40%
-20%
0%
20%
40%
60%
80%
Can
ola
Soft
Cit
rus
Lem
on
sSo
ybea
ns
Tab
le G
rap
es
Ro
oib
os
Sun
flo
we
rSh
eep
mea
tB
arle
yP
ou
ltry
Yello
w m
aize
Bee
fM
acad
amia
sD
airy
Po
rkW
oo
lEg
gsP
ears
Gro
un
dn
uts
Ap
ple
sO
rgan
ges
Nec
tari
ne
sP
ota
toes
Avo
cad
o P
ears
Man
gos
Litc
his
Win
e g
rap
esSu
gar
can
eP
lum
sG
rap
efru
itP
each
esW
hit
e m
aize
Wh
eat
Ap
rico
tsC
ott
on
Pru
ne
sP
inea
pp
les
% Change 2015 vs. 2011
Where should we focus?
19 |
Update on NDP Employment & Investment 2030 Matrix
Agricultural employment: 2011-2015
20 |
300 000
400 000
500 000
600 000
700 000
800 000
900 000
1 000 000
20
08
_1
20
08
_3
20
09
_1
20
09
_3
20
10
_1
20
10
_3
20
11
_1
20
11
_3
20
12
_1
20
12
_3
20
13
_1
20
13
_3
20
14
_1
20
14
_3
20
15
_1
20
15
_3
Employment in SA primary agriculture
New sample: Undercounting of agric in
the past
Since NDP in 2011, 70 000 new jobs in primary agriculture…but more can be done!
Expansion in irrigation
21 |
0
2 000 000
4 000 000
6 000 000
8 000 000
10 000 000
12 000 000
0
100 000
200 000
300 000
400 000
500 000
600 000
700 000
800 000
1990 2000 2010 2014
He
ctar
es
He
ctar
es
South Africa Field Cropped Boundaries (Excl. Sugarcane)
Pivots Orchards Subsistence & Smallholdings Dryland
Right Axis Left Axis
22%
Source: GeoTerraImages 2016
Reasons for vulnerability •Industries important to either job creation or food security are showing signs of vulnerability. Reasons are:
• Exchange rate volatility
• Labour environment volatility
• Trade tariff structures & non-tariff trade measures inhibiting growth
• High relative cost of capital
• Policy uncertainty with respect to land reform & land ownership dampens investment, innovation & overall drive
• Limited availability of water
• Unreliable supply of electricity
• Lack in cost effective logistics, mainly rail
• Lack of coherency between and within different government departments
22 |
Where to from here??
The drought in a global, regional and local context
Future Scenarios
Domestic
Macro
Economy
South
African Food
System
Global
Drivers
Regional
Drivers &
Outlook
Maize global price outlook
0
50
100
150
200
250
300
350
2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024
USD
/ t
on
Source: OECD-FAO, 2016
Livestock global price outlook
0
1000
2000
3000
4000
5000
6000
2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024
USD
/ t
on
(C
WE)
Beef Poultry Pork Sheep
Source: OECD-FAO, 2016
Low margins – high volumes
Regional implications
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
16.0
SA ZAM MOZ TAN MAL ZIM KEN
Mill
ion
to
ns
Maize production
2014
2015
EST 2016
Relative shift in area
0
500
1000
1500
2000
2500
20
00
20
02
20
04
20
06
20
08
20
10
20
12
20
14
20
16
20
18
20
20
20
22
20
24
Tho
usa
nd
hec
tare
s
WM
YM
WS
WW
SF
SB
CAN
White maize prices
0
500
1000
1500
2000
2500
0
1000
2000
3000
4000
5000
6000
7000
1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 2021 2023
Th
ou
sa
nd
to
ns
R/t
on
White maize
White maize imports White maize exports
White Maize - Import parity Randfontein SAFEX White Maize
White Maize Export parity africa
36% decline in 2017
-R 9 001 761
-R 854 548
-R 10 000 000
-R 8 000 000
-R 6 000 000
-R 4 000 000
-R 2 000 000
R 0
R 2 000 000
R 4 000 000
2014 2015 2016 2017 2018
En
din
g c
ash
su
rplu
s /
defi
cit
Northern Free State - Cash Flow
Scn 1 (50% area) Scn 2 (20% area) Scn 3 (0% area)
Farm-level Drought Implication: Cash flow
Negative cash flow positions until 2017/2018
Drought – 2015/16 production season
Production cost comparison
21 19 15 20
41
23
41 31 40 52 53
67 76
69 72
92 76
97
73
116
97 99
0
50
100
150
200
250
AR
33
0ZN
AR
70
0SB
A
AR
90
0W
BA
BR
13
00
MT
BR
19
5P
R
UA
67
00
PO
*
US1
21
5IN
C
US7
00
IA
ZA1
60
0EF
S
ZA1
60
0N
FS
ZA1
70
0W
FS
Argentina Brazil Ukraine US South Africa
US$
per
to
n m
aize
pro
du
ced
Seed Fertilizer Plant protectionCrop Insurance Contractor DieselTotal establishment cost Average: South Africa Sample averageCrop revenue
Figure 13.7, Pg. 115
Beef Market
Chicken Market
Shifting Apple Exports – Africa Rising
Source: ITC Trademap
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2005 2008 2011 2014
United Kingdom Other Europe Far East and Asia Other Africa Other
24%
39%
12%
12%
13%
13%
43%
20%
17%
7%
The Road from DAR to Lusaka
Proposed Interventions • “Keep farmers on the ground”
• Best chance of reducing maize meal prices and food security in next season – back to export parity?
• Restructuring debt: Security on loans & “Soft-loan” options to finance shortfall (input costs & additional feed demand)
• Carefully monitor irrigation water usage and availability • Crop insurance support
• Staple food price complex • Allow GM white maize imports from USA. • Identify vulnerable household hardest hit (IVIS spatial map) • SASSA (SA social security agency (social relief for distressed
households – R940 million approved) • Increase frequency of food price & marketing margin
monitoring by NAMC - efficient pass through of potential commodity price declines
End!
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www.bfap.co.za
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