The Trade in Agricultural Raw Materials and Livestock Industry in South Africa 2022

Introduction

This report deals with the wholesale trade in agricultural raw materials and livestock (the commodities), which represent essential building blocks for most human and animal food, and human beverages.

On the back of an 8.3% growth in income in the agricultural sector, following favourable weather and record crop production, wholesale trade in agricultural raw materials and livestock grew 18.5% to R201.6bn in 2021, faster than the 13.2% growth to R170bn in 2020. South Africa recorded a trade surplus of US$1bn in Q4 2021, up 36% year on year, with a record US$12.4bn in exports of agricultural products, food and beverages in 2021, up from US$10.2bn in 2020. Experts forecast income will decline slightly in 2022, largely due to excessive rain at the end of 2021. Producers are under pressure from significant price increases in inputs such as fertiliser and fuel, compounded by supply challenges caused by the Russia-Ukraine war. Other major challenges that affect agricultural sales include lack of traceability, lack of market access to key export markets, poor logistics and ailing municipal services. To gain a more complete perspective of the individual commodity value chains and their impact, this report should be read in conjunction with the relevant Who Owns Whom agricultural industry downstream sector reports.

Opportunities

Animal feed, if more meat is produced locally.

Current high prices, particularly for grains and oil-seeds, offer producers good revenue. Given the quality of South African red meat, including beef and lamb, exports can be ramped up. South African citrus and certain other fruit exports have grown in recent years. Soya beans, which recently saw a record increase in production, have gained share in animal feed. The cannabis industry, and ongoing moves to support it from government, represents an opportunity for producers and traders. The poultry sector is looking more promising given recent investments in local poultry and tariff measures to curb imports combined with rising consumer demand.

Outlook

Despite rising prices of farm inputs, shipping disruptions with the Russia-Ukraine war and excessive rainfall at the end of 2021, industry players were cautiously optimistic about 2022, following the record year in agricultural production and exports in 2021.

This could change if the geopolitical fallout of the war worsens. The Bureau for Food and Agricultural Policy, however, expects the agricultural sector to shrink by 7% in 2022, in sharp contrast to the past two years of growth. It warns that the longer-term outlook is one of stagnation and decline - unless South Africa improves its competitiveness in areas such as logistics and market access pretty soon. In contrast, Wandile Sihlobo, chief economist at the Agricultural Business Chamber, expects only a small contraction of 1% or 2% in agricultural production in 2022, partly because of a slightly smaller grain harvest.

Report Coverage

This report deals with the wholesale trade in agricultural raw materials and livestock, which represent essential building blocks for most human and animal food, and human beverages.

It contains comprehensive information on trade in major agricultural commodities and various livestock breeds, notable international and local players, corporate actions and developments. There are profiles of 29 companies including multinationals such as Bayer, notable local agri companies such as NWK, Kaap Agri, Senwes and VKB, fishing companies including Premier Fishing and Oceana, seed companies Pannar Seed and Sakata Seed and flower wholesaler Multiflora.

Strengths

Funding is available for small-scale farmers.

The industry contributes to the economy, supporting food security and job creation. The industry is well-established, providing a solid platform for rural development and transformation. The sector is export-driven as about half of revenue is generated from exports.

Threats

Animal diseases and pests.

Climate change, which threatens to increase the risk of pests and lower crop yields and animal production. Competition from other countries which receive significant incentives and subsidies has led to the sugar industry struggling to grow exports. Lack of market access for key exports through trade agreements and protocols and strict phytosanitary measures. Logistics challenges, including inefficiencies at ports, poor roads and an ailing rail system. Rising cost of inputs and production. The sugar tax is a threat to the sugar industry’s survival. The Ukraine-Russia war which threatens to lead to supply disruptions for grains and fertiliser, and may further drive up commodity prices.

Weaknesses

Highly concentrated commercial sector. Local prices are usually set outside of South Africa. R&D, which is expensive, is required to improve production systems and feed conversion ratios. Shortage of skilled and experienced personnel. Slow pace of transformation in the sector. Structural industry issues. The industry is very capital-intensive.