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ECONOMIC OUTLOOK REPORT XIII

Prepared by the Economic Services Unit:

Technology Transfer Division

December 2012

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Table of Contents

1. EXECUTIVE SUMMARY ......................................................................................................... 3

2. FOREWORD AND ACKNOWLEDGEMENTS ............................................................................. 5

3. MACRO-ECONOMIC INDICATORS ......................................................................................... 6

Global macroeconomic status .............................................................................................................. 6

South African macroeconomic status ................................................................................................... 6

Global Agricultural outlook .................................................................................................................. 7

SA Agribusiness ................................................................................................................................... 7

SADC Region ....................................................................................................................................... 7

4. FIELD CROP PRODUCTS ........................................................................................................ 8

Maize .................................................................................................................................................. 8

Wheat ................................................................................................................................................. 8

Sorghum ............................................................................................................................................. 9

Barley ................................................................................................................................................. 9

Cotton .............................................................................................................................................. 10

Soya beans ........................................................................................................................................ 10

Sunflower seed ................................................................................................................................. 10

Groundnuts ....................................................................................................................................... 11

Malting Barley ................................................................................................................................... 11

Canola .............................................................................................................................................. 11

5. HORTICULTURE OUTLOOK ................................................................................................. 12

Deciduous Fruit ................................................................................................................................. 12

Citrus ................................................................................................................................................ 13

Vegetables ........................................................................................................................................ 14

6. ANIMAL PRODUCTION ....................................................................................................... 16

Poultry .............................................................................................................................................. 16

Beef .................................................................................................................................................. 17

Pork .................................................................................................................................................. 17

Goat Meat......................................................................................................................................... 18

Dairy Products ................................................................................................................................... 18

Wool ................................................................................................................................................. 19

Mohair .............................................................................................................................................. 20

7 CONCLUSIONS ................................................................................................................... 21

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1. EXECUTIVE SUMMARY

Global macroeconomics The dampening effect of slow growth in the developed world still casts a long shadow across the global economy. Output is expected to remain sluggish in advanced economies but still relatively solid in many developing economies. In contrast to the faltering global recovery and sluggish pace of economic activity in advanced economies, Africa has performed well. Over the next five years, the IMF projects the region to grow on average by 5.7% a year. Unemployment is forecast to stay elevated in many parts of the world while financial conditions remain fragile. Global agricultural perspective International agricultural commodity prices have come off their highs but are by no means at low levels, with average US gulf prices for wheat, maize and soybeans between 22 % and 30 % higher than a year ago. The international soybean oilcake prices are forecast to remain at record levels for the first half of 2013 before prices should fall as supply response kicks in late in 2013. The anticipated recovery in meat prices has already induced a phase of rebuilding stock numbers and it is envisaged that in the long run production will expand in order to match consumption of meat. The dairy industry is expected to be one of the fastest growing agricultural industries over the next decade. South African macroeconomics The domestic growth outlook has deteriorated, while the upside risks to inflation have increased. The consumer price inflation is projected to run at 5.5% this year and 5.0% the year after, with a peak of 5.7% in early 2013. GDP growth is projected at 3.3% in 2013, up from 2.5% in 2012 and to average 3.5% over the five years to 2017. GDP per capita is also expected to rise to US$11,681 in 2017. Unemployment is projected to be 22.0% in 2013, from 23.0% in 2012, to fall further to 19.5% by 2017. South African Agricultural sector perspective Food price inflation is on the rise, and is expected to remain unchanged until February 2013. The impact of the weakening exchange rate is seen in wheat and chicken meat prices increasing on the back of higher import parity prices, and prices of fruit increasing as a consequence of higher export realizations. Field crop outlook The area estimate for maize production stayed at 2 699 200ha whilst the expected yield remains at 4.15 t/ha. The maize crop estimate is 11 830 million tons. The yield forecast for white maize is 3.89 t/ha. Commercial production of wheat is projected at 1784 million tons, which is 1. 3% more than the previous forecast of 1 762 million tons. The area estimate for wheat remained unchanged at 511 200 ha while yields should average at 3.49 t/ha. Projected commercial sorghum deliveries for November 2012 to February 2013 are 4 172 tons. The area planted to barley is 44 100 ha, with an expected yield of 3.54t/ha. Influenced by low cotton prices, and favourable prices of competing crops, the 2011/2012 cotton crop is 29% smaller than that of last season. The area estimate for soya beans is 472 000 ha with an expected yield of 1.46t/ha. The area planted for Sunflower is 453 350 ha, and projected output is 522 000 tons. The area estimate for the groundnut is 45 450 ha and the crop is estimated at 59 000 tons. The production forecast for malting barley is 293 980 tons, which is 2.2% less than the previous forecast. The forecasted canola crop is 69 400 tons.

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Horticultural outlook South Africa features among the top ten players when it comes to world trade in deciduous fruits. South Africa is expected to produce 3.6% of world pear production and is 5th on the list of apple exporters. It is expected to export 400 000 tons of apples in 2012/13. In the same year we occupy position 4 in world fresh grape production; expected to produce 275 000 tons. The area planted to citrus between 2011 and 2012 measured 60 355 hectares. The revised crop estimates for citrus production is 97.7 million cartons, lower than the previous season. Except for potatoes that recorded a decline of 10.1% y/y, other vegetables experienced growth in price percentage increases, where minimum prices increased by 8% and highs of 61.6% were realized. Livestock production With continued growth in egg and broiler producers, the chick industry continues to grow. Poultry consumption is forecast to grow by 3.6% in 2013 following slight growth of 0.5% in 2012. Considering economic growth and the forecasts for feed prices to moderate in the medium term, beef production is forecast to increase by 6.1% in the five years to 2016/17 while beef demand is expected to fall 1.0% in 2013. Pork consumption is forecast to grow by 1.0% in 2013 and by 23.9% in the five years to 2017. South Africa is becoming self-sufficient in goat meat production. The market demand for dairy products continues to grow at more than 4% per year. Milk production for 2012 is currently estimated at 2 695-million litres, up 3.0% on 2011. The demand for wool is forecast to be strong in the short term as sale clearance percentages are high. During the last sale of 2012, the price of mohair remained unchanged with a market indicator of R169.24/kg and a 100% sale clearance. SADC Food Security Outlook While stable food supplies and prices in high producing areas in the region have contributed to favourable food security conditions, staple food prices are unusually high. Acute food insecurity conditions in most parts of the region remained stable or minimal in September.

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2. FOREWORD AND ACKNOWLEDGEMENTS The Economic Services Unit presents this 13thEconomic Outlook to the ARC as a planning resource. The document analyses global and domestic trends in economic and agricultural markets and policy, as well as potential impacts on sector performance. Apart from a macroeconomic perspective, it deals with agricultural production, consumption, and price trends. A range of projections are provided, based on assumptions about a set of economic, technological, environmental, political, institutional and social factors. International and local publications form the basis of the Outlook. Projections developed by the OECD, IMF, Global Insight, FAPRI and the World Agricultural Outlook are used. Projections should be interpreted as possible scenarios. The following sources are acknowledged: Agricultural Business Chamber Media Release, August 2012 ABSA Weekly market analysis, 21 September 2012 Bureau for Food and Agricultural Policy (BFAP) 2012 Outlook Business Monitor International Report, Q1, 2013 Cape Mohair Wool (CMW) Mohair & Wool Market 04 & 05 December 2012 reports Citrus Growers’ Association of Southern Africa 2012, Key Industry Statistics for Citrus Growers 2012 Cotton SA, Cotton Market Report (9/3/3/1), December, 2012 Crop Estimates Committee 22 and 29 November 2012 reports DAFF: A profile of the South African Beef Market value Chain, 2011 DAFF: A profile of the South African Egg Industry Market Value Chain, 2011 DAFF: A profile of the South African Goat Market Value Chain, 2011 DAFF: A profile of the South African Citrus Market Value Chain, 2011 DAFF: A profile of the South African Apple Market Value Chain, 2011 Famine Early Warning Systems Network (FEWS-Net), November 2012 FNB Agri-Weekly, 23 November, 2012 GAIN Report 2012, USDA Foreign Agricultural Services, December 2012 http://www.cheesesa.co.za/sa-cheese-industry.html accessed 16/12/12 http://www.mpo.co.za/news/2012/19octe.pdf http://www.woolnews.net/news/forecast-supply-and-demand-2012-13-and-beyond/ http://www.reuters.com/article/2012/04/05/us-food-fao-idUSBRE8331CU20120405 http://www.fao.org/worldfoodsituation/wfs-home/csdb/en/ International Monetary Fund (IMF): World Economic outlook, October 2012 Milk Producers Organisation: Key market indicators, November, 2012. National Agricultural Marketing Council: Food Price Monitor: November 2012 National Agricultural Marketing Council: Trends in selected agricultural input prices, October 2012 NAMC (MERC), South African Fruit Trade Flow. Issue No. 7, September 2012 SA Economic Profile 2011 (http://www.globserver.co./en/south-africa/economy) SAPA Industry Profile, 2011 Speech by Gill Marcus, South African Reserve Bank, Johannesburg, November 2012. The poultry Site- Global Poultry Trends, 17 October 2012 www.imf.org/external/country/zaf/index.htm

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3. MACRO-ECONOMIC INDICATORS

Global macroeconomic status The outlook remains uncertain as policies in major advanced economies fail to rebuild confidence in medium-term prospects. The effect of slow or little growth in the developed world still casts a long shadow across the global economy. More recent drivers of growth; India, China and Brazil have also been impaired. Lower demand from the east and the west is impacting negatively on growth in Africa, particularly South Africa. The projected global growth, at 3.3% and 3.6% in 2012 and 2013, respectively, is weaker than anticipated in the July 2012 WEO update, which was in turn lower than anticipated in the April 2012 WEO update. Output is expected to remain sluggish in advanced economies but still relatively solid in many emerging market and developing economies. The October 2012 issue of the Global Financial Stability Report (GFSR) predicts unemployment to stay elevated in many parts while financial conditions remain fragile.

Figure 3.2: Overview of the World Economic Outlook Projections (IMF, 2012)

In contrast to the faltering global recovery and sluggish pace of economic activity in advanced economies, Africa has performed well. After slowing to 2.8% in 2009, growth in Sub-Saharan Africa has rebounded to 5% -close to pre-crisis rates of growth. Over the next five years, the IMF projects the region to grow on average by 5.7% a year. Economic activity in sub-Saharan Africa has expanded by more than 5% in each of the past three years, continuing a decade-long run only briefly interrupted by the global downturn in 2009.

South African macroeconomic status The domestic growth outlook has deteriorated, while the upside risks to inflation have increased. Despite weak economic growth, South Africa's Reserve Bank (SARB) opted to leave interest rate at 5.0%, fearing that any move to stimulate the economy now could fuel inflation. The bank also projected that the consumer price inflation would run at 5.5% next year and 5.0% the year after, with a peak of 5.7% in early 2013. It is expected that the real GDP growth will be 3.3% in 2013, up from 2.5% in 2012 to average 3.5% over the five years to 2017. GDP per capita is also expected to rise to US$11,681 in 2017 (from an estimated US$7,626 in 2012). Unemployment is projected to be 22.0% in 2013, from 23.0% in 2012, falling to 19.5% by 2017. Statistics South Africa reported that inflation stood at an annualized rate of 5.6 % in October. Increases in food prices, which in October rose at the fastest rate since 1994 and a weakening rand both played a role. Export opportunities to the EU are expected to increase significantly, as the country has benefited from duty-free access to the EU market since 2009.

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Global Agricultural outlook International grain and oilseed prices are expected to remain relatively stable until February 2013 and decrease thereafter as US farmers are expected to expand the area under production under the assumption of normal weather. The supply of soybean oilcake is projected to remain under pressure due to the drastic reduction in the 2012 US crop and the first relief is only anticipated with the 2013 South American soybean crop. As a result, international soybean oilcake prices are forecast to remain at record levels in 2012 and the first half of 2013 before prices fall sharply as supply response kicks in. The continued growth in the demand for animal products due to increased world income per capita and changing diet patterns in especially developing countries will provide long-term support to soybean oilcake prices. The anticipated recovery in meat prices has already induced a phase of rebuilding stock numbers and it is envisaged that over the long run production will expand in order to match consumption of meat. The dairy industry is expected to be one of the fastest growing agricultural industries over the next decade, with production of fresh milk and dairy products, whole milk powder and butter increasing by an annual average of more than 2.5 % in order to match the sharp increase in consumption in developing countries.

SA Agribusiness According to the NAMC Food Price Monitor report, food price inflation is on the rise, and is anticipated to remain unchanged until February 2013. Hence, it is likely that the year-on-year food inflation rate will increase, as agricultural commodity prices remain high and the recent weakening of the exchange rate will drive other costs in the value chain. The impact of the weakening exchange rate is seen in wheat and chicken meat prices increasing on the back of higher import parity prices, and prices of fruit that are increasing as a consequence of higher export realizations. Looking at 2014, it is expected that rice supply will improve. The increase in sugar production in 2012/13 is likely to benefit consumption growth, and demand in 2013 is forecast to grow by 2.6% to 1.8mn tons. This is based on the view that over the long term, macroeconomic fundamentals, together with the increasing use of sugar for biofuel, will have a positive impact on sugar production levels.

SADC Region The Southern Africa Food Security Outlook released by FEWS NET report (November, 2012) indicates that while stable food supplies and prices in high producing areas in the region have contributed to favourable food security conditions, staple food prices in areas of concern are unusually high. Acute food insecurity conditions in most parts of the region remained stable or minimal in September with the exception of localized areas in Malawi, Zimbabwe, Mozambique, Angola and Lesotho. Poor households in southern Malawi, southern and western Zimbabwe and southern Mozambique are facing food insecurity conditions ranging between stressed and crisis state. In areas experiencing minimal food insecurity conditions, many households are still able to meet their food needs from their own production, while poorer households are supplementing winter production foods with market purchases. The projected outlook through December 2012 is that food insecurity conditions are expected to deteriorate with the advent of the lean season.

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4. FIELD CROP PRODUCTS

Maize In spite of reports of reduced yield estimates from the South African Crop Estimates Committee (CEC), and the drought in the US, the BMI maintained its forecast for maize and production will continue to grow owing to an improvement in plantings against elevated global prices. According to the CEC, the area estimate for maize production stayed at 2, 699 200ha whilst the expected yield remained at 4.15 t/ha. The maize crop estimate is 11, 830 million tons. The production of white maize is expected to be 5, 090 million tons, as shown in Table 4.1 and Figures 4.1 and 4.2.

Table 4.1 Commercial Maize

Source: CEC (2012). The yield forecast for white maize is 3.89 t/ha, 0.26 t/ha lower than the national maize average. The production forecast for yellow maize is 6 740 million tons which is 1, 910 million tonnes higher than the previous forecast. According to the BMI, South African maize exports to Sub-Saharan African countries will decrease. This is expected to cause a production deficit of 110, 000 tonnes in countries like Botswana, Lesotho and Mozambique.

Figure 4.1: South African maize production and consumption, 2011 – 2016 (BMI, 2012).

Wheat Commercial production of wheat is projected by the CEC at 1 784 million tons, which is 1.3% more than the previous forecast of 1 762 million tons. The CEC also expects wheat yield to stay at 3.49 t/ha. The estimated production in the Western Cape is 775 200 tons (43%), in the Free State 370 500 tons (21%) and in the Northern Cape 277 200 tons (16%).The area estimate for wheat remained unchanged at 511 200 ha.

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Figure 4.2: South African Wheat production and consumption, 2011 – 2016 (BMI, 2012).

Sorghum The November 2012 forecast for the commercial sorghum crop is 135 500 tons. This will be 1 650 tons less than the previous forecast. SAGIS producer deliveries remained higher in March to October at 127 828 tons. Projected commercial sorghum deliveries for November 2012 to February 2013 are 4 172tons. A total of 3700 tons is expected to remain as farm retentions for own use or direct sales. The CEC predicts that sorghum yield is expected to remain unchanged at 2.82 t/ha and the estimated crop is at 135 500 tons which is 1.2% less than the previous forecast. The area estimate for sorghum will also remain unchanged from the previous forecast at 48 550 ha, as shown in Table 4.1 and Figure 4.3.

Figure 4.3: SA Sorghum Summer crop estimate (CEC, 2012).

Barley The CEC forecast for barley is 300 638 tons. This is 11 362 tons less than the previous season’s crop of 312 000 tonnes. Estimates from the CEC further reveal that the area planted for barley is 44 100 ha, with an expected yield of 3.54t/ha.

Figure 4.4: SA Barley crop estimate 2008 – 2012 (BMI, 2012).

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Cotton The International Cotton Advisory Committee (ICAC) expects cotton production to decline for the second consecutive season. Cotton production will decrease by 11%, which will put global supply at 23.2 million tonnes, due to low prices and increased attractiveness of competing crops. The USA and Turkey will experience the highest decrease in production due to strong competition with grains and soya. Generally, most of the cotton producing countries will experience a decline in production, except India which is forecasted to increase production if prices improve. Cotton mill use will, however, increase albeit gradually against expected recovery of the world economy. Global cotton use will to rise by 3% to 24.2 million tons, against high demand from South Asia. World cotton trade could remain almost stable at 7.8 million tons, as a projected further drop in Chinese imports could be offset by increased demand from the rest of the world. Global cotton stocks are forecasted to shrink by 6% from 16.6 million tons in July 2013, to 15.6 million tons in July 2014. Most of this reduction is expected to take place outside of China. International cotton prices are currently supported and stabilized by Chinese policies, but changes to these policies could have opposite results. Local forecasts indicate that cotton production will be at 64 066 lint bales, down 1% from last month’s estimate. This also shows that the 2011/2012 crop is 29% smaller than that of the previous season. This is mainly due to low cotton prices, and favourable prices of competing crops. About 60 336 lint bales are estimated to be produced from RSA grown seed cotton, down 30% from the previous season. The balance of 3 730 lint bales relates to expected Swaziland produced cotton to be ginned by the Swaziland gin.

Figure 4.5: RSA Cotton Lint Consumption (Cotton SA, 2012).

Soya beans The area estimate for soya beans is 472 000 ha with an expected yield of 1.46t/ha, as shown in Table 4.2 and 4.3. The anticipated output for soya beans is 720 000 tons, which will be 0.47% higher than the previous quarter’s estimate.

Sunflower seed Table 4.3 shows that the CEC’s expected sunflower seed crop is 522 000 tons. Most of the deliveries occurred during January to October 2012, with very little expected in November and December 2012, as

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shown in Table 4.2. The area planted for the Sunflower seed crop is 453 350ha, and the projected output is 522 000 tons as shown in Table 4.3.

Table 4.2: Sunflower seed and Soya Beans

Source: CEC (2012)

Groundnuts The CEC predicts that the area estimate for the groundnut crop is 45 450ha and the groundnut crop will be 59 000 tons, as shown in Table 4.3. This will be 1 290 tons less than the last forecast. Table 4.3 Summary: Area Planted and Crop Production Figures of Commercial Summer Crops for 2012

Source: CEC, 2012.

Malting Barley The production forecast for malting barley is 293 980 tons, which is 2.2% less than the previous forecast. The area planted is estimated at 84 940 ha, while the expected yield is 3.46 t/ha.

Canola The area estimate for the canola crop is 44 100ha. An expected canola crop yield of 1.57 t/ha is projected by the CEC. The forecasted canola crop is 69 400 tons, which is an increase of 0.4% or 5 390 tons, from the previous forecast.

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5. HORTICULTURE OUTLOOK

Deciduous Fruit In the latest report of the USDA’s Foreign Agricultural Service released on December 2012, South Africa features among the top ten players when it comes to world trade of deciduous fruits. Per capita consumption of deciduous and subtropical fruit in South Africa during 2010 was 23.38 kilograms per year. This represented a 6.6% decline from the 2009 figure of 25.03 kilograms per year. Pears South Africa ranks number 7 on the world market when it comes to pear production after China, the EU, Argentina, the US and Turkey who occupies position 1-6 respectively. Close to one-third (114 000 tons) of pear produced by South Africa goes to processing and more than half (190 000 tons) is exported, for which South Africa ranks number 4, after Argentina, China, and the EU. According to the USDA report, world pear production in 2012/13 is projected at 21.9 million tons of which South Africa is expected to produce 3.6%. The biggest share (75%) is claimed by China, expected to produce 16.5 million tons during 2012/13. Other important players include Europe, Argentina and the US. EU production in 2012/13 is projected to drop by 25% to 2.1 million tons as a result of drought. Argentina’s production is projected to rise by 8% to a near-record 820 000 tons, of which 18% would be exported, whereas production by the US will drop by 10% to 796 000 tons. South Africa’s position is illustrated in table 5.1 below. Table 5.1: Trade Forecast for Pear during 2012/13

Pear Summary for 2012/13 (1000 tons) China EU Argentina US Turkey SA Japan Chile Russia Australia Mexico Production 16500 2112 820 796 390 370 350 282 110 100 Processing 19508 123 260 1350 10 114 -------- 70 14 30 3 Exports 450 430 1632 170 30 190 -------- 140 --------- --------- ----- Source: USDA, Foreign Agricultural Service Dec 2012 Apples During the 2009/10 season, apples contributed approximately 34% (R2.9 billion) of the total gross value for deciduous fruits (R8.8 billion) in South Africa. In 2012/13, South Africa is expected to produce 815 000 tons of apples, of which 225 000 tons would be consumed locally and 190 000 tons are destined for processing. South Africa will export 400 000 tons in 2012/13 and it ranks 5th, after the EU, China, the US and Chile which occupies position 1-4 respectively. Fresh Grapes In 2012/13 South Africa is expected to produce 275 000 tons of grapes, occupying position number 4 in the world ranking after Turkey, the US and Ukraine which are expected to produce 2 200 000, 901 000 and 320 000 tons respectively. Only 15 000 tons of fresh grapes would be consumed locally whereas 260 000 tons would be exported.

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Citrus In terms of gross value, the citrus industry is the third largest horticultural industry after vegetables and the deciduous fruit industry. During the 2009/10 production season the industry contributed R6.5 billion to total gross value of South African agricultural production. This represented 20% of the total gross value (R32.9 billion) of horticulture during the same period. According to the report released by the Citrus Growers’ Association of Southern Africa 2012, the area planted to citrus between 2011 and 2012 measured 60 355 hectares. Of this 25 398 ha were planted to Valencia; 14 832 ha was planted with navels; 9477 ha to grapefruit; 5200 ha to soft citrus; and 4726 to lemons. Other plantings totaled 723 hectares. Limpopo and Eastern Cape are main production areas with roughly 25 674 ha in Limpopo and 12 508 ha in the Eastern Cape. In the Western Cape the area planted to citrus measured 8961 ha, Mpumalanga 6817 ha, KZN 3405 ha, Swaziland 1774 ha and Northern Cape 1215 ha. Production According to the NAMC’s South African Fruit Trade report 2012, the Citrus Marketing Forum (CFM) originally estimated a total crop of 102.9 million equivalent cartons (carton is equivalent to 15 kg) in March 2012 across all different citrus commodities. This was due to climatic conditions and fruit development at the time. However, as these production factors changed, so did the crop estimates. The revised crop estimates now expect a total crop of 97.7 million cartons, which is lower than the total crop harvested in the previous season. Crop estimates including volumes from South Africa, Zimbabwe, Swaziland and Mozambique are illustrated in figure 5.1 below.

Figure 5.1: Southern Africa crop estimates 2012 season (NAMC, 2012) Oranges The biggest contributor to total citrus gross value is oranges, accounting for over R4 billion in 2010. Valencia oranges were the most common, planted on 23 976 ha followed by navel oranges on 14 853 ha. Limpopo province contributed 49% of all Valencia oranges planted in 2010 while the Eastern Cape contributed 33% of all Navel oranges planted in 2010. Northern Europe is the largest export market for oranges, accounting for 26 % export share, followed by the Middle East with 18 % and the Far East with 14 % export share. The African market comprises a small share in orange exports.

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Figure 5.2: Orange export volumes per market in the 2012 season (NAMC, 2012) Lemons The total area planted to lemons and limes in South Africa during 2010 was 3 807 ha. The Eastern Cape Province was the leading grower of lemons and limes at 43% (1 905 ha). Following was the Limpopo Province at 17% (774 ha) and Mpumalanga at 15% (642 ha). The Western Cape is also a significant producer of lemons and limes, accounting for 14% (619 ha) during 2010. The Middle East is by far the largest export market for South African lemon exports, with a 42 % export share, followed by the Northern Europe with a 15 % share and the Far East with an 11 % export share in the 2012 season.

Figure 5.3: Lemon export volumes per market in the 2012 season (NAMC, 2012) Grapefruit The total hectares planted to grapefruit in 2010 was 8 978 ha. The Limpopo Province was the leading grower of grapefruit at 37% (3 312 ha). Following was the Mpumalanga Province at 30% (2 680 ha) and KwaZulu Natal at 20% (1 793 ha). Northern Europe and Japan are the two largest markets for South Africa grapefruit exports, collectively accounting for 65% of South African grapefruit exports in the 2012 season.

Figure 5.4: Grapefruit export volumes per market in the 2012 season (CGA, 2012)

Vegetables According to the FNB Agri-weekly report dated 23 November 2012, vegetables experienced positive growth except for tomatoes that experienced a dramatic decrease in volumes delivered to National Fresh Produce Market (NFPM), by a percentage of 15.1% y/y. Volumes of potatoes delivered increased by 7.6%, carrot

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11.6% and onion by 2.6 %. Vegetables prices grew substantially, where minimum prices increased by 8% and highs of 61.6% realized. This was for all vegetables except potatoes recording a decline of 10.1% y/y. Tomatoes Tomato prices extended recent losses due to high supply. Weekly tomato prices fell by 21.6% w/w but were still 61.6% higher y/y at R5 066 per ton. Volumes of tomatoes traded were pegged at 3 896 tons, up 6.6% w/w but 15.1% lower y/y. Prices are expected to bottom out in the short term on improved uptake. Potatoes Potato prices continued to post modest losses due to limited uptake and higher volumes on markets. Weekly potato prices fell by 9.8% w/w; still 10.1% higher y/y at R2 598 per ton. Volumes traded were pegged at 13 685 tons, which is up 3.9% w/w and 7.6% y/y. Prices are expected to rebound in the short term with moderation in supplies and improved uptake. Onions Onion prices were again sharply lower as a result of increased supplies and weak uptake. Weekly onion prices fell by 15.2% w/w but were 98% higher y/y at R3 016 per ton. Volumes traded were 5218 tons; up by 31.8% w/w and 2.6% y/y. Prices are expected to trend slightly firmer on improved uptake in the short term. Carrots Carrot prices continued to post modest losses due to increased supplies and limited demand. Weekly carrots prices fell by 7.6% w/w but were still 8.3% higher y/y at R2 460 per ton. Volumes of carrots traded rose by 10.4% w/w and 11.6% y/y at 1 554 tons. Prices are expected to move sideways with some upward potential in the short term as demand improves. Cabbages Prices reversed recent gains and declined under pressure due to increased volumes on markets. Weekly cabbage prices closed at R1, 973 per ton, down by 7.1% w/w but still 34.3% higher y/y. Volumes of cabbages traded increased by 8.9% w/w but still 2.9% lower y/y at 1,280 tons. Prices are expected to trend sideways to higher in the short term on improved uptake.

Table 5.2: Weekly and Year-on-Year statistics of South Africa vegetables

Vegetable prices: South Africa’s Major Fresh Produce Markets (Average statistics in Pretoria, Bloemfontein, Johannesburg, Cape Town and Durban NFPMs) Week ending 23 November 2012 Average Price (R/t) w/w y/y Total Volume (t) w/w Year-on-year Tomato 5066 -21.6% 61.6% 3896 6.6% -15.1% Potato 2598 -9.8% -10.1% 13685 3.9% 7.6% Onion 3016 -15.2% 98.0% 5218 31.8% 2.6% Carrot 2460 -7.6% 8.3% 1554 10.4% 11.6% Cabbage 1973 -7.1% 34.3% 1280 8.9% -2.9% Source: FNB: Agri-weekly 23 November 2012

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6. ANIMAL PRODUCTION

Rising food prices underpin the reduced growth expectations for poultry, beef and pork consumption in the short term. With continued growth in egg and broiler producers, the chick industry continues to grow. Egg industry turnover increased from R109 million in 2006 to R158 million in 2011, while chick supply to the broiler industry increased from a turnover of R1.975 billion to R3.66 billion. Poultry consumption is forecast to grow by 3.6% in 2013 following slight growth of 0.5% in 2012. The long-term poultry outlook remains positive.

Poultry In South Africa, the poultry industry is the largest agricultural sector contributing about 24% of agriculture income in 2011 with a combined gross income for 2010/11 set at over R 31.7 billion. Around 10% of all workers in agriculture are employed in the poultry sector. According to SAPA, registered poultry farmers include 199 producers and 205 contract growers in the commercial broiler sector, and 267 commercial egg producers. Approximately 1554 small scale famers have been established by government. At 36.1kg in 2011, poultry uptake was well ahead of beef at 16.62kg, pork at 4.6kg and mutton and goat combined at 2.7kg. In 2011, retail sales accounted for 52 % of chicken sales, followed by the wholesale trade taking 25 % and the food-service sector, 15 %. Despite this progress, the operating environment for South African poultry producers such as Astral Foods and Rainbow Chicken is still expected to be difficult, driven by weak economic growth, persistently high unemployment and a strong rand, which has encouraged an influx of cheap poultry imports. BMI’s extended forecast for poultry production envisages strong growth of 22.0% in the five years to 2016/17, driven by strong GDP per capita growth and a steady fall in unemployment. BMI forecasts poultry consumption expanding by 23.8% in the five years to 2017.

Figure 6.1: Comparison of poultry meat and eggs vs. other meat (DAFF in SAPA,2011) Egg production Egg production is ranked the fourth largest animal product sector in agriculture with an average gross turnover of R6.951 billion per annum and an estimated 6 000 workers nationwide. Per-capita consumption for 2011 was 137 eggs - or 8.9 kg - per person per annum, an increase of 3.4% in comparison with the 2010 figure of 132 eggs per annum. The egg industry boasted an average laying flock of 24.2 million layers in 2011 that produced 19.3 million cases or 580.2 million dozen eggs. During 2011, egg exports totalled 2 786 tons, which is 26% or 976 tons less than the previous year. Total egg imports, including shell eggs and egg product (liquid and dried), were 268 tons in 2011, 58 tons or 28% more than the previous year. The average egg production projected for December 2012 is 417 000 cases per week. Compared to December

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2011 this will be an increase of 11 200 cases (2.8%). An average production of 412 100 cases per week is forecasted for 2012. This represents an increase of 21 800 cases per week (5.6%) compared to 2011. An average national laying flock of 25 037 000 hens is forecasted for 2012. This is 877 000 (3.6%) hens more than the average laying flock projected for 2011.

Figure 6.2: Provincial Egg Production(SAPA,2011)

Beef Beef is produced throughout South Africa. Commercial farmers are estimated at 50 000, emerging farmers at 240 000 and communal farmers at 3 million. There are approximately 70 feedlots in South Africa and 495 abattoirs. The beef industry is a major employer with 500 000 people employed and 2 125 000 dependent on the industry for their livelihood. The players in the beef industry are vertically integrated. They have their own feedlots, abattoirs, processors and distributors. Beef prices driven by expensive feeds temporarily increased by 38% in October, but weakened again to trade around levels of R32/kg. BMI forecasts beef production to fall by 1.9% in 2012/13 because of tight margins for beef producers and the fact that the beef is the least preferred because of its high price. Taking into account expectations for economic growth and the forecasts for feed prices to moderate in the medium term, beef production is forecast to increase by 6.1% in the five years to 2016/17 while beef demand is expected to fall 1.0% in 2013 following a decline of 2.0% in 2012. In the five years to 2017, BMI forecast a 16.2% increase in beef and veal consumption.

Figure 6.3: South Africa Beef & Veal Utilization (BMI, 2012)

Pork World pork production is almost flat as high feed costs temper growth. Global production is forecast nominally higher to a record 104.7 million tons. BMI’s forecast sees pork consumption growing by 1.0% in 2013 and by 23.9% in the five years to 2017. Consumption is expected to decline slightly in 2012 in response

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to the decreasing beef price, before gradually increasing over the next decade to 2020. South Africa is expected to remain a net importer of pork.

Figure 6.4: Pork Production & consumption (BMI, 2012)

Goat Meat South Africa is a relative small goat producing country and possesses only approximately 3% of Africa’s goats and less than 1% of the world’s number of goats. Goats are found throughout the country with Eastern Cape and Limpopo Provinces being the largest producers, accounting for approximately 57% of the total production. Goat meat is often called chevon when from adults and cabrito when from young animals. There are only 250 stud breeders in the country. White commercial farmers mainly own Boer goats and Angora goats while black farmers mainly own indigenous goats in a communal farming system. Indigenous goats represent approximately 63% of the goats found in South Africa. The average gross value of chevon produced amounted to R 376,101,616 for the past ten years. The quantity of chevon exported from South Africa was relatively high from 2008 to 2010 and during the same time, imports diminished showing that South Africa is becoming self-sufficient in chevon production.

Figure 6.5: Provincial distribution of live goats in 2010 (DAFF, 2011)

Dairy Products The market demand for dairy products continues to grow at more than 4% per year. During the first ten months of 2012 dairy products equivalent to 242-million litres of milk were imported and dairy products equivalent to 330-million litres of milk were exported. Milk The total milk production for 2012 is currently estimated at 2 695-million litres, up 3.0% on 2011. Producer prices decreased from June 2012 to October 2012 while input prices increased. As a result, due to a

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decrease in producers’ profitability production growth has been reported to have slowed down from 5.6% in July to negative growth of 0.7% in September and this trend is projected to continue into 2013. Following this trend, since October few milk buyers increased their prices slightly. Exports to the BLNS countries (Botswana, Lesotho, Namibia and Swaziland) and other Africa destinations continue to grow. According to SAMPO the longer-term outlook for the dairy industry remains favourable. Cheese The per capita consumption of cheese in South Africa has increased from 1.0 to 1.9 kg per year since 1995. This is still much lower than many other cheese producing countries. The French tops the list with 25 kg per year followed by Greece and Germany with 20kg and the Netherlands with 18kg. The English, Australians and New Zealanders are on 9kg and the Japanese on 2kg. About 84% of cheese consumers eat Cheddar and Gouda; however, there is a growing demand for specialty cheeses. Cheese sales in South Africa are growing at 3% per annum against a world figure of 1.8%. Supermarkets dominate the retail sales of cheese and it is estimated that 75 - 85% of total cheese sales happen through this sector of retail. The Western Cape is the undisputed cheese province of South Africa as it is estimated that more than 50% of all cheese is produced in this province. South Africa produces about 82 000 tons of cheese per year from 800 million litres of milk. About 51% is in the form of Cheddar (31%) and Gouda (20%) and the rest consists of Mozzarella, Feta and Cream cheese. About twelve big automated and modern factories produce about 65% of all cheese made in the country while the rest is produced in medium to small cheeseries, some producing only 25 kg per day. It is foreseen that improved economic conditions will increase consumption of cheese in any form.

Figure 6.5: Annual percentage retail market growth for the 12 months to Dec 2012 (SAMPO, 2012)

Wool The wool market rose sharply at the final sale of 2012 with the Cape Wools Merino indicator reaching an all-time high when it gained 7% on the previous week to close at R109.91/kg (clean). This is higher than last season’s highest level; it also represents a 25.8% increase on the opening sale and is up almost 12% on the corresponding sale last year. The average clean prices for the different categories of long fleeces were as follows: 18 microns gained 3.6% to R122.76/kg, 19 microns were 7.8% at R119.77/kg, 20 microns were up 6.9% at R111,36/kg, 21 microns gained 6,9% at R109,63/kg, and 22 microns were up 6,1% to close at R107,56/kg. The lower global wool production, the lowest in 70 years, together with the improving economies has caught processors low in stocks. As a result demand is forecast to be strong in the short term as sale clearance percentages are significantly high.

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Figure 6.6: Price Movement for good quality wool per micron: (CMW, 2012)

Mohair According to Cape Mohair and Wool, the winter season proved that the demand for mohair is healthy, but very micron sensitive in price. The range from 25 to 28 micron was more expensive in the winter season, compared to the same micron group in the summer season, which is unusual, but shows an improving demand for kids’ mohair. There was a 6% improvement in the total weight offered in 2012. During the last sale of 2012, the price of kids mohair remained unchanged with a market indicator of R169.24/kg and a 100% sale clearance; young goat hair increased by 2.4% with a market indicator of R108.60/kg and a sale clearance of 100%. Adult mohair was also unchanged with a market indicator of R72.48/kg and a sale clearance of 100%. This brought the overall sale clearance to 100% and the overall market indicator to R98.75/kg, unchanged from the previous sale.

Figure 6.7: Cape Mohair market indicator movement for different age group categories (CWM, 2012)

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7 CONCLUSIONS

In the midst of a global economy that is still in turmoil, African countries have a new determination to leverage their economic success into sustained growth and development which must result in a better life. African countries have an opportunity to be collaborators in crafting a new era of economic, social and political developments for a continent that should play a dynamic role in global growth and development. Their ultimate goals must be sustainable growth, job creation, and alleviating poverty and inequality. South Africa has close trading ties with Europe and can serve as a manufacturing and export hub for both European and Asian markets. The SADC region accounts for about 22% of South Africa’s manufactured exports, second to the EU. The prospects for agribusiness are improving globally and locally. An increasing role for biofuels is projected in the long-term, which together with food security concerns will make agricultural R&D a priority. The ARC should play a role in enhancing productivity, growth and competitiveness across a spectrum of value chains. South Africa continues to be an important world player when it comes to production and trade of deciduous fruits both in terms of quality and volumes produced. However a point worth noting is the poor rate of consumption of deciduous fruits locally; a condition confirmed by two independent reports (USDA, Foreign Agricultural Service 2012 and the NAMC 2012 report). There is a need for investment towards the building of targeted local markets. Government Social Programmes, such as School Feeding Programmes can play a critical role in this regard. Despite a constant increase in South African meat production, quantities produced are still below demand and particularly beef, pork and poultry are imported, indicating a local growth potential for production. A large number of livestock is in the hands of communal and small scale farmers in the rural areas of South Africa. Most communal and small scale farmers farm with indigenous breeds. Indigenous goats represent approximately 63% of the goats found in South Africa. The indigenous breeds fetch inferior prices at the market (abattoirs) due to their slow feed conversion rate. With nearly 80% of South Africa’s agricultural land almost solely suitable for extensive livestock production, and significant untapped communal reserves, there is extensive scope for improved meat production. If the ARC can expand its research and development focus to improve the market traits of the livestock to produce quality livestock with better feed efficiency and growth, it would address poverty, rural development, food security and commercial output. South Africa is also a net importer of pork with significant opportunities for new prospective producers to enter this market. The ARC could play a leading role in capacitating these producers.