BARLEY MARKET VALUE CHAIN PROFILE

Transcription

1 BARLEY MARKET VALUE CHAIN PROFILE

2 1. DESCRIPTION OF THE INDUSTRY After wheat, barley (Hordeum vulgare L.) is the most important small grain in South Africa. It is mainly used for production of malt (which is used for brewing of beer), animal feed and pearl barley. A very small part of the South African barley crop is generally less suitable for malting purposes: it is used for animal feed. On average the annual commercial production in South Africa is about tons while the local consumption requirements for barley are around ton per year. The contribution of the barley industry to the gross value of agricultural production is summarized in Figure 1. Source: Agricultural Statistics Figure 1 indicates that the contribution of the barley industry to the gross value of agricultural production was at its lowest level in 2000 mainly as a result of the decline in production volumes while the prices remained relatively stable at that period. The industry s contribution to the gross value of agricultural production increased dramatically from 2001 to 2003 as a result of concurrent increase in producer prices and production volumes at that period. The gross value started to decline from 2004 until 2005 due to a decline in production volume. However the gross value increased again between 2006 and 2009 despite relatively lower production volumes, mainly as a result of improved producer prices. 1.1 Producing Areas Barley is a winter cereal crop whose production is restricted to specific areas in the Northern and Southern Cape (two-thirds of our barley production happens here) as well as the North West Province. In the Southern Cape (Overberg region) barley is grown in areas surrounding Caledon, Bredasdorp, Riviersonderend, Napier and Swellendam and is grown under dry land conditions and in the Northern Cape under irrigation (Vaalharts Douglas, Barkley West, Rietrivier and Hopetown Area). Barley is also grown by some emerging farmers at Taung in the North West Province. In the Northern Cape and North West Provinces, barley production takes place close to stable water sources namely the Vaal River, Harts River, Orange River and the Vaalharts Irrigation scheme. The main world barley producers are Russian Federation followed by Canada, Germany, France, Australia, Turkey and Ukraine respectively. In Africa, barley is produced mainly in Ethiopia, followed 2

3 by Morocco, Algeria and South Africa respectively. Contribution of various provinces to the total South African barley production is represented by Figure 2. Source: Agricultural Statistics Figure 2 indicates that during 2009 the Western Cape Province was the largest producer of barley in South Africa with a share of 73% followed by the Northern Cape and North West Provinces with shares of 24% and 3% respectively. Smaller quantities of barley are also produced in the Free State Province which commanded a 0% share of total production during The larger barley production volumes in the Western Cape can be attributed to the fact that the latter is a winter rainfall area while barley is planted mainly in winter. As indicated by Table 1 production of barley has been declining between 2004 and 2005 in the Eastern Cape Province until there was virtually no production between the years 2006 to In the Western Cape Province the increase in barley production that occurred between 2004 and 2006 was followed by successive decreases between 2007 and 2008 while the Northern Cape and North-West Provinces increased their volumes of barley produced during the latter period. 3

4 Table 1: Barley Production by provinces Province Production in 2004 (tons) Production in 2005 (tons) Production in 2006 (tons) Production in 2007 (tons) Production in 2008 (tons) 1 Production in 2009 (tons) 2 Western Cape Eastern Cape Northern Cape North West Free State Source: Agricultural Statistics Production of barley in the Western Cape Province increased from 110 thousand tons in 2008 to about 162 thousand tons in Although production volumes declined in Northern Cape and North West Provinces in 2009, the improved production volumes in Western Cape and Free State were enough to boost the national production volumes from 192 thousand tons in 2008 to about 224 thousand tons in Production Trends Globally, the major producers of barley are Russia, France, Germany, Ukraine, Canada, Australia and Spain as depicted in Figure 3. Russia produces the greatest quantities of barley with an estimated production of approximately million tons followed by Ukraine with a production of about 12 million tons in The lowest producer of barley in the world is Lesotho, having produced only 720 tons of barley in South Africa is ranking number 49 in the world in terms of barley production and produced only 216 thousand tons of barley during the year Source: FAOSTAT 1 Preliminary 2 Preliminary 4

5 On the African continent, the top barley producers for the year 2009 were Algeria and Ethiopia having produced 2, 2 million tons and 1, 5 million tons respectively in 2009, followed by South Africa and Egypt who produced about 216 thousand tons and 146 thousand tons respectively, during the same period. Lesotho is the least producer of barley on the African continent after producing only 720 tons in Source: FAOSTAT Domestic barley production trends and areas planted to barley in South Africa from 2000 to 2009 are represented by Table 1 and Figure 3. Table 2: Barley: Local Area Planted and Total Local Production Year Area Planted (1000 ha) Total Production (1000 tons) Source: Agricultural Statistics 5

6 Source: Agricultural Statistics Table 1 and Figure 3 indicate that area planted for barley declined from 2000 until 2002 while production volumes experienced a continual increase during the same period. The production volume increased until a peak was reached in 2003 even though the area planted has experienced just a marginal increase, indicating that farmers were becoming more efficient then compared to 2002 and 2004 (i.e. they managed to produce more barley per unit area). In 2004 the production volume decreased following a slight decline in area planted. Production quantities increased from 2005 until 2006, motivated by an increment in area planted. Both the area planted to barley and the total production declined between 2007 and 2008 in spite of increases in the producer prices during these years. Barley production volumes increased substantially in 2009 compared to 2008, mainly as a result of improved yields and increment in production volumes in the major producing Province (Western Cape). 1.3 Local Consumption Figure 6 depicts local consumption of barley comparing it to the total production for each year to determine if the country is self-sufficient in terms of barley or not. 6

7 Source: Agricultural Statistics Figure 6 indicates that between the years 2000 and 2009 South African barley supply was lower than local consumption. In general the figure indicates that in South Africa more barley is consumed than it is produced and this makes it extremely important for our country to import barley. During the period between 2000 and 2002 domestic deliveries of barley were extremely lower than quantities of barley used in processing within the domestic market. Domestic deliveries began showing increases from 2003 until 2006 triggered mainly by slight increases in the area planted and total production of barley. However, deliveries of barley experienced a marginal decline again during 2007 and 2008 followed by a slight increase in The implication is that the market for barley in South Africa is huge though the production volumes are low and this makes it clear that we need to come up with various strategies in which we can improve our capacity to increase production of this product. 2. MARKET STRUCTURE 2.1 Domestic Market and Prices In South Africa barley is planted mainly for malting purposes, as there is no significant feed market for barley due to the oversupply of maize produced in the country. Barley differs from most other agricultural commodities in that there is only one major barley buyer in South Africa, namely South African Breweries Malting (Pty) Ltd, which supplies its major stakeholder South African Breweries, with malted barley. Barley producers have a guaranteed market and fixed price contracts. Average producer prices of barley from 1999 to 2008 are as indicated in Table 3 and Figure 7 respectively. 7

8 Table 3: Barley Producer Prices Marketing Year Producer Prices (R/ ton) Source: Agricultural Statistics Table 3 and Figure 7 indicate that barley producer prices increased from 2000 to 2003 mainly as a result of a decline in the value of rand against US dollar. Generally, price fluctuations for the past five years can be attributed to fluctuations in production volumes which occurred mainly as a result of variable weather conditions. However, barley producer prices experienced an increase from 2006 to 2008 marketing year following a slight decrease in the domestic production levels. Source: Agricultural Statistics Barley producer prices declined marginally from R /ton in 2008 to R /ton in 2009 and this could be attributed to a slight increase in the local supply. 8

9 Source: Agricultural Statistics The figure above clearly indicates that the domestic production of barley in South Africa has been far below the domestic consumption 3 requirements between the years 2000 and Despite higher levels of demand for barley, the South African Farmers have not been able to respond and meet the local demand mainly due to the fact that the most part of South Africa is not suitable for barley production. Dry-land barley production can only be practiced in the Western Cape Province due to suitable climatic conditions in the province. This on its own is a great limitation for the expansion of the industry as all other regions in the country can only produce barley under irrigation. 2.2 Import-Export Analysis Figure 9 compares the volumes of imports and volumes of exports of barley from 2000 to Consumption includes animal consumption 9

10 2.2.1 Exports Source: Agricultural Statistics Figure 9 indicates that for the period under analysis, South Africa was a net importer of barley as indicated by the figure. This means that we use more barley than we produce in our country and this could be because in South Africa barley is planted only for malting purposes where there is only one major buyer (SAB Maltings) and farmers find it too risky to participate in such a market since they know that failure to meet SAB quality requirements would mean no or narrow market for their products. On average, imports of barley increased substantially between the years 2000 and 2002 after which a decline in imports was experienced until The exports of barley during the period under analysis were minimal as a result of lower levels of local production. South Africa has an import-led barley industry, and as such during 1999 there were practically no exports of barley to the world. 10

11 Source: Quantec Easy Data Although it is not forming part of the main producers of barley, the Gauteng Province is indicated in Figure 10 as the main exporter of barley in South Africa. This is mainly as a result of availability suitable infrastructure for storage and value adding facilities in the Gauteng Province which attracts many producers to transport their products to this province after harvest. KwaZulu-Natal and Western Cape Provinces also take part in the exportation of barley mainly because of availability of harbors in these provinces which serve as an overpass for barley exports to other countries, but exports from these provinces are minimal. Intermittent exports of barley were recorded from the Western Cape Province in between 2005 and The values of barley exports from the Gauteng Province which is the main exporter of barley in South Africa are indicated in Figure

12 Source: Quantec Easy Data In the Gauteng Province, the City of Johannesburg Metropolitan Municipality played a major role in exportation of barley between 2000 and The value of barley exports from the Gauteng province were higher in 2002 and began to decline immediately after These declines are in tandem with the general decrease in the total production of barley in the domestic market. Exports of Barley from Gauteng Province increased significantly during the year 2009 mainly as a result of improved local production Share Analysis This section reviews the analysis made on contribution of various provinces to the country s total barley exports and contribution of various districts to provincial exports. Table 4: Share of provincial barley exports to the total South African Barley exports (%) Year Western Cape Free State KwaZulu-Natal Gauteng Province Source: Calculated from Quantec Easy Data Table 4 indicates that between the years 2000 and 2004 and again between 2006 and 2009, Gauteng Province commanded a greater share of barley exports followed by the KwaZulu-Natal Province. This indicates that the greatest percentage of barley is recorded as originating from the Gauteng Province and partly from the KwaZulu-Natal Province despite the fact that the Gauteng Province does not form part of the main producing areas for barley. The implication is that Western 12

13 Cape and the Free State provinces transport their barley to the Gauteng Province for value adding before exportation and trade arrangements for these products are done by the traders in the Gauteng Province. Table 5: Share of District barley exports to the total Gauteng Barley Exports (%) Year District Sedibeng 9.23 Ekurhuleni City of Johannesburg Imports Source: Calculated from Quantec Easy Data Table 5 indicates that between the years 2000 and 2009 the City of Johannesburg Metropolitan District commanded a greater share of barley exports with the exception of the 2003 year when the Ekurhuleni district commanded 97% share in the value of barley exports from the Province. The reason behind City of Johannesburg s dominance in the exportation of barley is availability of suitable infrastructure in the district making it easier for the district to deal with larger volumes of agricultural products. South African barley processors depend mainly on barley imports to successfully carry out their daily operations and as such South Africa imports an average of about 121 thousand tons of barley per annum. Over the past five years, variability in rainfall has caused fluctuations in barley quality and yields in South Africa. When local crop has fallen short of requirements, SAB Malting relied on imports mostly originating from Canada and to a lesser extent from the EU and Australia. Barley imports from 2000 to The total imports of barley pursue the pattern which is shown in figure 13. Source: Quantec Easy Data and Agricultural Statistics 13

14 Figure 12 indicates that barley imports (in terms of both value and quantity) into South Africa from 200 to 2005 were considerably high. Considerable declines in both the volume and value of barley imports occurred between the years 2006 and 2007, followed by a marginal increase in This is mainly because in South Africa barley consumption is more than production which makes it extremely important for South African processors to import barley from other countries at all the times. Barley imports declined significantly in in response to higher production volumes. Source: Quantec Easy Data Figure 13 indicates that South Africa imports barley mainly from the Americas, Asia, Europe and Oceania. During the year 2000 South Africa imported more barley from Europe and the imports from this region declined in The figure also shows that barley imports from the Americas dominated the South African market between the years 2002 and Imports of barley from the rest of the world declined during the year 2009 mainly as a result of higher levels of local production at the time. 14

15 Source: Quantec Easy Data In the North American Free Trade Area (NAFTA) South Africa sourced its imports of barley mainly from Canada between the years 2001 and 2009 while menial imports were also obtained from the United States of America between 2003 and Source: Quantec Easy Data During the year 2000 barley imports into South Africa originated mainly from France and the United Kingdom in the European Union. From 2001 to 2006 barley imports originated from Denmark, France and the UK as shown in Figure 16. Imports of barley from the EU into South Africa decreased substantially between 2007 and 2009 and were replaced by imports from Oceania. 15

16 Source: Quantec Easy Data In Oceania South Africa imports barley from Australia and New Zealand. The volume of barley imports originating from Oceania increased substantially from 2000 with a peak attained during 2001 and thereafter declined to reach the lowest levels between 2004 and During 2008, the value of barley imports originating from Oceania increased considerably, replacing those from other regions such as the EU and NAFTA, and dropped to zero in Processing Malting barley is a particular type of barley used in making beer, flavourings, and extracts. Only a portion of the malting barley planted each year has the specific qualities needed to be selected for malt. To produce malt, barley kernels are soaked, germinated, and dried. Although the kernels look the same on the outside, this process causes chemical changes inside. The malted barley can now be used to make malt extract, beer and flour. Like regular barley, hulless barley does have a hull, but it is only weakly attached to the kernel and therefore easily removed during harvesting. The hull is the inedible outer coating of the kernel that protects the seed like a jacket. Hulless barley is convenient and is becoming increasingly popular both for human nutrition and as feed for livestock. Barley grain may be milled to produce barley flour, flakes, and bran. Milling involves crushing the seed kernel and separating the outside (bran) from the endosperm, which is the inside part of the kernel where food is stored to nourish a new plant. The endosperm is then ground to make flour. To improve its digestibility, barley grain is cracked or rolled for cattle feed and ground to make feed for hogs and chickens. Barley straw is the dried stems of the barley plant after the head that holds the grain kernels has been removed. Straw is often used as a soft, dry bed for livestock. It can also be made into building materials, paper and fiber board. To make silage, the entire plant is cut down, piled, compacted, and then allowed to ferment. Fermentation preserves this highly nutritious feed for beef and dairy cattle. 16

17 Figure 1 7: Barley Value Chain Tree explaining its uses Whole Barley Plant Malt/Beer Silage Flour Grain Flakes Bran Stem Livestock Feed Paper Building Materials Starch Paper Coating Bedding for Livestock Paints Biodegradable Plastics Source: Alberta Barley Commission 17

18 Figure 18: Barley Market Value Chain Farm Animal feed Manufacturers SAB Malting South African Breweries Wholesalers Bottle Stores & Pubs Imports 2.5 MARKET INTELLIGENCE Tariffs There is no import tariff charged for barley imports into South Africa from other countries. This is due to the fact that South Africa is a net importer of barley and it is considered that imposing an import tariff would make it expensive to import. Table 6 indicates the tariffs that are applied by France to the imports of barley originating from South Africa (for 2009 and 2010). Table 7 shows the tariffs that are applied by Germany to the imports of barley originating from South Africa (for 2009 and 2010). 18

19 Table 7 HS Code Product Description Trade regime description Applied tariffs 2009 Ad valorem equivalent of specific applied tariffs 2009 Applied tariffs 2010 Ad valorem equivalent of specific applied tariffs Barley seed Preferential tariff for RSA $/ton 2.98% $/ton 2.98% Barley (excl. seed): for the manufacture of malt with the following quality criteria: 60,5 kg/ hl or more, damaged grains Preferential tariff for RSA $/ton 8.91% $/ton 8.91% Barley (excl. seed): Other Preferential tariff for RSA $/ton 8.91% $/ton 8.91% Source: ITC Market Access Map During 2009 and 2010 Germany applied a tariff of US$121/ton for exports of barley originating from the rest of the world. Germany applies a preferential tariff of 20.57$/ton on barley imports from South Africa; which is equivalent to 2.98% for barley seed and 8.91% for barley that excludes seed. Similar to France, Germany is also among the top world barley producers and; it is therefore necessary to protect their market to a certain degree. Table 8 shows the tariffs that are applied by Ukraine to the imports of barley originating from South Africa (for 2009 and 2010). 19

20 Ad valorem equivalent of specific applied tariffs 2010 Applied tariffs 2010 Ad valorem equivalent of specific applied tariffs 2009 Applied tariffs 2009 Barley: other Barley: seed MFN duties (Applied) Product Description MFN duties (Applied) HS Code Trade regime description Table 8 Source: ITC Market Access Map Table 8 above indicates that Ukraine applies a tariff of 5% of the FOB value on barley imports originating from South Africa. The table further shows that tariff levels remained at lower level between the years 2009 and Ukraine is also among the top world barley producers. Table 9 shows the tariffs applied by the United Kingdom to imports of barley originating from South Africa (for 2009 and 2010). 20

21 Table 9 HS Code Product Description Trade regime description Applied tariffs 2009 Ad valorem equivalent of specific applied tariffs 2009 Applied tariffs 2010 Ad valorem equivalent of specific applied tariffs Barley seed Preferential tariff for RSA $/ton 2.98% $/ton 2.98% Barley (excl. seed): for the manufacture of malt with the following quality criteria: specific weight 60.5 kg/hl or more, damaged grains 1 Preferential tariff for RSA $/ton 8.91% $/ton 8.91% Barley (excl. seed): other Preferential tariff for RSA $/ton 8.91% $/ton 8.91% Barley (excl. seed): other Preferential tariff for RSA $/ton 8.91% $/ton 8.91% Source: ITC Market Access Map During 2009 the United Kingdom applied a preferential tariff for exports of barley originating from South Africa; which is 20.57$/ton for barley seed which is equivalent to 2.98% of the FOB price for barley seed and 8.91% for barley (excluding seed). In 2010 the applied tariffs for all forms of barley originating from South Africa to the United Kingdom remained at the same levels as in Table 10 indicates that the Russian federation applied a general tariff of to all forms of barley originating from South Africa, which remained unchanged between 2009 and

22 Ad valorem equivalent of specific applied tariffs 2010 Applied tariffs 2010 Ad valorem equivalent of specific applied tariffs 2009 Applied tariffs Barley: other barley Barley: barley seed MFN duties (Applied) Product Description MFN duties (Applied) HS Code Trade regime description Table 10 Source: ITC Market Access Map The import tariff for barley into Canada originating from all countries belonging to the WTO has remained unchanged between 2009 and Table 11 shows the tariffs that are applied by the United States of America to the imports of barley originating from South Africa (for 2009 and 2010). 22

23 Ad valorem equivalent of specific applied tariffs % 21.00% Applied tariffs % 21.00% Ad valorem equivalent of specific applied tariffs % 21.00% Barley: over access commitment Applied tariffs % Barley for malting purposes: over access commitment 21.00% MFN duties (Applied) Product Description MFN duties (Applied) HS Code Trade regime description Table 11 Source: ITC Market Access Map The import tariff for barley into Canada originating from all countries belonging to the WTO has remained unchanged between 2009 and Table 12 shows the tariffs that are applied by the United States of America to the imports of barley originating from South Africa (for 2009 and 2010). 23

24 Table 12 HS Code Product Description Trade regime description Applied tariffs 2009 Ad valorem equivalent of specific applied tariffs 2009 Applied tariffs 2010 Ad valorem equivalent of specific applied tariffs Barley, for malting purposes MFN duties (Applied) 1.00$/ton 0.37% 1.00$/ton 0.37% Barley, for malting purposes Preferential tariff for AGOA countries % % % % Barley, other than for malting purposes MFN duties (Applied) 1.50$/ton 0.14% 1.50$/ton 0.14% Barley, other than for malting purposes Preferential tariff for AGOA countries % % % % Source: ITC Market Access Map There is no import tariff in USA for barley imports from African countries due to the Africa Growth and Opportunities Act (AGOA). For other members of the WTO the USA applies a tariff of 1.00$/ ton on barley that is imported for malting purposes, which is equivalent to 0.37% of the FOB price. The USA also applies a tariff of 1.50$/ton for barley other than for malting purposes. Because USA produces only lower quantities of barley, it is unnecessary for them to impose heavy tariff barriers on barley imports Performance Analysis Table 13: Barley imports during

25 Imported value 2009 (thousand US$) Share in SA s imports (%) Imported quantity in 2009 (tons) Unit value (US$/ unit) Import growth in value between (% p.a.) World Canada Exporter Japan Import growth in quantity between (% p.a.) Import growth in value between (% p.a.) Source: ITC Trade Map Table 13 indicates that during 2009 South Africa imported a total of tons of barley from the world, which represented a decrease of 13% in value and 22% in quantity between 2005 and These imports were mainly from Canada and Japan. During the year 2008, Canada alone accounted for 99.80% of South Africa s total barley imports followed by Japan with 0.2%. 25

26 Source: ITC Trade Map The Figure above indicates that between 2005 and 2009 South Africa s imports of barley from the Canada grew at a rate slower than Canada s exports of barley to the rest of the world. Canada s barley exports to the rest of the world increased by 18% between the year 2005 and 2009 while the value of imports by South Africa from Canada declined drastically over the same period. 26

27 Source: ITC Trade Map If South Africa is to diversify its imports of barley from the world, the biggest markets exist in France, Ukraine, Russian Federation, Tanzania and Argentina. During 2009 South Africa imported no barley from most of these countries while their barley exports to the rest of the world have increased dramatically between 2005 and A small market for barley imports also exist in Romania whose exports of barley exports to the world have increased by about 50% between 2005 and Traditional markets for barley imports for South Africa remain Canada and Japan. 27

28 3. ACKNOWLEDGEMENTS The following organizations are acknowledged: Agricultural Statistics: Department of Agriculture, Forestry and Fisheries Tel: (012) Fax: (012) Alberta Barley Commission Quantec Easydata P.O.Box Menlo Park Pretoria 0102 Tel: Fax: Website: ITC Trade Map Website: ITC Market Access Map Food and Agriculture Organization (FAO) Disclaimer: This document and its contents have been compiled by the Department of Agriculture for the purpose of detailing the barley industry. Anyone who uses the information as contained in this document does so at his/her own risk. The views expressed in this document are those of the Department of Agriculture with regard to the industry, unless otherwise stated. The Department of Agriculture therefore accepts no liability that can be incurred resulting from the use of this information. 28