ECONOMIC OUTLOOK REPORT XI

Transcription

1 ECONOMIC OUTLOOK REPORT XI Prepared by the Economic Services Unit: Technology Transfer Division July

2 Table of Contents 1. EXECUTIVE SUMMARY FOREWORD AND ACKNOWLEDGEMENTS MACRO-ECONOMIC INDICATORS... 6 Global macroeconomic status... 6 South African macroeconomic status... 6 Global Agricultural outlook... 6 SA Agribusiness... 7 SADC REGION FIELD CROP PRODUCTS... 8 Maize... 8 Wheat... 8 Sorghum... 9 Barley... 9 Cotton Sunflower Soya beans Groundnuts Dry beans HORTICUTURAL OUTLOOK South African canning industry Bulida Apricots Peaches Bon Chretien Pear Vegetables ANIMAL PRODUCTION Poultry Beef Pork Dairy Products Wool Mohair CONCLUSIONS

3 1. EXECUTIVE SUMMARY Global macroeconomics The global growth outlook remains weak, with declining consumer confidence. The Euro area remains at the centre of the global financial crisis with potentially widely spread spill over effects through trade and financial channels. Although the outlook for growth in the US improved in the first quarter of 2012, activity in China, India and emerging Asia moderated alongside weaker growth prospects for the Euro area. Sub- Saharan Africa (SSA) sustained solid growth with relative insulation from financial spill overs from Europe. Global agricultural perspective Current higher agriculture commodity prices are projected to last for some time. Global wheat supplies for 2012/13 are lowered 7.0 million tons with beginning stocks lowered 1.5 million tons and world production expected down 5.5 million tons, reflecting reduced crop prospects in several exporting countries. South African macroeconomics Real economic growth in the domestic economy decelerated to 2.7% in Q1 of GDP is predicted to average 3.4% until 2016 while GDP per capita is expected to rise to $ in 2016 from ±$8 088 in Unemployment rose from 25% in Q1 of 2011 to 25.2% in Q1 of It is predicted to fall to 20.1% by South African agricultural perspective Agribusinesses kicked the first quarter of 2012 off on a positive note. Due to the strong Rand and weak demand in Europe, exporters are also focussing on local markets, which have a negative impact on growth in volumes exported. Fruit markets in the Far and Middle East are becoming very attractive and a significant change in export focus could contribute to expanding export potential. Private food consumption growth is forecasted to grow at 3.3% in 2012, following a ±4.8% expansion in Agricultural exports are expected to increase by almost 50% and imports by almost 47% in US dollar terms by Field crop outlook Commercial maize production is projected to increase by 11.7%, to 12.2 million tons at a yield of 4.10t/ha, whilst maize areas will remain unchanged at million ha. New import duties and wheat varieties are projected to benefit long term wheat production growth. Sorghum production is also expected to increase. South Africa s dependence on expensive imported barley is expected to decrease due to a projected recovery in local barley production. A total cotton crop of lint bales is expected. The production forecast for sunflower seed is at tons. The area estimate for soya beans is ha with an expected yield of 1.46t/ha. The area estimate for groundnuts is ha with an expected yield of 1.45 t/ha. The production forecast for dry beans is tons. Horticultural outlook Export volumes of apples, pears, table grapes and stone fruits grew positively last year. Both the area planted to major deciduous fruits as well as rates of local consumption are declining. About 90% of local canned fruit is exported, mainly to Europe, but now also exploring Asian markets and fruit delivery for processing increased by 4% in 2011/12. Quantities of vegetables sold remained relatively constant, but local market value increased significantly between 2006 and

4 Livestock production Falls in meat prices on a month on month basis have been noticed recently; 1.8% in February, 1.1% in March, 0.6% in April and 1% in May. Poultry consumption is estimated to expand by 21.8%, with strong production growth of 21.4% envisaged up to A steady expansion in beef sector consumption is expected, due to strong demand and high tariffs on imports. A 3.6% rise in beef consumption is expected in New forecasts see pork consumption growing by 5.2% in 2012 and by 29.3% in the five years to Total milk production during Q1 of 2012 was 3.1% higher than last year. Total dairy exports exceeded imports by tons in May South African wool production in was tons, a fall of 6.7%. Mohair has been in good demand during the last 2-3 years boosted by high demand for natural fibres and a bulky, hairy, natural look. SADC Food Security Outlook Food security improvements are evident across most of the region, enhanced in areas where crop production benefited from favourable rainfall and minimal exposure to production shocks. Staple food prices are expected to continue to decline until the end of the harvest period (July/August). 4

5 2. FOREWORD AND ACKNOWLEDGEMENTS The Economic Services Unit presents this 11 th Economic 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, whilst considerable local input is obtained from BMI and BFAP. Projections should be interpreted as possible scenarios. The following sources are acknowledged: Agricultural Business Chamber Media Release, March 2012 Bureau for Food and Agricultural Policy (BFAP) 2011 Outlook Business Monitor International Report, Q3, 2012 Business Report; 28 June, 2012 Cape Mohair Wool (CMW) Mohair & Wool Market 30 November and 6 December Reports 2011 Cotton SA, Cotton Market Report (9/3/3/1), June, 2012 Crop Estimates Committee May report, 2012 Famine Early Warning Systems Network (FEWS-Net), May 2012 Fast Facts, No.6/2012/, June 2012 FNB Agri-Weekly, 12 June, 2012 Food & Agriculture Organization of the UN: Food Outlook- Global market Analysis, June 2011 GAIN Report 2011, USDA Foreign Agricultural Services, SA. Republic of canned Deciduous Fruit Annual accessed on 28/06/ International Monetary Fund (IMF): World Economic outlook. April 2012 NAMC -Food Price Monitor: May 2012 NAMC &DAFF -International Trade probe, No. 39, May 2012 OECD-FAO Agricultural Outlook, and Economic Outlook May 2012 SA Economic Profile 2011 ( SARB Quarterly Bulletin No. 264, June

6 3. MACRO-ECONOMIC INDICATORS Global macroeconomic status The Euro area remains at the centre of the current global financial crisis with potentially widely spread spill over effects through trade and financial channels. Weak recovery is anticipated in the major advanced economies, whilst activity will remain relatively solid in most emerging and developing economies. There are still daunting challenges including, job creation, and maintaining fiscal and financial stability. Although the outlook for growth in the US improved in the first quarter of 2012, activity in China, India and emerging Asia moderated alongside weaker growth prospects for the Euro area. Sub-Saharan Africa (SSA) has thus far sustained solid growth with relative insulation from financial spill overs emanating from the euro area. However, high oil and food prices pose unprecedented inflationary pressures, and these may exert additional pressure on the region s external and fiscal balances. South African macroeconomic status Real economic growth in the domestic economy decelerated to 2.7% in the first quarter of GDP is predicted to average 3.4% over the five years to 2016 while GDP per capita is expected to rise to US$ in 2016 from an estimated US$8 088 in Global consumer price inflation remained well contained in early 2012, despite intensifying concerns regarding international oil prices resulting from geopolitical tensions over the period. The April 2012 Consumer Price Index (CPI) released by Statistics South Africa (Stats SA) showed that food and non-alcoholic beverages inflation was 8.7 %. Headline CPI increased by 6.1 % between April 2011 and April Food and non-alcoholic beverages inflation increased on a year-on-year basis by 9.6 % in February 2012 and 8.6 % in March The Fast Facts report from the South African Institute for Race Relations (SAIRR), predicts a consumer price inflation of 6.2% in June 2012, up from an average of 5.0% in According to Stats SA, the unemployment rate rose from 25% in the first quarter of 2011 to 25.2% in the first quarter of The SAIRR predicts unemployment to fall to 20.1% by Combined with larger shortfall on services, income and current transfer account with the rest of the world, the current-account deficit widened further to 4.9% of GDP in the first quarter of Global Agricultural outlook The OECD-FAO Agricultural outlook forecasts higher agriculture commodity prices to last for some time. A good harvest in the coming months is expected to push commodity prices down from the extreme levels seen earlier this year. However, over the coming decade real prices for cereals could average as much as 20% higher and those for meats as much as 30% higher, compared to Global wheat supplies for 2012/13 are expected to be 7.0 million tons lower with production expected down 5.5 million tons. Higher 2011/12 global consumption, fuelled by increased global trade and reflecting reduced crop prospects in several exporting countries including Russia, EU-27, Turkey, and the United States. Russian production is expected 3.0 million tons lower due to a continuation of spring dryness in key winter wheat producing areas and indications of crop development problems resulting from winter freeze damage. EU-27 production is also expected to be 1.0 million tons lower with reduced acreage in Germany, Poland, and Spain, only partly offset by higher expected yields in France and Bulgaria. 6

7 '000 tonnes US$mn SA Agribusiness Agribusinesses kicked off Q1 of 2012 on a positive note. The ABC/IDC Agribusiness Confidence Index increased to 64 index points in in Q1 of 2012, 3% higher than in Q1 of 2011, 25% higher than Q4 of Due to the strong Rand, and weak Eurozone demand, exporters are now focussing more on local markets, which has a negative impact on growth in volumes exported. The fruit markets are seriously considering markets in the Far and Middle East. The significant change in export focus could contribute in expanding export potential in future. There is a relatively positive indication on private food consumption in South Africa, forecasting real growth of 3.3% in 2012, following an estimated 4.8% expansion in This is due to a number of favourable factors including high nominal wage growth, declining unemployment (although slowly) and the low interest rate environment which should keep a lid on debt servicing costs. BMI expects South Africa's food, drink and tobacco trade surplus to increase slightly over the forecast period Exports are expected to increase by ± 50% and imports by almost 47% in US dollar terms over this period Exports Imports Balance e 2012f 2013f 2014f 2015f 2016f Figure 3.1: Trade Indicators - Historical Data & Forecasts, (BMI, 2012) A combination of weaker production and higher food prices is expected to contribute to reduced sugar consumption in South African sugar consumption is predicted to grow by just 1.2% in 2012 and by just over 14.1% in the five years to It is envisaged that over the long term, macroeconomic fundamentals, together with the increasing use of sugar for biofuel, will have a positive effect on sugar production levels f 2014f 2015f 2016f Figure3.2: Sugar production and consumption (BMI, 2012) SADC REGION The region s food security outlook by FEWS NET (May, 2012) shows a general improvement across most of the region; enhanced in areas where crop production benefited from favourable rainfall, and where minimal exposure to production shocks was experienced. Increased on farm food availability has eased pressure on local market supplies, in turn easing the pressure on prices. Staple food prices had stabilized and most markets were adequately stocked with this season s early harvests as well as last season s stocks which traders offloaded in preparation for this season s crop. Staple food prices are expected to decline until the end of the harvest period (August) when prices should stabilize before rising as the lean season approaches. 7

8 4. FIELD CROP PRODUCTS Maize Projected increases in the production of genetically modified (GM) maize together with the introduction of new GM maize varieties in South African agriculture have improved estimates for the maize yield in The BMI projects that GM maize will account for 68.7% of total maize output in SA. This will lead to a longterm increase of 28% in maize production over the next 5 years. Likewise, first estimates of plantings and yields look favourable. BMI projects that the production of commercial maize will increase by 11.7% to 12.2 million tons with an expected yield of 4.10t/ha. The CEC s revised area estimates that the area under maize production will remain unchanged at million ha. The total area for white maize production is million ha with million ha for yellow maize. The yield for white maize dropped slightly to 3.89t/ha against 3.92t/ha in the last forecast. The yield for yellow maize is 4.42t/ha or 0.32t/ha higher than the national maize yield average. Maize demand for human consumption will continue to slow down given high prices. Demand for maize for animal feed purposes is expected to continue. Total demand for maize will increase by 2.9% in 2012 and is projected to increase by 15.2% over the next 5 years. Greater consumer diet diversification is expected to cause the demand for white maize to level off over the long term. Figure 4.1: South African maize production and consumption, (BMI, 2012). In the non-commercial sector, the area for maize production is expected to decrease by 9.17%. The CEC predicts that the maize crop output will increase by 13.4% owing to higher maize yield in the Eastern Cape, which accounts for over 60% of total maize planted in the non-commercial sector. The international price of yellow maize (US No.2, Yellow, U.S. Gulf) decreased by 8.48 % between April 2011 and April 2012.During the same period, the price of domestic yellow maize increased by %. The domestic price of yellow maize traded on average at R per ton during April 2012 and above the export parity price of R The domestic white maize price increased by % compared to April Wheat The BMI estimates that the area for wheat plantings in 2012/2013 will decrease by 7.4%, owing to increased maize plantings. Wheat production will continue to experience a production deficit. A production deficit of 1.3million tons is forecasted against an estimated production output of 1.7 million tons. The overall, long- 8

9 term view for wheat is positive: production will be moderate over the next 5 years. New import duties and wheat varieties are projected to benefit long term wheat production growth. Supply side factors such as increased maize production may stimulate farmers to allocate more land to wheat production. In the five years to 2016, BMI estimates that wheat production will grow by 34.7% to reach 2.0 million tons. Weak demand in 2012 is anticipated, mainly driven by high wheat prices and local underproduction. The international price of wheat (US No.2, Hard Red Winter ord. Prot, US Fob Gulf) decreased by % and the domestic price of wheat decreased by % from April 2011 to April Figure 4.2: South African Wheat production and consumption, (BMI, 2012). Notwithstanding volatile wheat prices in April, BMI predicts that wheat prices will average USc575/bushel in 2012 and USc560/bushel in Prices will be relatively stable owing to weak supply in North Africa. Sorghum Sorghum production is expected to continue increasing. The CEC predicts that sorghum output shall increase by 450 tons to tons in 2012 against tons in the previous forecast. The area estimate for sorghum is ha with an expected yield of 2.91 t/ha. Figure 4.3: SA Sorghum Summer crop estimate (CEC, 2012). Barley South Africa s dependence on expensive imported barley is expected to decrease due to a projected recovery in barley production, locally. The BMI forecast for total barley output is tons. In the five years to 2016, barley production is projected to increase by 48.1% to reach tons. 9

10 Figure 4.4: SA Barley crop estimate (BMI, 2012). Cotton Sustained high levels of global cotton stocks will continue to affect cotton prices. The Chinese are expected to decrease their cotton output by over 13% in 2012/13. The ICAC anticipates world cotton stocks to increase by 9% in 2012/13 to reach a record 14.5 million tons. This is expected to represent 61% of global cotton use and the highest stock-to-use ratio in 14 years. Global cotton consumption will drop by 6% against an 8% increase in production. Combined forecasts by the ICAC and Cotton South Africa project a cotton surplus of 5.2 million tons, despite an expected decline of 7% in global cotton production. Whilst production is expected to decline to 25.1 million tons, consumption will increase by 3%. In the local outlook for cotton, Cotton South Africa s 5 th estimate for the 2011/12 production year predicts that a total crop of lint bales will be produced of which lint bales will be produced from SA grown seed cotton. The shortfall of lint bales will be covered with cotton produced in Swaziland. Whereas lower cotton prices in 2011/12 will cause a decline of 26% in total cotton output compared to last season, favourable prices for other competing summer crops will cause more farmers to move away from cotton production. Figure 4.5: RSA Cotton Lint Consumption (Cotton SA, 2012). Sunflower Revised area estimates by the CEC for the 2012 summer crop is ha, with an expected yield of 1.46t/ha. The production forecast for sunflower seed is at tons, which is tons more than the previous forecast. The sunflower seed price traded at R per ton in April On an annual basis the price of sunflower seed increased by % between April 2011 and April

11 Figure 4.6: Sunflower area planted and 4th production forecast 2012 (CEC, 2012). Soya beans The area estimate for soya beans is ha with an expected yield of 1.46t/ha. The anticipated output for soya beans is tons. This will be tons less than the previous forecast s output. Figure 4.7: Soya beans area planted and 4 th production forecast 2012 (CEC, 2012). Groundnuts The CEC predicts that the expected groundnut crop is tons. This will be 150 tons more than the last forecast. The area estimate is ha with an expected yield of 1.45 t/ha. Figure 4.8: Groundnuts area planted and 4 th production forecast (CEC, 2012). Dry beans Dry beans production is predicted by the CEC to increase slightly. The production forecast for dry beans is tons, which 380 tons more than the previous forecast. The expected yield is 2.91 t/ha, whilst the area estimate is ha. Figure 4.9: Dry beans area planted and 4 th forecast for 2012 (CEC, 2012). 11

12 5. HORTICUTURAL OUTLOOK Export volumes of apples, pears, table grapes and stone fruits are expected to grow positively for the 2011/2012 production season. This outlook presents information for different section of the horticulture sector, revolving around value-addition and agro-processing of these commodities. South African canning industry About 90% of South African canned deciduous fruit is destined for export markets. Despite Europe being the leading market historically, the South African canning industry has positioned itself to supply other major markets in the East, such as Japan. This export orientation makes producers susceptible to foreign exchange fluctuations. While the industry struggles to remain price competitive, the input cost of cans, sugar and electricity have increased significantly in recent years. Both the area planted to major deciduous fruits as well as the rate of consumption of commodities in local markets have either remained flat (constant) or are declining due to the unexpected increase in the establishment cost of orchards for these crops. South African fruit deliveries for processing for the year 2011/12 is set to increase by nearly 4% overall as the crop recovers from previous seasons, affected by the bad weather conditions during the harvest period in December and January. Apricot deliveries are forecast at million tons; Clingstone peach raw fruit deliveries at million tons and pear deliveries at million tons. Jan-11 Jan-10 Jan-09 Jan-08 Bon Chretian pears Clingstone peaches Bulida apricot Million Tons Figure 5.1: Fruit delivered for canning: (Canning Fruit Producer s Association in GAIN report 2011) Apricots The forecast for deliveries of Bulida apricots for canning increased by 4% to million tons for 2011/12 as trees planted 2-3 years ago reach their bearing potential. The area planted to Bulida apricots is expected to remain flat for the year 2011/12 as rising production costs and weak demand for apricots for canning has led to a decline in area planted for several years as illustrated in figure 5.2 below. The cost of establishing an apricot orchard has increased about 56% from 2008 and was R in

13 Million Tons Rands Figure 5.1: Establishment costs of Bulida Apricot Orchard (Hortgro in GAIN report 2011) Peaches The area planted with Cling peaches is forecast at 6300 hectares; a decline of 3%. The area planted has been declining since 2007 on escalating production costs. The cost of establishing a peach orchard has increased by 42% from 2008 and is currently R /ha. Total deliveries of Cling peaches for canning are forecast at million tons for 2011/12, a 4% increase driven by an increased number of trees at the prime of production potential. The main export markets are Russia, Japan and Hong Kong. Pears The area planted with canning pears is forecasted to remain stable at hectares on demand for fresh pears compared with canned pears. Over the past three years, the area planted has shifted towards pears for the fresh market where producers enjoy stronger prices as opposed to canning. The cost of establishing one hectare of pears has risen 83% in the past three years, driven by the cost of planting materials and the cost of trellising. Total deliveries of Bon Chretien pears are forecasted to remain flat at million tons for 2011/12, given the high number of aged trees. UK Germany Japan Russia US Figure 5.2: Export statistics for canned pears (GAIN report 2011) Vegetables Vegetable production in South Africa has experienced significant growth in the last eight years, largely driven by expanding domestic demand, attributed to rising numbers of middle-class consumers. Processing and storage technology improvements are also stimulating vegetable production. The bulk of vegetables produced are sold domestically and only small amounts are exported annually. Although the quantity of vegetables sold on both the domestic and export market remained relatively constant, the value of the 13

14 domestic market increased significantly between 2006 and Consumer preference for healthy products also stimulated vegetables sales. Tomatoes Tomato prices lost momentum and softened due to weak uptake at most markets. Weekly tomato prices fell by 2.2% w/w and 25.6% y/y, closing at R4 195 per ton. Volumes traded fell by 6.3% w/w but were 7.3% higher y/y, at tons. Prices will trend sideways in the short term with limited upside potential. Potatoes Potato prices decreased slightly due to limited market uptake. Weekly prices fell by 4.4% w/w and 15.6% y/y to R2 384 per ton. Volumes traded were pegged at tons, down 5.1% w/w but still up 19.3% y/y. Prices are expected to move sideways with some upside potential due to moderation in supplies. Onions Onion prices eased slightly lower as a result of weak uptake on markets. Weekly onion prices closed at R3 114 per ton, down 1.9% w/w but still 18.9% higher y/y. Volumes traded came in at 4,944 tons, down 9.5% w/w but 23.0% higher y/y. Prices are expected to trend sideways in the short term but with limited upside potential. Carrots Carrot prices drifted lower despite reduced volumes due to softer demand. Weekly carrot prices fell by 5.0% w/w and 37.2% y/y and closed at R2 168 per ton. Volumes traded reached tons, down 1% w/w but 48.7% higher y/y. It is however expected that prices will firm due to limited market supply. Cabbages Cabbage prices posted slight gains supported by improved demand across most markets. Weekly cabbage prices increased by 3.0% w/w and 5.7% y/y to close at R1 945 per ton. Volumes traded were pegged at tons, up 0.8% w/w 7.9% lower y/y. Prices are expected to improve somewhat in the short term. Table 5.1 Vegetable prices and volumes at major fresh produce markets (FNB Agri-weekly 15/6/12) Week ending 15 June 2012 Average Price (R/t) w/w Y/y Total Volume (t) w/w Tomato 4, % -25.6% % 7.3% Potato 2, % -15.6% % 19.3% Onion 3, % 18.9% % 23.0% Carrot 2, % -37.2% % 48.7% Cabbage 1, % 5.7% % 7.9% Y/y 14

15 '000 tons 6. ANIMAL PRODUCTION The forecast for consumption of meat and meat products remains vulnerable to any significant dip in economic growth. Recent sharp falls in prices have been recorded; 1.8% in February, 1.1% in March, 0.6% in April and 1% in May. Although rising food prices, especially in meat, are expected to have a negative impact on consumption in 2012, currently production is not expected to be adversely affected. Poultry The poultry meat industry is the country s largest individual agricultural industry and contributes 17% to agriculture s GDP. Since 2000, broiler production has grown by an average of 4% p.a. The news in February 2012 that government planned to impose anti-dumping duties on imported Brazilian frozen whole birds and boneless cuts saw JSE-listed poultry producers Country Bird Holdings, Astral and Sovereign Foods gaining market share. However, the poultry sector is projected to face challenges with elevated feed costs. It is estimated that in 2012, poultry consumption will increase by 2.9% to reach 1.7mn tons. An extended forecast envisages poultry consumption expanding by 21.8% in the five years to BMI s extended forecast for poultry production envisages strong growth of 21.4% in the five years to 2015/16; driven by strong GDP per capita growth and a steady fall in unemployment. Broiler meat production Total supply Broiler meat consumption Figure 6.1: SA Poultry Utilization ( Beef The rising price of beef in 2012 is expected to have an impact on consumption levels. A steady expansion is expected to continue, fuelled by consumption demand and high tariffs on beef imports from outside the SADC. A 3.6% rise in beef consumption is expected in In the next the five years to 2016, BMI forecast a 25.2% increase in beef and veal consumption. This will be influenced by population growth, rising GDP per capita and the decision by more consumers to integrate red meat into their diets. 15

16 000'tons Carcass weight equivalence Beef & Veal Production Beef & Veal Consumption Total supply Figure 6.2: South Africa Beef & Veal utilisation ( Pork Although only 3% of local pork production is exported, any additional pork meat on the domestic market helps to drive down prices. Local producers compete with imports from Canada and Germany. BMI s new forecast sees pork consumption growing by 5.2% in 2012 and by 29.3% in the five years to On the domestic market, prices continued to decline as a result of weak demand. Weekly baconer prices traded at R16.97/kg, down 1.4% w/w but still 7.5% higher y/y. Porkers prices fell by the same margin and traded at R18.03/kg, still 11.4% higher y/y. Pork production Pork consumption Figure 6.3: Pork production & consumption (BMI, 2012) Dairy Products Total milk production during Q1 of 2012 was 3.1% more than last year; mainly due to adverse production conditions in 2011 and more favourable climatic conditions early this year. The increase in milk production as production shifts to more specialised dairy farmers also contributed to higher production. According to MPO economist Dr Koos Coetzee, the higher production will enable processors to source the bulk of their requirements from local producers. Total dairy exports exceeded imports by tons in May During the first five months of the year tons were imported while tons were exported. Although higher imports are possible during the winter, the significant increase in exports will probably result in a net export situation for the year, resulting in a favourable supply/demand situation. 16

17 07- Mar 14- Mar 28- Mar 04- Apr 18- Apr 25- Apr 09- May 23- May 06- Jun Tons Yoghurt production Yoghurt sales Butter production Butter sales Cheese production Cheese sales Figure 6.4: SA Dairy Market Trends (BMI, 2012) Wool SA produces 48 million kilograms of p.a, 90% of which is exported, at a value of ±R $2 billion. Weaker consumer demand from the EU is causing concern for the global wool industry. The lack of orders from Europe has resulted in reduced production in China with both wool top and yarn manufacturers unable to sell to their traditional markets in Europe and the US at past levels. South African wool production in was tons, a fall of 6.7%, due to an outbreak of Rift Valley Fever, foot-and-mouth disease and notably predators that are killing stock. Most of the disease issues have been alleviated and it is expected that South Africa will reach 30,000 tonnes by The demand from China, the largest consumer, is expected to remain weak until Europe sorts out its economic woes and consumers feel more confident MICRON 21 MICRON ZAR Price Figure 6. 5: Price Movement for good quality wool per micron: (CMW, 2012) Mohair South Africa currently produces approximately 50% of global production. Mohair has been in high demand during the last 2-3 years, boosted by demand for natural fibres and a bulky, hairy, natural look. As a result demand for hand-knitting yarns and fancy yarns has been robust allowing adult prices to be maintained. 200 Kid Indicator Young Indicator Adult Indicator Average Price Feb 06-Mar 27-Mar 24-Apr 15-May 29-May 12-Jun Figure 6.6: Cape Mohair market indicator movement for different age group categories (CWM, 2012) 17

18 7 CONCLUSIONS Whilst the global outlook is characterised by heightened uncertainty, weak growth and declining consumer confidence, the regional sub-saharan economy is projected to grow at 5% in 2012 benefiting from production boosts in a number of countries. By 2050 the world population will reach 9 billion, with demand for food, including meat products to increase by at least 70%. Food security remains a challenge. More research, development and technology transfer is needed to improve the profitability of resource poor farmers to participate in well-defined commercial markets. The ARC has a role in defining and conducting research that address the challenges of farmers on the continent, research that impact on job creation and rural development. 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 issues will make agricultural R&D a priority. The ARC should play a key role in enhancing productivity, growth and competitiveness across a spectrum of value chains. Import volumes continue to raise alongside declining export volumes. Recession in Europe and economic slowdown in Asia could worsen the situation as demand from these regions would decrease. South Africa will be affected as these regions are major export markets. South Africa has the largest and most efficient agricultural sector in Sub-Saharan Africa and there are expectation that the country will have to lead food security and productivity initiatives. The Agricultural Research Council with its extensive R&D know-how has a role to play in development on the continent. In terms of grain production, the biofuel industry will in all likelihood grow significantly in the coming years, increasing the importance of maize, beyond human consumption and already extensive expected growth in feed requirements. The role of the ARC in maize production R&D will therefore in all likelihood increase. In wheat production the ARC will also have to play an increasingly important role, as demand for wheat products increases. New import duties and wheat varieties are already projected to benefit long term wheat production growth. The ARC also has a key role in addressing South Africa s dependence on expensive imported barley. Oilseed crops such as soya beans, groundnut and dry beans production are all predicted to play an increasingly important role in food and feed production in South Africa, and the ARC has extensive R&D capacity that can be brought to bear on this issue. 18

19 In the vegetable and fruit sector, there are extensive business prospects as more middle class consumers turn to healthy diets that include vegetables and fruit, creating high demand, also for processed products. There are significant opportunities for the ARC to invest in research in post-harvest and agro-processing as well as in value-chain and business logistics. Fruit and vegetable production efficiency can be improved dramatically through relevant agro-processing, and value-addition research. A comprehensive study done by the Bureau for Food and Agricultural Policy at UP for the Presidency, indicated that the horticultural sector has the highest, most labour intensive, growth potential. Despite a constant increase in South African meat production, quantities produced are still below demand and particularly beef, pork and poultry are imported, indicating significant local growth potential. 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. A particularly undeveloped focus area is the 86% of smallholder farmers that have cattle. The ARC should expand its R&D focus on these farmers to produce quality livestock with better feed efficiency and growth, to would address poverty, rural development and food security. South Africa is also a net importer of pork and significant opportunities for new prospective producers to enter this market exist. The ARC could play a leading role in capacitating new producers. 19