Economical Impact of drought & disasters on agriculture Drought - - PowerPoint PPT Presentation

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Economical Impact of drought & disasters on agriculture Drought - - PowerPoint PPT Presentation

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Economical Impact of drought & disasters on agriculture Drought Dialogue Western Cape Government Prof Ferdi Meyer Bureau for Food and Agricultural Policy (BFAP) 23 June 2016 When talking about the impact of the drought on the

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Economical Impact of drought & disasters on agriculture

Drought Dialogue – Western Cape Government Prof Ferdi Meyer

Bureau for Food and Agricultural Policy (BFAP)

23 June 2016

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When talking about the impact of the drought on the Agriculture, Food and Beverage sector…

  • People matter
  • The Environment matters
  • Profits matter

Are we on track with NDP 2030 goals??

2 |

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Example of Monitoring Drought

Oct 2015 Nov 2015 Dec 2015

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The Region and the drought

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Impact of drought: 3 Thresholds

  • Area planted summer crops
  • Pastures – first summer

growth

  • Impact on irrigation

agriculture still limited

  • Critical for yields
  • Pastures-late summer

growth

  • Heat affecting fruits ..
  • Smaller dams and

boreholes affected

  • Critical for all dams

and boreholes etc

  • Long-term damage on

pastures

  • All three industries

affected

Oct Jan Feb Mrch

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Dams levels

20 40 60 80 100 120 % Full Last Year (%Full) This Week (%Full) Source: DWS, 2016

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White maize prices

500 1000 1500 2000 2500 1000 2000 3000 4000 5000 6000 7000 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 2021 2023 Thousand tons R/ton White maize

White maize imports White maize exports White Maize - Import parity Randfontein SAFEX White Maize White Maize Export parity africa

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Livestock numbers

100 200 300 400 500 600 700 2013 2014 2015 2016

  • No. Animals

Cow herd

National Average Eastern Cape Free State KwaZulu-Natal Northern Cape Limpopo North West Western Cape

Source: UFS survey for RPO

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Livestock numbers

Source: UFS survey for RPO, BFAP calculations

75 80 85 90 95 100 105 110 2013 2014 2015 2016 Index

Herd Size: National

Cow herd Replacement Heifer Steer: 7-36 Months

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Drought impact on food inflation

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Food Inflation in the context of total inflation

% Share of CPI Basket % Share of CPI Food Basket

14.20 16.43 24.52 44.85 Food Transport Housing and utilities Other 25 32 3 12 4 2 11 5 7 Bread and Cereals Meat Fish Milk, eggs and cheese Oils and Fats Fruit Vegetables Sugar and Confectionary Other foods

Source: StatsSA, CPI Brief (2015)

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What are we producing & consuming?

  • 100
  • 80
  • 60
  • 40
  • 20

20 40 60 80 100 1 2 3 4 5 6 7 8 9 10 11 Net trade/SA consumption (%) Share of food expenditure (%)

2005

  • 100
  • 80
  • 60
  • 40
  • 20

20 40 60 80 100 1 2 3 4 5 6 7 8 9 10 11 Share of food expenditure (%)

2010

2024

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Average Projected Increase 2016 with mitigating factors January 2015 R282 per household per month R350 per household per month

↑24%

Drought impact on staple basket Inflation

R364 per household per month

↑29%

Average Projected Increase 2016

Imports of GMO White Maize – 10% reduction in White Maize Price

Low-income households = R82 more per month

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Drought impact on trade

Agri Net Trade: R12 billion - R15 billion

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Source: Van der Burgh, AGIS 2014

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Historic overview of drought impact

5000 10000 15000 20000 25000 30000 35000 40000 45000 50000 1975 1978 1981 1984 1987 1990 1993 1996 1999 2002 2005 2008 2011 2014 Million Rands

Real Gross Income

Horticulture Field crops Livestock

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Agricultural growth

17 |

  • 20%
  • 15%
  • 10%
  • 5%

0% 5% 10% 15% 20% 25% 30% Q1/05 Q3/05 Q1/06 Q3/06 Q1/07 Q3/07 Q1/08 Q3/08 Q1/09 Q3/09 Q1/10 Q3/10 Q1/11 Q3/11 Q1/12 Q3/12 Q1/13 Q3/13 Q1/14 Q3/14 Q1/15 Q3/15 Percentage

Year on year quarterly change in Agriculture, Forestry and Fisheries GDP

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Agricultural production growth: 2011-2015

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Mixed results & overall growth not fast enough – more can be done! Total growth over past 4 years = 7.6% on average across industries

  • 25%
  • 20%
  • 15%
  • 10%
  • 5%

0% 5% 10% 15% 20%

  • 100%
  • 80%
  • 60%
  • 40%
  • 20%

0% 20% 40% 60% 80%

Canola Soft Citrus Lemons Soybeans Table Grapes Rooibos Sunflower Sheep meat Barley Poultry Yellow maize Beef Macadamias Dairy Pork Wool Eggs Pears Groundnuts Apples Organges Nectarines Potatoes Avocado Pears Mangos Litchis Wine grapes Sugar cane Plums Grapefruit Peaches White maize Wheat Apricots Cotton Prunes Pineapples

% Change 2015 vs. 2011

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Where should we focus?

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Update on NDP Employment & Investment 2030 Matrix

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Agricultural employment: 2011-2015

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300 000 400 000 500 000 600 000 700 000 800 000 900 000 1 000 000 2008_1 2008_3 2009_1 2009_3 2010_1 2010_3 2011_1 2011_3 2012_1 2012_3 2013_1 2013_3 2014_1 2014_3 2015_1 2015_3

Employment in SA primary agriculture

New sample: Undercounting of agric in the past Since NDP in 2011, 70 000 new jobs in primary agriculture…but more can be done!

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Expansion in irrigation

21 |

2 000 000 4 000 000 6 000 000 8 000 000 10 000 000 12 000 000 100 000 200 000 300 000 400 000 500 000 600 000 700 000 800 000 1990 2000 2010 2014 Hectares Hectares

South Africa Field Cropped Boundaries (Excl. Sugarcane)

Pivots Orchards Subsistence & Smallholdings Dryland

Right Axis Left Axis

22%

Source: GeoTerraImages 2016

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Reasons for vulnerability

  • Industries important to either job creation or food security are

showing signs of vulnerability. Reasons are:

  • Exchange rate volatility
  • Labour environment volatility
  • Trade tariff structures & non-tariff trade measures inhibiting

growth

  • High relative cost of capital
  • Policy uncertainty with respect to land reform & land
  • wnership dampens investment, innovation & overall drive
  • Limited availability of water
  • Unreliable supply of electricity
  • Lack in cost effective logistics, mainly rail
  • Lack of coherency between and within different government

departments

22 |

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Where to fr from here?? The drought in a global, , regional and local context xt

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Future Scenarios

Domestic Macro Economy

South African Food System

Global Drivers Regional Drivers & Outlook

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Maize global price outlook

50 100 150 200 250 300 350 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 USD / ton Source: OECD-FAO, 2016

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Livestock global price outlook

1000 2000 3000 4000 5000 6000 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 USD / ton (CWE) Beef Poultry Pork Sheep Source: OECD-FAO, 2016

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Low margins – high volumes

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Regional implications

0.0 2.0 4.0 6.0 8.0 10.0 12.0 14.0 16.0 SA ZAM MOZ TAN MAL ZIM KEN Million tons

Maize production

2014 2015 EST 2016

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Relative shift in area

500 1000 1500 2000 2500 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 Thousand hectares WM YM WS WW SF SB CAN

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White maize prices

500 1000 1500 2000 2500 1000 2000 3000 4000 5000 6000 7000 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 2021 2023 Thousand tons R/ton White maize

White maize imports White maize exports White Maize - Import parity Randfontein SAFEX White Maize White Maize Export parity africa

36% decline in 2017

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  • R 9 001 761
  • R 854 548
  • R 10 000 000
  • R 8 000 000
  • R 6 000 000
  • R 4 000 000
  • R 2 000 000

R 0 R 2 000 000 R 4 000 000 2014 2015 2016 2017 2018 Ending cash surplus / deficit

Northern Free State - Cash Flow

Scn 1 (50% area) Scn 2 (20% area) Scn 3 (0% area)

Farm-level Drought Implication: Cash flow

Negative cash flow positions until 2017/2018 Drought – 2015/16 production season

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Production cost comparison

21 19 15 20 41 23 41 31 40 52 53 67 76 69 72 92 76 97 73 116 97 99

50 100 150 200 250

AR330ZN AR700SBA AR900WBA BR1300MT BR195PR UA6700PO* US1215INC US700IA ZA1600EFS ZA1600NFS ZA1700WFS Argentina Brazil Ukraine US South Africa

US$ per ton maize produced

Seed Fertilizer Plant protection Crop Insurance Contractor Diesel Total establishment cost Average: South Africa Sample average Crop revenue

Figure 13.7, Pg. 115

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Beef Market

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Chicken Market

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Shifting Apple Exports – Africa Rising

Source: ITC Trademap

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 2005 2008 2011 2014 United Kingdom Other Europe Far East and Asia Other Africa Other 24% 39% 12% 12% 13% 13% 43% 20% 17% 7%

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The Road from DAR to Lusaka

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Proposed Interventions

  • “Keep farmers on the ground”
  • Best chance of reducing maize meal prices and food

security in next season – back to export parity?

  • Restructuring debt: Security on loans & “Soft-loan”
  • ptions to finance shortfall (input costs & additional feed

demand)

  • Carefully monitor irrigation water usage and availability
  • Crop insurance support
  • Staple food price complex
  • Allow GM white maize imports from USA.
  • Identify vulnerable household hardest hit (IVIS spatial map)
  • SASSA (SA social security agency (social relief for distressed

households – R940 million approved)

  • Increase frequency of food price & marketing margin

monitoring by NAMC - efficient pass through of potential commodity price declines

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End!

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