Business Report (South Africa) | January 23, 2009
By Tom Robbins
Cape Town - The poor summer wheat crop expected this month highlighted the need for the government to intervene in the market to protect the viability of eastern Free State farmers, Philip Theunissen, a financial accountant to growers, said yesterday.
Before 1994, under a regulated agriculture regime, the country was able to grow all the wheat it needed. But the opening up of the economy to international competition squeezed local farmers as food imports increased.
Last year South Africa became a net importer of food for the first time in more than 20 years, reigniting concerns about food security and the viability of some farming sectors.
Theunissen, an associate of agricultural professional services company Forensies.com, said most eastern Free State wheat farmers were expected to report a loss on the crop due to poor rains in the spring
With production costs higher than the imported price, most Free State farmers would convert land to alternative uses, Theunissen said. The region is the second-biggest producer after the Western Cape.
Production costs were R5 000 a hectare on the back of high fuel and fertiliser prices at the time of June plantings.
Due to rains coming late, the yield was only one ton a hectare, down from a "normal" yield of up to 2.5 tons.
Based on the current wheat price of about R2 500 a ton, the loss was expected to be about R2 500 a ton. When farmers planted in June, the price was as high as R3 000 a ton.
Theunissen, who provides accounting services to more than 20 farmers in the region, said that the outlook for the wheat price was poor because of falling global demand due to the financial crisis.
But foreign investors such as Lonrho and the Gulf states are bullish on agriculture, investing in arable land in Africa.
They argue that higher global food demand will continue when the credit crunch is over, justifying investments in the riskiest countries.
Theunissen said that government protection should be in the form of annual price setting - along the lines of the former agricultural control boards - to ensure a profit margin for farmers.
A second option was to raise the import tariff on wheat. The current tariff was 2 percent, but could be raised as high as 72 percent under World Trade Organisation rules, he said.
Theunis Coetzee, the manager of products at Western Cape seed and services firm Morreesburgse Koringboere, said the important Swartland winter crop was up by about 10 percent on 2007, though quality was affected by too much rain during the harvest.
The Swartland crop size was similar to those during the days of government protection, Coetzee said.
Land under cultivation was lower, but due to technological advances yields were now higher. But marginal lands elsewhere were no longer farmed as they had been in the days of self-sufficiency.
"If the price is good people will plant those areas previously cultivated," said Coetzee.
Commenting on the eastern Free State, Kobus Laubscher, the chief executive of Grain SA, said a combination of a margin squeeze in recent years and the lack of spring rain had placed the future of non-irrigated wheat production in this region in jeopardy.
He added that the government needed to adopt a strategy that resulted in a sustainable wheat farming sector, coupled with affordable prices for the consumer.
Call for state to shield wheat farmers
URL to Article: https://farmlandgrab.org/post/view/2711
Source: Business Report