SOUTH AFRICA: Maize may suffer from high input costs

Thursday, August 28, 2008

High fertiliser and fuel prices in South Africa may impact the 2009/2010 maize harvest in the region's largest producer, a grain farmers' body warned.

"The high costs will influence farmers to plant less - it is difficult to predict by how much now," said Nico Hawkins, manager of commodity services at Grain South Africa (Grain SA), a farmers' association that provides strategic support to all grain producers in the country.

The cost of fertiliser has shot up by more than 100 percent - higher than the official inflation rate of around 11.6 percent - fuel prices have increased by over 70 percent since August 2007, and seed prices are up by more than 30 percent, Hawkins said.

Studies by Grain SA show that if farmers are to recover the high cost of inputs in 2008, they will have to hike prices by 63 percent in 2009. "It is highly unlikely that they will be able to charge that amount and recover the money, so farmers are going to plant less," Hawkins explained.

South Africa's national consumption requirement of the staple food is around 9 million mt, and surplus maize is exported to neighbouring Botswana, Lesotho, Zimbabwe, Swaziland, Namibia and Mozambique, as well as countries outside of Africa.

Global trends show that food prices will decline next year, leaving South Africa's farmers little room to pass on increased costs to the consumer, said Abdolreza Abbassian, secretary of the Intergovernmental Group on Grains Trade and Markets Division at the Food and Agriculture Organisation (FAO) in Rome. "The vulnerability of farmers will be increased."
Farmers want relief

Farmers have asked the government to provide relief by exempting them from a tax on diesel, used to fund monetary assistance to victims of road accidents. "Farmers don't use roads a lot - they do most of their commuting on farm roads," said Hawkins.

Grain SA has urged the government to spend more on agricultural research and to set up drought insurance schemes. "We are not asking for any input subsidy, but they could perhaps subsidise the premiums."

South African maize exports dipped to 529,000 mt during a severe drought in 2007, the lowest in a decade, when the country had to import more than a million tonnes.

Hawkins said projections for the 2008 harvest season, which lasts from May 2008 to April 2009 in South Africa, were positive, and exports were expected to cross the million-tonne mark. Final crop estimates put production at more than 12 million mt for 2008/09, five million mt more than in the 2007/08 season.

Lulu Xingwana, Minister of Agriculture and Land Affairs, recently told parliament that the government would intensify programmes to increase production of wheat, maize, soya and milk.

Although the total contribution of agriculture to the economy has risen from more than US$3 billion in 2001 to over $4 billion in 2007, she acknowledged that investment in the sector had not kept up.

However, she noted that the Agricultural Research Council had made some progress in identifying wheat breeding lines resistant to stem rust virus infection, and resistant to drought. "This is a step in the right direction towards ensuring wheat production and food availability, which in turn could mean lower bread prices."