Good crops are bad news

Figures from the agriculture, forestry & fisheries department show that the sector's net income was R38,8bn for the year to end-December. Debt rose to R51,9bn.

Low grain prices after bumper crops in SA and other parts of the world were the main reason for the decline in income. But production was also down an estimated 1.5% on 2008.

Though production of field crops such as maize, wheat and sunflower was 2.5% down on the 2008 record year, it was still the second-highest for many years. However, the gross income for this subsector fell 21.2% to R31,8bn and was the big loser in agriculture. Income from maize fell 25%, wheat 45% and sunflowers 39%.

The big fall in income from wheat seems to confirm SA farmers' warnings that a lack of import protection could destroy wheat production.

Gross income from horticultural products — fruit and vegetables — increased by 4.7% to R31,7bn. Income from vegetables was R11,9bn, 19% higher than in 2008. Potatoes realised R4,1bn, more than a third of the income from vegetables. This was 12% higher than 2008.

Deciduous and other summer fruit realised 10% more than 2008 at R8bn, but income from citrus fell 21% to R4,6bn.

Agriculture's third subsector, animal products, grew gross income by 7% to R62,9bn. Red meat production accounted for R12,8bn — an increase of 1%, though beef prices paid to farmers rose more than 4%. Income from slaughtered sheep rose 2% to R3bn, but poultry realised 17% more at R23,2bn.

Poultry production is growing because of increasing demand from a growing middle class for protein.

Gross income from milk fell 5% to R9,1bn. Wool made 4% less at R1,2bn.

Salaries and wages paid by farmers last year were 4% more at R11,8bn. This represented 13% of farmers' total costs.

Expenditure on intermediate goods and services was 4% up at R69,2bn. The biggest items in this category were farm feeds (23% of total expenditure), fuel (17%), farm services (12%), maintenance and repairs to machinery and implements (10%) and fertilisers (9%).

There were large increases in expenditure on seeds and plants (24%), dips and sprays (20%), packing material (19%), maintenance and repairs to machinery and implements (17%) and farm services (16%).

Farmers' terms of trade (the extent to which prices received by farmers kept pace with prices paid for requisites) weakened by 5.5% overall.

Food expenditure in SA rose 7% to R339bn in 2009, with the CPI (for food) increasing by almost 18%. Nonfood items increased by 1.1%. Despite the lower prices received by farmers, meat prices were 19% higher, and grain products 10% up in 2009 as transport, labour and processing costs increased. Vegetable prices rose by 13%, fruit by 11%, dairy products by 31% and sugar by 15%.

SA has again become a net exporter of agricultural goods, after a blip in that trend a couple of years ago. The country exported R46bn worth of goods during 2009, 3% more than in 2008. Imports of agricultural products were almost 9% down at R35bn.

Source: Financial Mail