SIMON BROWN: I’m chatting now with Wandile Sihlobo, chief economist on the Agricultural Business Chamber of South Africa. Wandile, I at all times recognize the early morning insights from you. [We are talking about] Ukraine initially.
We spoke simply after the battle began and one of many challenges, after all, was getting the grain out of Ukraine, merely due to the logistics of doing it throughout a battle.
Read/pay attention: How the Russia-Ukraine battle will have an effect on agriculture imports and exports
That has began to occur. There had been some preliminary stumbles and the like, but is it honest to say that we are actually getting grain out, albeit maybe at lowered ranges from what we had been doing a yr in the past?
WANDILE SIHLOBO: Yes. That’s appropriate, Simon, and good morning to you and the listeners. We are getting grain out of Ukraine at this level and the anticipation on our aspect was that when the motion of cargos begins to come back out of Ukraine, we may see costs coming beneath stress on account of that enhance in provide. But over the previous few days it’s more and more changing into clear that that grain is kind of costly for all the safety causes. Some of the individuals are even fearful concerning the high quality of that grain popping out of Ukraine, to the extent that Lebanon and the others have needed to flip down a few of the shipments that they’d initially ordered. So that’s starting to be one of many regarding issues.
Of course you’re a hundred % appropriate that about three or 4, about three months and now [for] a consecutive three months, you’ve seen international commodity costs coming down, and we had thought this is able to be a further issue to essentially [apply] downward stress. But it brings some doubts.
SIMON BROWN: I take your level on that. I hadn’t thought. Of course this isn’t an affordable means of transferring grain world wide. In one sense, if the standard’s proper a minimum of we’re getting grain to individuals; we will eat. You talked about costs usually. I’m white maize for September – and I’m by no means certain which of those contracts to take a look at as a result of there are such a lot of – in early June, late May, it was R4 900. It’s now all the way down to R4 200. We are seeing it pattern decrease, but still we’re at elevated costs. R4 200 is a giant quantity.
WANDILE SIHLOBO: Absolutely. We are still at elevated costs. You would even make the purpose that we’re roughly 15% up on a year-on-year foundation on these costs, notably when you deal with a spot value on that. But these costs, you possibly can take a look at [them] in two alternative ways when you’re sitting in South Africa. You say they’ve come off from the place we had been a couple of months in the past. If they’re still greater than final yr and also you begin to look ahead [and] say, ‘What do these mean?’ a minimum of from a producer perspective this implies these are engaging costs as farmers are supposed to start out the brand new season, 2022/23, in about two months’ time from now, [at] the start of October in japanese areas of South Africa.
So these costs – we want them, a minimum of within the close to time period, to stay that engaging. Combined with the climate they are going to be ample incentive for farmers to extend planting.
For the patron we additionally need to make the purpose that sure, [they are] still elevated from final yr, but issues are progressively changing into higher than [we saw] possibly at first of the yr.
SIMON BROWN: Yes, still excessive, but I take your level – higher than we’ve got seen. What about for the farmers? Diesel peaked final month. It has come down a bit now. I’m unsure what’s occurring with fertiliser costs. I do know definitely they had been extremely elevated. They are clearly getting squeezed a bit if the commodity value is coming down, but are they actually struggling or are they doing alright?
WANDILE SIHLOBO: From a farmer’s perspective I’d say the image is kind of various, within the sense that if you’re within the grains and the oil seeds you’re doing comparatively alright broadly, as a result of these costs which might be on the ranges we’ve simply mentioned – plus-R4 000/ton maize, for instance – offer you some returns you probably have the yield, and we do know that some areas have the yield.
We expect, for instance, a maize harvest of about 14.7 million tons, nicely above the long-term common of round about 12 million tons, and ample to feed us and now have exports of three million tons. So that provides a little bit of a return if you’re within the grains and oil seeds, and the identical is true for all soybeans and sunflower [seeds].
But if you’re in fruits and you’re in greens, the image then will get to be barely tough. Prices have not likely soared in the identical means that we’ve seen in grains, in fruits and sure greens. And there are additionally some commerce points.
We as South Africa, for instance, are export-oriented, and now inside the EU we’ve seen some challenges for our citrus and a few fruits. All of these issues start to [exert] stress. So vegatables and fruits should not maybe getting pretty much as good returns at this second as we see in grains and oil seeds.
SIMON BROWN: Got you. When we spoke again in February, the battle broke out in Ukraine. One of them was citrus – about 7% of exports had been going to Russia. I spoke with Bruce Strong from Mpact yesterday, which clearly offers the packaging for the fruit exporters. He mentioned they’d been having challenges, as you say, simply discovering these markets with Russia off the radar.
WANDILE SIHLOBO: Absolutely. That has been a problem – and discovering ourselves within the EU having some modifications of their phytosanitary requirements and rules on getting the merchandise there. All of these have brought about a little bit of a default, a delay, and actually I believe you may need seen some headlines a couple of days in the past the place they had been speaking about some stranded ships there within the ports of assorted international locations within the EU that are coming from South Africa [which] are imagined to be offloading some citrus. So that has brought about a little bit of a problem.
But Simon, the opposite trade that’s actually hammered at this level is the livestock trade.
We are for the primary time in South Africa seeing ourselves the place we’ve got the biggest unfold of the foot and mouth illness. That has meant the identical factor – that we are literally out of the export markets, but additionally that a few of the largest feedlots can not actually slaughter that a lot. So all of that’s placing stress on them as a result of they’re feeding cattle they can’t actually totally take to market.
The similar is true for the wool trade. In China it has been quickly blocked due to the concerns round foot-and-mouth illness. And China is a crucial market: about 70% of our wool exports go to China.
So we’ve got these challenges which might be weighing [on] this trade, but broadly I still suppose that the image is comparatively higher, particularly if we [are] in a position to resolve these challenges outlined over the subsequent couple of weeks.
SIMON BROWN: I take your level. Better, but still some challenges there. I’d forgotten concerning the foot and mouth [disease]. We have to observe up on that. We’ll depart it there.
Wandile Sihlobo, chief economist on the Agricultural Business Chamber of South Africa, I recognize the early morning.
