SA’s important export market must remain profitable

by Chris Jooste

The export market is extremely important to the stimulation and growth of South African agriculture. Every aspect of product export is therefore important to ensure profitability. 

Exporters must ensure the money makes its way back to the producer and that the value chain’s profitability is retained and improved.

Dr André van der Vyver, executive director of the South African Cereals and Oilseeds Trading Association (Sacota), said at the Grain Handling Organisation of South Africa’s symposium in Mossel Bay that due to the export of South African products being so important, growth and increased production on the farm level is necessary. It is, however, impossible to only produce for the local market. 

Exporting has a lot of advantages. With the unemployment rate at 34%, food security is a big problem. Surplus production means export parity, which is the cheapest form of food security. It creates much-needed foreign exchange and exports are supported by various economic activities in the value chain, spreading the benefits widely.

Growth in production

Agriculture is one of the biggest employers in the rural economy. Growth in export volumes leads to economies of scale and the ability to compete worldwide. 

André said production has gradually grown since the drought South Africa experienced up until 2017. The local demand for white maize, however, grew slower than the production thereof, which led to a surplus and a supply was accumulated. This supply allowed for white maize to be exported monthly, over especially the past two years. Export parity remained nearly stable in the last two years. 

Some of the countries white maize is exported to include Mexico, Italy and Portugal. New markets include Honduras and Guatemala and hopefully, more markets will open. During the 2022-’23 season, nearly 1,04 million tonnes of white maize were exported. 

Soya bean production followed a similar course of lower local demand than production, leading to a surplus. Soya beans was not initially exported, but after production surpassed the demand two years ago the market realised there is enough to export. 

New exporting countries

New markets have opened, and the countries are satisfied with the quality of South African soya beans. During the 2022-’23 season, about 258 000 tonnes of soya beans were exported to Malaysia (59%), Thailand (19%), Vietnam and Bangladesh (both 11%). Recently, a protocol for the export of white maize and soya beans to China was undersigned. There is also much potential for export to countries like Indonesia and Egypt. 

André said export needs to be profitable. Production costs vary, but the profitability of soya beans has grown better than that of white maize, which means soya beans would rather be exported. “The more tonnes per hectare can be produced, the more the cost per hectare decreases and each tonne more that is exported makes it more profitable.”

To be able to export, affordable transportation of the products is needed. South Africa is reliant on good railway transportation as it remains the cheapest way of transportation. Not enough products are transported by railway. Some of the product’s profitability is lost by transporting it along the roadway. 

The damage due to the recent flooding in KwaZulu-Natal caused a sharp drop in railway transportation. Since then, it has yet to be repaired. Durban is the ideal port for the export of white maize, but since the floods, less maize has been exported. Durban has the potential to export 385 000 tonnes of white maize per month with 178 000 tonnes thereof exported via railway. During December 2022, only 69 000 tonnes were exported and only 134 000 tonnes during January 2023. During both months only 7 000 tonnes were exported via railway. 

Published unloading rate

Regarding the storage of grain, André said each JSE-approved silo has a published hourly unloading rate and total storage capacity. How quickly can a silo be loaded out when it is full? Theoretically, not all silos are fully utilised as there are differences and some outperform or underperform the published rate. 

Only 36 of the JSE-approved silos can unload their full capacity within 30 days, and 83 are required to deliver their supply within 120 to avoid fines. 12 silos only have to deliver your product after a year.

He said the ideal would be to standardise access to supplies. Without standardisation, minimum requirements for the delivery period, and accompanying fines for non-compliance, users of physical supplies will not be able to place an economic value on the grain in the silo.

Some solutions for this include buyers that want to unload physical supplies being able to identify their maximum cost and time frame. A specific requirement includes JSE-approved silos. The JSE’s Derivatives Market is standardised with regards to type, amount, quality, price, location and period for expiration, but it is not standardised with regards to when you can expect to receive silo delivery and the cost thereof. This needs to change if South Africa wants a future market.

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