Grain South Africa on drought impact and its food security strategy

Meeting report

Impact of Drought on the Grain Industry
Mr Jannie de Villiers, Chief Executive Officer of Grain South Africa, started his presentation by showing the Committee a number of photographs taken during a road trip to the North West, the Free State and the Mpumalanga provinces in January 2016. The photographs showed how short the grass was, which impacted on the cattle industry as sheep can still eat the grass when it is short but cows cannot get to the grass when it is very short. Another series of photographs showed how there was no grass in some parts of the country which looked like the Kalahari. The wind is blowing the sand away in these areas and they have lost a lot of land that way. Further photographs showed large pieces of land that had not been planted. Another photograph showed farm workers loading animals to transport them for slaughtering. Farmers have sold a lot of their cattle during the drought. Some photographs depicted moisture management techniques in which a farmer will not plant on a piece of land for a year, to preserve the moisture, and then next year when they get a little bit of rain, the top moisture can meet the middle moisture. When the farmer then plants on that land the following year, the crops will just need enough water to grow through into the water table soil.
 
In 1980, when the Maize Board still existed in South Africa, approximately 85% of grain was transported by rail. Today it is the opposite as approximately 85% is transported by road and the rest - only 15% - by rail. That is probably how the roads are becoming so damaged because the sector has to transport all the grain by road. The rail facilities are still there and using rail could make a huge difference in the efficiency of transporting grain. The sector should consider using rail in the future and figuring out how to get more grain onto the locomotives. Rail stopped being used to transport grain because it became more profitable for Transnet freight rail to transport coal, rather than grain. This is because coal could always be transported on the same routes while the routes for agriculture changed depending on where in the country it rained at a particular time. The country’s locomotives were therefore all dedicated to coal and iron ore, which is how the grain industry ended up in the situation it is now in. Transporting grain via rail rather than road could be hugely beneficial to the sector. The sector needed to consider how to get more grain onto rail, which Mr de Villiers believed would not be that difficult to achieve.

He showed photographs of very small maize plants that were battling in the heat, which was already 27.5 degrees Celsius at 7am. In the photograph one could see that the farmers had not planted the maize close together and they did this as a way of trying to deal with the drought.

Some of the photographs showed rubble on the land, depicting farmers practicing conservation agriculture. The maize did not look good in the photographs of crops in Schweitzer, Delarey, Sannieshof, Vermaas, Gerdau and Ottosdal. The plant populations in those areas are bad and the farmers there are already not looking at a normal crop yield. One photograph showed empty pieces of land near a silo in an area where the maize had been exposed to much heat when still small and the crops had already died. Even in photographs showing good maize crops, one could see that the plants’ leaves were folded as the maize plants tried to protect themselves from the heat. When it is so hot the leaves fold up to avoid losing too much moisture. He showed many photographs of poor plant populations and empty fields. In a photograph taken outside of Klerksdorp, one could see the difference between irrigated maize that has had enough water, and maize that has not had enough water. He temphasised how important irrigation is to ensuring the country’s food security. He realized that there is a lot of debate happening in the country on water usage. He had read in the National Development Plan that the government was considering constructing more irrigation for farms, specifically in the Eastern Cape. He showed them a photograph of an irrigation system in Ventersdorp. However the irrigation system had not had water to irrigate the plants after they were planted and so the maize did not grow. He also showed them a photograph of some dry land that looked like a desert and a dust storm, which gave a good indication of the soil erosion that had happened this year.

On 12 January, Grain SA visited Mpumalanga. The photographs from the East of the country showed the dualism in the maize crop in the country because in the east of the country things are not as bad as the western parts of the country like the North West and the North West Free State which have been so dry. There were at least some green things to be found in the fields in the eastern parts of the country. Near Delmas, the maize that was planted was not in a very good condition because of the heat stress it had experienced in December. The maize that was planted later looked very good as it had not experienced the heat stress and the farmer could expect about 60% good maize and 40% average maize from the maize planted later. He showed them some photographs illustrating the effects of heat damage on maize plants. One photograph showed good maize that was planted later and had received better rain and not as much heat. There were also some photographs that showed hail damage to plants. While hail had only affected a small area, it was still going to have an effect on those farmers. This emphasised the need for insurance for farmers. Companies are prepared to insure farmers in the east of the country because they get consistent rain there, but for farmers in the west of the country those companies use quotas because they say that it is too risky for them to ensure those farmers.

Grain SA believes that there are two issues connected to the drought. The first is to ensure that there is enough affordable food in the country and secondly, to consider how to get the cattle through the winter. Grain SA is distributing all the feed that it has, from one side of the country to the other, trying to help farmers get their cattle through the winter. However, it was concerned that it was going to run out of feed. These are the big concerns for 2016. But the big problem for 2017 is that if those farmers who are under stress this year cannot plant next year because they cannot afford to do so due to the money lost this year, then even if there is sufficient rain, the production next year will still be similar to this year’s production. Looking to the future, these two issues need to be considered separately. Infrastructure and all the logistics concerned with bringing huge quantities of grain into the country also need to be taken into account.

Grain SA is also worried about crop finance for the new season, as there are many farmers who cannot get finance. If their farms come into the market all the land prices will drop. He reminded the Committee that on average a grain farmer will borrow R8 million to plant and then has to wait for the rain and hope that it will come. That is the risk that the people who feed us have to take.

The single biggest issue that Grain SA wanted to impress on the Committee was the difficulty that their new era, Black farmers were having in trying to obtain finance. Even if those farmers are able to get through this drought they would battle in the upcoming seasons because they cannot get finance. Even though grants would help these farmers, they do not ask for grants but rather for something like a soft loan or something with a guarantee behind it.

The farmers knew that they would start the season with very low moisture levels as this had been predicted, so they bought wheat seed, but have not planted a lot of wheat yet. If the country then gets a lot of rain, all the farmers in the Free State will plant wheat, which will be good for SA because it is importing 60% of its wheat at the moment. So there were some good things happening in the sector this year. The eastern parts of the country produce about 40% of SA’s maize and the western parts produce about 60%. Plantings in the western parts of the country happened very late, outside of the optimal window, because of the drought. All of these crops are going to be exposed to frost. Frost damage is going to affect the yield, and farmers are not going to get the yields that they had originally expected to.

On 15 January, Grain SA surveyed their farmers and discovered that they have planted about 1.3 million hectares. Then on 25 January, they heard from the Department of Agriculture, Forestry and Fisheries (DAFF) that farmers had planted 700 000 hectares of maize in 10 days, which is 1.26 million seeds per minute. That is the capacity that this country has in the commercial sector, which is a huge food security asset that we have, because if nature provides rain in the next few days then the sector has a small window in which to plant. Countries that do not have this capacity might not be able to feed themselves under similar circumstances.

The strategy that Grain SA was using to try and ensure food security was to try and ensure that there are surpluses of maize, which will allow the maize to be sold at import parity. All of the country’s import and export products are priced according to how much it costs to bring them into the country. Therefore the cheapest way to feed our nation is to have a surplus of maize in the country. Grain SA emphasised that the sector has to do everything possible to ensure there are surpluses of grain in the country, then people who eat white maize will be able to buy it as cheaply as possible, the people feeding their chickens will be able to buy feed as cheaply as possible and to ensure that we have low food prices in the country. He showed the Committee a graph which indicated that up until 2013, the country had experienced low food prices, and low inflation, but then there was a shortage and there was a mild drought in the North West resulting in concern in the market and prices went up to the import parity level. The gap between having a shortage and having a surplus is 75% in food prices, so the country cannot afford to have a shortage of maize. Obviously the sector cannot control the rain but there are a couple of things that it can do to keep farmers profitable at export parity, which is the cheapest way to feed the nation.

The second point that grain SA wanted to impress on the Committee about food security is that the sector needs to migrate about a million tons of production from Mpumalanga to the Eastern Cape by 2020 because of the coal mining activity in Mpumalanga. The coal mines are buying up all the agricultural land in Mpumalanga. The Eastern Cape has excellent conditions for grain production such as cheap transport and good rainfall. Even though there was a drought this year, there was still enough rainfall in the Eastern Cape for there to be decent crops there. The Eastern Cape is therefore very sustainable and stable when it comes to their production but the country is losing production in Mpumalanga because it is too dry there. If the sector does not migrate production from Mpumalanga to the Eastern Cape successfully, the country will continue experiencing high consumer prices. It is also necessary to migrate production to the Eastern Cape because the agriculture sector is not going to be able to beat the mining sector in the competition for land in Mpumalanga. Grain SA has opened three offices in the Eastern Cape; one in Kokstad, one in Umtata and one in Maclear. There is soil that is good for agriculture and sufficient rain in the Eastern Cape. There are also farmers there who have completed training courses and are ready to expand their businesses, however they cannot get a loan.

The huge challenge for Grain SA is to ensure that there is surplus maize so that we have the cheapest prices for food and for animal feed.

On farmer development, there are about 5000 subsistence farmers that Grain SA is trying to help to grow commercial yields. There are numerous things that Grain SA does in this regard; such as holding farmers’ days and planting trial plots which are used as teaching aids. It has also created a database of farmers which stores a lot of information about individual farmers such as what their yield was last year and various other pieces of information. Last year Grain SA set themselves the target of a thousand farmers on a thousand hectares, one hectare each. Each farmer had to pay in R1 500 rand in order to be included in the organisation. Grain SA is well aware that R1 500 is a lot of money for a farmer with only one hectare. However, 155 farmers paid this amount and they also had to give Grain SA a soil sample. Grain SA gave them seed and fertilizer and a hand planter. Even though last year was not a very good year for production in general, Grain SA was able to increase production by as much as 3.5 tons per hectare in this programme, increasing some of these farmers’ yields to 4.5 tons. These farmers were then able to sell their surplus and increase their family income. This programme was therefore very successful and last year Grain SA approached National Treasury and the Job Fund to ask if they could assist Grain SA in increasing this programme two-fold. Grain SA received some money from Treasury, and its aim is to have these farmers produce 1 800 tons in 2015/16. So far they have produced 1 500 tons because some of the farmers could not plant as it was too dry. And sometimes it is a challenge to explain to people in Treasury why farmers did not plant because Treasury works by the book, saying that you promised us you would plant a certain amount. Grain SA does not expect that these farmers will have the same good result this year because of the drought, but those farmers that have planted dry beans or maize, especially in the Eastern Cape and KwaZulu-Natal, might still get a very close to commercial yield. The organisation aims to have almost 4 000 farmers in this project in the next two years. This project tries specifically to get subsistence farmers up to a commercial yield. Then the organisation has 1 100 farmers who produce upwards of 250 tons a year and Grain SA want to help these farmers to become commercial farmers. However, they are farming on communal lands and do not have title deeds and therefore cannot get a loan. There are also about 140 farmers that Grain SA serves one-on-one to ensure that they can become commercial farmers. Some of these farmers receive financial recapitalisation from the rural development and land reform programme.
This is totally commercial, this is a big enough farmer that can get a loan and can move on with his business

On Grain SA’s support to farmers, they have approximately 123 farmers that are members of the 250-Ton Club. They produce more than 250 tons in any one year and can therefore get a loan to increase their business. This shows some of the dualism of the sector for Black grain farmers in the country, where some are doing very well but the majority is battling. Grain SA has a good system for monitoring the farmers through the organisation’s projects and meetings. For example, Mr de Villiers could use the monitoring system to see where a meeting had been held the day before, which farmers had attended, the farmers’ personal details and so forth. Grain SA has ten developing offices in SA to assist Black farmers, in Lichtenburg; Nelspruit; Taung; Louwsburg; Dundee; Bloemfontein; Botshabelo; Kokstad; Maclear; Mthatha; and in the Western Cape in Paarl for the wheat farmers. They have just over 5 000 subsistence farmers who do not have enough hectares to produce a commercial yield. They have 138 study groups and 55 trial plots that are used to show farmers best practice, such as what to look for when there is a problem with the maize. There have held 87 farmers’ days and they have also trained 335 farm workers. One of the things that they train farmers to do is to fix their own equipment. To do this there are six mobile units that travel with a trailer that contain things like a welder, a grinder and some spray paint. These mobile units go into a community and tell the farmers to bring all of their broken equipment and they are then trained on how to use the machines like the grinder, safely, so that they can fix their own equipment. This will happen for a week and by the end of the week the farmers in that area have learnt some skills and they can fix their own equipment. This programme happens on a continual basis with the six mobile units in the deep rural areas.

The organisation has 140 advanced, commercial farmers. It has presented 137 accredited training courses, which cover the basics such as planting of maize and the safe handling of chemicals, right up to very advanced skills such as hedging your positions when trading on the Johannesburg Stock Exchange and management ethics. 1 775 people attended courses.

Grain SA publishes the Pula/Imvula magazine in seven different languages and the magazine goes out to approximately 240 000 people. There is a schools programme for grade nine learners who are going into matric and deciding what to study after matric. Grain SA shows these learners DVDs about how to farm and the different kinds of careers that are available in the farming sector, such as research and trading. These DVDs also show them where products come from, such as where a t-shirt comes from, where a hamburger comes from; explaining that you have to slaughter the cow and the meat needs to be processed, you need to grow the tomato, you need wheat for the bun, you need butter; to explain to the learners that things do not just come from the supermarkets, but that farmers are needed in order for these products to be available to consumers. The cost of this development programme is R21.9 million a year. Grain SA contributes towards the programme and there are also other contributors, such as the Winter Cereal Trust, which is asking for a statutory levy to make contributions to this fund to ensure it is possible to run and maintain the programme.
 
On Rural Development Land Reform, most farmers, the moment they get recapitalised and they get a good crop go and buy their own farm the next season and they then have security to get loans which will allow them to move forward. Many farmers that have been recapitalised have done really well, some of them have moved on to large scale production. One such farmer in the Woodstock area harvested 1 500 tons of sunflower alone last year, this was not even considering his maize production. He then bought some additional farms, so he is really moving forward. Then there is the One Hectare project, and Grain SA aims to produce 1 600 tons from this project. They have currently produced about 1 540 tons. The farmers themselves contribute R1 710 per hectare and Grain SA and other role players contribute R4 500 per hectare to make this happen and get a farmer up to a commercial yield. This programme is working out very well.

Regarding strategy for ensuring food security, Grain SA says that they need to establish partnerships with government because they are too small by themselves and do not have sufficient numbers of farmers or produce enough volumes to be able to ensure food security in the country. Therefore new partnerships with government are needed to ensure that Grain SA can continue to improve on food security. It wants to be able to keep the farmers profitable at export parity, because this is the lowest price that the farmers can get to ensure people get cheap food while ensuring that farmers are still sustainable.

More money needs to be spent on research because currently there is no research being conducted on the drought and the heat. What SA farmers have seen lately is that plants do not pollinate when it is too hot. People that do the research, like Monsanto, on the heat tolerant varieties, say that heat and drought are the same thing, that they have the same effects on the plants. But SA farmers know that these are not the same and the sector is going to have to look for varieties that are heat tolerant and can still pollinate when exposed to extreme heat because it has been getting very hot in many parts of the country.

He said that the sector needs to improve on research and it needs to ensure there are export markets. However, there also needs to be surpluses in order for the country to be able to export to these markets and at the moment SA’s grain prices are so high that no country will import from SA. So the sector needs to improve on research that will lead to increased yields and surpluses and it needs to have export markets. DAFF is doing an excellent job at negotiating export markets.

On the maize production estimates versus the final estimates for 2014/15, Grain SA’s farmers did really well in terms of white maize, yellow maize and total maize, the sector was only out by 0.5% at the end of last year, which is a much smaller margin of error than the Americans have been able to accomplish. The sector uses satellite technology and digitizes all the pieces of land and then someone flies over them with a very low flying aircraft, and a farmer sitting in the plane can record details on a laptop regarding the number of hectares there are for different crops. Software then very accurately calculates the amount of production for different crops. The sector does the country a big favour by having a system like this. This year is a bit of a challenge because farmers planted late, and the sector started with the estimates earlier, it usually starts these in February but this year it started them in January. This might therefore be the year when the estimations may be a little bit out because the sector is not sure how long the drought is going to last. However, DAFF has been doing very well in its estimations over the last few years and DAFF deserves a round of applause for doing so well in that regard.

On the challenges facing the grain industry, crop finance for new farmers is needed. Mr de Villiers said that if Grain SA could get R1 billion rand of guarantees from government, that would enable banks and the agricultural businesses to lend money to farmers without land being the security as the farmers would be backed by these guarantees that would serve as their security. These farmers would then be able to grow their operations. It would not necessarily cost the government anything as this would be almost like a cash free guarantee in which the government would be helping Black farmers in this country to grow maize or to grow whatever they would like to grow.

A second issue is that there has been a decrease in the amount allocated to research. More money is needed to do research on drought tolerance and heat tolerance, given climate change and the severity thereof. A SA delegation went to an international wheat conference recently and when they returned Mr de Villiers asked them what the single biggest difference is between SA’s wheat production and wheat production in other countries. The delegates said that other countries focus on yield while we focus on quality, and in doing so we have lost our position as competitive exporters of wheat. So something needs to be done about both the country’s wheat yields and maize yields. The sector also needs to consider how climate change is going to impact it and strengthen conservation agriculture processes for dealing with it. The maize seeds that are being used by the sector are hybrid seeds that one cannot plant again and get the same yield with. These seeds have been designed to do this so that the people who developed them can ensure that people have to keep buying more seeds to ensure that the company that designed them can recover their costs. What South African farmers do is keep this seed for three or four years before they plant it. The people who developed the technology to develop these seeds are saying that if the sector pays us a royalty then they can bring the best technology to SA because then they know that they are going to be able to recover their costs. These people say that they have developed an improved soy bean seed that results in an approximately 20% improvement in yield. However, they do not want to make this soy bean hybrid available to SA because farmers keep the seed and do not buy anymore and then the company cannot recover their development costs.

The issue of diesel rebates in a sore point for Grain SA. This is because farmers apply to the South African Revenue Service (SARS) for a diesel rebate but do not receive it in the North West as the SARS office there does not attend to these applications. Grain SA surveyed farmers in the area and found that there are 86 farmers that had claimed R8.8 million worth of diesel rebates, but these applications are not being dealt with by the SARS office there for whatever reason. And it is not fair that the people who have the biggest effect on the country’s food security are having to finance SARS. This is something that the sector needs to give attention to. This does not happen throughout the country, it is localized in the North West province. The SARS office there just needs to ‘step up’ and send somebody there who can do the job and attend to the applications.

The wheat tariff had only been triggered in December last year and it has not yet gone through all of the necessary procedures to get government approval. These procedures represent difficult delays in difficult times.

It is international companies that are the underwriters for the SA grain industry. There are only three companies that ensure crops in SA and only about 16% of Grain SA’s farmers’ hectares get insured. This insurance is very expensive, and even if farmers are prepared to or can afford to pay for insurance, banks might tell them that they do not provide insurance to farmers in their area because it is too risky. If a farmer uses all their savings to plant maize and then they experience a drought like the one this year, they are never going to be able to recover from it financially. There should be a contingency in which the government can help farmers recover from disasters like this. Mr de Villiers has seen this being used in the United States and in Canada.

Land reform has not progressed with speed, and there has been very little progress since last year. Mr de Villiers said that Grain SA would love to present their proposals to the Committee to work with them to ensure that farmers are sustainable and are moving forward. Grain SA has good farmers who have been trained, who want to be farmers and are committed to farming, they do not just farm on weekends as a hobby. These farmers stay on their farms during the summertime when it is hot, and through the cold of winter.

Grain SA has received a lot of assistance from the Department of Science and Technology. It has however not received much assistance from DAFF. When Mr de Villiers has spoken to government officials in DAFF, they have told him that DAFF does not have much money as money gets allocated to the other government departments, rather than to them. Grain SA has a good relationship with DAFF when it comes to co-operation but they do not have a partnership with DAFF when it comes to financial issues. He said that this made him wonder what DAFF was doing in terms of farmer development. He wondered if farmer development only happened in rural areas. Financing is an area in which there could be better co-operation between Grain SA and DAFF in the future.

On government assistance to grain farmers, Grain SA received feedback from their regional offices to give them an idea of what is happening at the grass roots level. The Western Cape received 70% wage subsidies from the government. In Mpumalanga 18 municipalities of ten farms each reported that they had received some feed and one Jojo tank per farm. In Umtata there was nothing specifically reported and very little has been done in Matatiele. New era, Black farmers were therefore not receiving much assistance from government; for some reason assistance from the government was not reaching farmers. The government also needs to provide more money to new era farmers as R100 million or R200 million was not going to be enough to ensure SA’s food security capacity.
 
In the Free State, Grain SA made 14 phone calls to farmers and two of them responded positively, saying that they had received feed from the government. The rest had not received anything. Grain SA was not sure if commercial farmers received any assistance from government, but Mr de Villiers is aware that there have been a lot of talks between organized agriculture and government.

Mr de Villiers showed the Committee a matrix depicting the grain industry’s strategic options. On the horizontal axis were the options of the grain industry being controlled by government, or allowing for a free market. SA has had experience of both options. The other axis shows whether our grain sector is competitive in the world or not. Considering the possible combinations in this matrix, it would be most beneficial for SA to be in the top right-hand corner of the matrix, what Grain SA calls the ‘cornucopia’ or maize heaven. Grain SA believes that the government needs to allow the market to be free and SA needs to be competitive in the world. If we are competitive we will have surpluses, and if we have surpluses, the prices are the lowest that we can get. But if the government controls the sector then SA might end up with the International Monetary Fund having to bail us out, or food agencies providing us with food because we cannot feed our nation ourselves. He said that the big picture that he wanted to leave the Committee with is that dealing with the drought of 2016 is about dealing with infrastructure and making sure that there is enough food in the country and that prices do not rise to unaffordable levels for consumers. But going forward the country needs to produce more because we need surpluses. Surpluses are not necessarily good for the farmers because this lowers prices but it is best for the country in terms of ensuring food security and therefore the nation’s stability. The Arab Spring happened when the world experienced high food prices. However, he said that the sector can overcome this drought by working together and then it would take the industry forward making sure there is enough food in the country in the future. The farmers are very positive that as a country we can achieve this goal and can overcome this drought together.

How the drought is affecting food prices
Mr Wandile Sihlobo, an economist in the Industry Service Department at Grain South Africa, said that Mr de Villiers had painted a picture of some of the challenges in the sector and he was sure that members had read and heard in the media that SA needs to import a lot of grain this year and that the government is concerned about food security.

The drought will affect not just SA but it will affect maize production in Southern Africa negatively because if there is a problem with the supply in SA, there is a problem in the whole region because about 70% of the maize needed by other Southern African countries is imported from SA.

Over the years, SA total maize production has progressed quite well, however this season’s total maize production will be the lowest since 2006/2007. What makes this year more difficult then 2006/2007 is that SA’s population has grown and that puts pressure on the maize supply as more maize will be required for consumption this year, compared to previous years. In addition to this, other countries within the SADC region were not as reliant on SA for grain in the past and SA has had better stocks of grain.

On crops that are common to South Africans’ tables, white maize production is at its lowest level since 1994. So while SA is producing white maize, its production will still be at a very low level this year. Much of the country’s maize is planted in the west of the country, and that’s where planting was done outside of the planting window, which will result in lower yields.

Yellow maize production is the lowest since 2006/2007, however it is not as bleak as the situation is for white maize as it is easier to import yellow maize as there are much higher volumes of yellow maize being produced internationally than white maize.

The production of all summer crops has been negatively affected by the drought. Farmers have actually been doing fairly well over the years in the production of some of these crops, up until 2015. Peanuts are the only crop in which production has not been doing well over the past few years. However there has been a decrease in the production of summer crops over the last year. Looking at the yield of these crops, there has been a 48% reduction in the production of groundnuts, 27% reduction in soybean, a 25% reduction in maize and a 6% reduction in sunflowers.

The demand for maize as animal feed is at higher levels. What usually happens when prices go up is that people buy less but that has not been the case with white maize because it is a staple in the country and people need to eat, whatever the cost of this staple. We are going to have a problem in the supply of yellow maize in the country because the yellow maize crop was not pollinating, as the plants were too hot; and therefore the yield will be lower this year. However, despite this, consumption has continued to grow because animals have to be fed and therefore there needs to be crops in the market. The middle class in SA has expanded, and this has driven demand in the feed industry, as those in the middle class eat more meat than those in the working class. These are some of the changing dynamics in supply and demand and prices in recent years.

On SA’s white maize supply and demand, SA’s appetite for white maize has increased over the last few years for various reasons and the amount of maize that is expected to be produced in SA this year will not be able to satisfy that demand. This means that SA will have to import roughly 3.8 million tons from 1 May 2016 until 30 April 2017. But despite the amount that we will need to import, we will continue to see some of the exports going to the SADC countries; like Botswana, Lesotho, Swaziland and Namibia. SA will have to export roughly 630 000 tons to those countries. There is also the possibility that the demand for maize in those countries will be higher than what the sector has estimated.

On SA’s white maize supply and demand, the challenge is that outside of Africa, white maize is produced mainly in Mexico.

On SA’s supply and demand of yellow maize, imports of yellow maize will have to be around 2.7 billion tons. South America is increasingly exporting a large part of their total maize produced to SA and they have good supplies so it is not very difficult to source yellow maize. But there is a price difference between white maize and yellow maize, with white maize being more expensive.

SA exports to SADC are likely to continue. SA would normally export its maize globally but this year it is likely that 100% of SA’s maize exports will be going to SADC countries, while in previous years less than 40% went to the SADC countries and the majority was exported to the global market. Exporting globally is good not only for farmers but also for the economy, as the country can make money on these exports.

He showed the Committee a slide depicting the SADC countries’ expected percentages of imports of annual domestic consumption for different countries. For example, Zimbabwe will have to import more than 60% of what they consume from outside. All of these percentages are based on estimations of what each country will produce itself.

Members might have heard people say that we do not need to worry that SA is experiencing a drought because there is still a lot of maize in the world as global maize supplies remain at high levels. However, 95 to 98% of that maize is yellow maize, and South Africans are not about to eat yellow pap, they want to eat the traditional white pap. Some people have suggested that South Africans can switch to eating pasta and rice and that SA should not be reliant on white maize. However, despite all maize prices have increased, by roughly 150%, and this includes yellow maize, it is still the cheapest staple to buy. While the price of yellow maize has increased, it is still cheaper to buy than rice as rice is quite expensive. It is therefore not realistic to think that because there is a shortage of white maize that people will stop eating pap. And even though the price of importing yellow maize had decreased by 8% from a year ago, the price of importing yellow maize is still more expensive than in previous years. So it is not just a case of finding the cheapest supplying country and importing from them, especially when one considers how the Rand is doing currently and how it is expected to do in the next three quarters of the year. So although commodities might be cheaper in the world, importing them is not necessarily cheaper and that could be seen in the import parity prices that Mr de Villiers showed in his presentation.

The key to ensuring food security is to find measures to ensure adequate production and supply in the country, because importing from other countries, even when we can source white maize, is more expensive than producing it locally and this will lead to increases in the price of food for consumers. We will all start to feel the price increases later in the year when the products that we buy on a daily basis become more expensive. The white maize price is well above the import parity price and it is expensive to import it. It is therefore very important to find measures to keep the supply in SA up.

The yellow maize price is currently at import parity price level, however, there is usually a lag of between six and nine months before a shortage in supply results in higher food prices for the consumer at a retail level. The weak Rand is also not allowing SA to enjoy the lower price of brent crude oil at the moment. So increases in the price of food is something that end consumers can expect not only this year, but continuing into next year, as retailers are not going to suddenly hike up their prices, but will gradually increase them. Food prices will therefore stay at a high level until the end of the year and looking forward at 2017, consumers can expect to see more price increases next year.

SA’s wheat production is under pressure because consumption is increasing. The other commodity that is important in SA, besides maize, is wheat, and our wheat industry of late has not been doing well, it is under stress. The country’s consumption of wheat has been increasing but its production of wheat has been decreasing. The more our economy and the middle class increases, the more wheat will be needed because the middle classes want a variety of food besides pap, such as Weetbix and biscuits, all of which are derived from wheat, rather than maize. The country needs to be producing more wheat because it is expensive to buy wheat from other countries.

SA is increasingly importing more wheat which can equate to R5 billion that is spent on bringing wheat in from other countries, rather than producing it locally. A lot more money needs to be invested in local production so that the country can turn that situation around and make money from exporting large volumes of wheat, rather than spending a lot of money on importing large volumes of wheat.

Regarding SA’s wheat demand and supply, Grain SA has estimated that the country will need to import 1.9 million tons of wheat this year. But this could easily change to 2 million tons, and Grain SA will be releasing this figure soon on their website. Although international wheat prices remain low and there is a large supply of wheat in the world, the country is still spending too much money on importing wheat. The country needs to invest a lot more locally to fix the problem of spending too much money on imports.

Global wheat supply remains at high levels. In the global market wheat prices are at a lower level but SA cannot rely on importing wheat as this will cause it to lose out on the advantages of producing it locally, such as the creation of jobs.

Also important to note is that when SA buys large volumes of its wheat from countries like the Ukraine and Russia, there are sometimes geopolitical issues that will affect the market and we therefore cannot be dependent on imports for our wheat supply. For example, Russia is now considering implementing an export tax on their wheat. That is an example of some of the risks that the country takes in being reliant on imports for its supply, and why it is so important for SA to be a self-sufficient in its food production.

Tariffs are one of the strategies that are used to revive the sector; they are not employed to increase prices for consumers as some may think. Tariffs ensure that farmers can produce wheat at a profitable level and that when global prices fall they can still sustain themselves. The tariff price in October last year for importing wheat to SA was R911 per ton.

To give perspective on the amount of money a farmer makes from the bread industry, Mr Sihlobo used the example of a loaf of bread and said that a farmer will only receive approximately R2.38 from a loaf of bread, (roughly four slices of the loaf) which costs on average R11.76. And from that R2.38, the farmer still has to pay for things like electricity tariffs, labour costs, processing costs and so on. Wheat tariffs are intended to ensure that farmers are able to make enough money.

Considering SA’s total grain and oilseed import estimates for 2016, assuming that SA does produce the amount of grain that has been estimated, it will need to import 7.3 million tons of grain this year.

Considering SA’s possible total grain imports for the year, this is estimated to be 3.8 million tons in total for maize.

2016 will be a difficult year for consumers. The price of white maize has increased by roughly 80% on a year on year basis. But looking at the trend of increases, it is basically the same price levels as it is for other commodities. The price of maize meal is already up by 22%, and this is the situation for other food products. However, consumers have yet to feel these increases as there is a lag of six to nine months for production and supply prices to reach the end consumer and these price increases have not yet fully filtered down to the shelves of the retail stores. So South Africans have not really felt the drought in their pockets yet but the country will start to see the reaction from the general public later this year. Consumers have, up until now been living fairly well, compared to what the situation is on the raw commodity side, but this will change in the coming months.

In conclusion, Mr Sihlobo wanted to bring to the Committee’s attention that the usual grain port usage is roughly 4.8 million tons a year but the port authorities have indicated that they can be in a position to accommodate roughly 7 million tons a year.

Discussion
Ms A Steyn (DA) thanked Grain SA for their presentation which had given the Committee a very good picture of what is going on in the sector; but also a very sobering picture. Grain SA had said that SA would need to import more than 7 million tons of grain this year. She asked if SA had ever in the past had to import the amount of grain that it would need to import this year.

She is concerned about the early estimates this year, as she is worried that they give people a false sense of security and a sense that the situation is not so bad. However, she has traveled through various sections of the country and has seen the effects of the drought. She therefore wanted to know when the sector will have reliable crop estimates so that it will know for certain how much it needs to import. She thought that it was important to have an idea of the date of these final estimations that it could then work towards.

She asked why the sector is experiencing such massive price increases already and what the price of white maize will be at the end of this year. She knew that it is a difficult question to answer but that it is important to start planning for possible continued high prices, if it is possible to do so.

Lastly, she said that Grain SA had spoken about the R8 million rand that a farmer needs to invest on average in order to plant, and if there is no harvest it is a problem because farmers will not be able to recover this investment. Grain SA had indicated that a R1 billion investment for new farmers was needed from government. She asked what amount would be needed for commercial farmers. She said that she shared Grain SA’s concern over the drought as making it through this year is one issue, but if farmers lose money this year and are then not able to plant next year, then the country would be facing an even bigger crisis.

Mr F Mncedisi (ANC) thanked Grain SA. Some of his questions might sound like they were directed at the Department of Agriculture, Forestry and Fisheries (DAFF) but to just bear with him, because there were some people from DAFF at the meeting. Mr de Villiers made a statement to say that black farmers are battling to get loans because they do not own the land, and he wanted to know what the Department of Rural Development’s reaction had been to the drought, because they are the department responsible for making sure that Black farmers can get access to finance.

He then asked the critical question, when did SA get to know that this big drought, the most severe one since 1904, was coming and to realize the severity of it?

Mr de Villiers had spoken about a potential migration of maize production from Mpumalanga down to the Eastern Cape and had showed the Committee some statistics indicating that currently, the Eastern Cape is the lowest maize producing province. He is aware of the vast fallow land currently available in the Eastern Cape. Considering that the Eastern Cape is an ideal place for grain to be produced and that there is fallow land available, he asked what the inhibiting factors are that make the Eastern Cape one of the lowest producing provinces. He also could not believe that Grain SA had not received any feedback from Umtata, considering that there are two development agencies there. He also wanted to know if any preparations had been started, as far as Grain SA is aware, for the potential migration.

On lack of electricity on farms, he asked to what extent this is negatively impacting on the production of maize, if at all. He had spoken to a farmer last year who told him that “Eskom is just not coming to the party” in a meaningful way.

On the rand-dollar exchange rate, he wanted to know how much more government should make available to increase maize production in SA. The Minister had said that SA has to import over 6 million tons of maize this year and to what extent is this going to have a knock on effect on the budget of the state.

Ms C Carter (COPE) thanked Grain SA for their presentation, which she said had been so thorough that she found it difficult to ask questions. She wanted to thank them for compiling their farmer development fact sheet which would definitely be of value to DAFF and the Committee. She asked how, in their opinion, the sector could fix the problem of the domestic supply of maize and wheat in the country.

Regarding grain tariffs and the amount of profit that farmers make on their production of grain, she referred to the example that Grain SA had used that out of a load of bread that a consumer would buy, the farmer only makes R2.38. She asked how much of this R2.38 is net profit and how much of it is cost.

She asked what the knock-on effect would be of managing the soil moisture this current year. She asked how long the country would experience this drought and how long this drought would affect grain production.

She said that what is really concerning is that farmers are still operating on the Permission to Occupy (PTO) system and that they still do not own their own land. All the members know that it is impossible to get a loan if a farmer does not own the land that they farm on. She said that in the past PTOs arrived six or seven months after they were applied for and sometimes only two or three months before they expired. She wanted to know if this is still a problem.

She asked what support farmers are getting from the Land Bank and at what rate, because she knows that obtaining help from the Land Bank for farmers has been problematic.

A committee member referred to the moisture content of the soil. Mr de Villiers had made a very interesting reference to the fact that the plants need to go through a first layer of moisture in order to get to the water table. Is the drought severe enough at this stage to have affected the water table? Grain SA had referred to the fact that the Western Cape government is giving assistance to farmers in the form of 70% of worker’s wage subsistence. Has Grain SA researched the effect that the drought has had on farm workers and if the government was providing any support to farm workers, and if so, what kind of assistance is there for them? If SA has a shortage of maize and needs to import maize itself, why is it exporting maize to SADC countries? Will this still be the case this year or will SA keep the maize that it produced this year? Would SA continue providing maize to SADC countries and then importing maize from other countries at a cost?

The Chairperson said that she wanted to address two issues. Firstly, she said that it is important to contextualize the problems presented by Grain SA and to start to think about how the sector is going to deal with them going forward. Droughts are part of the phenomenon of climate change, and the sector needs to look at the phenomenon broadly and consider the interventions that are needed to sustain the production of commodities in the country to ensure food security. Grain is a commodity that the country needs to focus on. She asked if DAFF had discussed the targets with Grain SA and whether these targets were factored into the amount of grain that Grain SA had estimated that the country would need for this year. She asked what interventions had been decided upon when Grain SA had interacted with DAFF to deal with the grain shortage, as the country was already experiencing a shortage even before the drought occurred.

She said that rail is critically important, particularly in terms of reducing traffic on the roads. It was vital for the Committee to hold joint meetings with other committees, especially the Portfolio Committee on Transport. DAFF should develop a map of the transport system needed for agriculture, so that when the Committee interacts with other Portfolio Committees, particularly on roads and transport, it will have that map, and the needs of our farmers in terms of transport would be known. That way the Committee would not debate the need for rail transport one route at a time. The Committee had interacted with the Minister of DAFF, and the Chairperson has said to him that he is the farmers’ custodian and he needs to establish a database of farmers that need land. He also needed to approach the Department of Rural Development and tell them which farmers were small scale farmers that wanted to expand their operations to become commercial farmers. This is what is needed in terms of land reform to increase the country’s production of commodities.

Lastly, she asked about the very critical issue of research. Was the sector interacting with the Agricultural Research Council and the Department of Science and Technology and what their response to the drought was. The sector should make better use of those research institutes that are funded by the government to help them deal with drought and climate change.

She said that DAFF must take note that the protection of agricultural land is crucial. This was needed as soon as possible and should form part of the priorities of the DAFF. The Committee had interacted with DAFF who had indicated where they have made their input, and the Committee would need to actually follow up on this input and go down to the farmers concerned to see whether they have been assisted or not. The Committee is aware that some farmers are not on the database and that some farmers are not interacting with organisations, even though they have lost livestock. The sector therefore needs to prioritise properly maintaining the database of all the country’s farmers, including emerging farmers.

The other element that needs to be prioritised by SA is food security and stabilising prices to safeguard food products against the fluctuation of prices. Society in general needs to be educated about what is needed to ensure food security because we do not know what effects climate change may have on the environment and the country therefore needs to have a contingency plan. For example, climate change might cause floods, and the rain that farmers might appreciate in March might cause flooding that would also affect the crops. It is therefore necessary to have plans going forward that would allow the sector to adapt to and mitigate the effects of climate change.

Ms Steyn said that Grain SA had mentioned that farmers will move on to wheat production in winter this year. She wanted to know what impact this will have on the water table and next season’s maize production.

Responses from Grain SA
Mr de Villiers said that the grain business is Grain SA’s passion and they believe that they have a responsibility to help not just the farmers but also ensure that the country has enough food.
On  whether the ports can export the amount that is needed to the SADC countries, theoretically SA’s ports can export the tons needed by the SADC countries. Zimbabwe has signed some deals with Mozambique which will allow the 1.1 million tons that Zimbabwe needs to go through Mozambique to Zimbabwe, which will provide relief for SA’s ports in that regard. The country does not have a lot of storage for grain at the ports, in the Cape Town ports there is almost no storage available. Even at the processing plants and the mills they can only store approximately six weeks’ worth of grain. Grain therefore needs to be offloaded quicker at the ports. A lack of storage also pushes up the cost of grain as it then needs to be transported somewhere away from the Durban harbour for storage. In the past this was not as expensive because a truck would drive maize to the storage facility and bring back a truckload of wheat on its way back. However, because there is a lack of maize now, these trucks have to transport wheat to Durban but there is no maize to send back in the truck, and so the cost of transport is not being split between the maize and the wheat. Durban harbour is in a terrible mess as far as grain is concerned because there is no parking for the grain trucks there. The truck drivers were having to park on the sidewalks and get traffic tickets. But they take these tickets and stay on the sidewalks because there is nowhere for them to move their trucks to. There is also no ablution facilities for the drivers. But Grain SA said that they are going to find a way to fix the ports and ensure that there is enough food in the country. He said that there might be a day or a week where there is going to be a factory that runs out of maize, and are waiting for a grain delivery, but otherwise there will be enough grain in the country. However, if there is a truck drivers strike like the one in 2012 which lasted for three weeks, the factories will run out of grain and the country will be in trouble. This is a possible risk for 2016.

Mr de Villiers said that he had taken the presidency to the ports in Durban twice last year to show them what the issues are at the ports. The presidency then scheduled to have the ports deepened, specifically at the grain elevator, by 2024/2025. The country currently uses small ships because it is not deep enough at the grain elevators to accommodate larger ships. The ports therefore need to be deepened so that bigger ships can be used, making the SA industry more efficient globally, it will make exporting easier and importing cheaper. He had asked the Presidency if it could bring these plans forward and deepen the ports quicker. Now that the drought has happened the government is saying, “Why didn’t we do this sooner”.

On the crop estimate, Mr de Villiers said that it was brave of the sector to come out with an estimate in January. Grain SA’s own estimate was a little bit lower than that of the sector but the farmers had planted huge numbers of hectares of sunflowers. Sunflowers are tougher than maize and are not as susceptible to frost as maize is because they dry off quicker after being exposed to frost. He therefore thought that there would be an increase in the sunflower yield this year. However, for those farmers in the North West and the North West Free State, if it does not rain in those provinces soon then their maize is not going to survive. Some of the maize plants that were planted earlier in the season are pollinating now and need a lot of water in order to produce corn kernels. Therefore, if it did not rain in those provinces in the next few days then the country will be in trouble and will have an even lower production and will need to import even more tons, which will put a lot of pressure on the sector. By May Grain SA would know exactly how much grain will be produced this year, as the estimates are almost final by May. But between now and May, when the plants are growing, these provinces would need rain. But the sector is still in trouble now as the plants are trying to grow now but are not receiving any rain, and it was not certain if there would be rain soon.

Mr de Villiers had calculated that R1 billion would be needed for new farmers. However Grain SA had not done a specific calculation for the grain sector per se. What they have done together with the agro-processing sector, is to conduct a study to determine the finance that is needed for the commercial farming sector, which includes cattle farmers and sugar farmers, and they determined that approximately R12 million is needed. This is a modest estimate. But he said that farmers are tough and know how to get through this drought, they just need a little help. And not all the farmers need help, some in Mpumalanga have done exceptionally well in the last year and have had their best year yet. These farmers had fantastic maize and soy bean crops last year. AgriBusiness has calculated that approximately 450 farmers on their books will not be able to get a loan next year, and those farmers will struggle. The banks have said that it is not a farmer problem this year, as they know that the farmers are capable and well trained; rather it is a weather problem. If these farmers can get some kind of guarantee that will allow them to extend their debt, it will be enough to get them out of trouble.

On loans and title deeds and DRDLR’s reaction to the difficulties faced by farmers in getting finance; in their discussions with the land reform department Grain SA had said, don’t make someone a squatter by making them farm on government land, rather give him the land. Criteria can be used to assess the farmer and determine that he has fulfilled certain requirements before he would be given land. People in the grain industry have said to each other that they are not going to try and fight the traditional authorities in the country, such as the local chiefs, because even if farmers are given Permission to Occupy for a period, their crop is not guaranteed because the local chief might give the land to someone else without warning. Because their crops are not guaranteed, banks will not insure them because the Bank cannot take the crop as collateral if it cannot be sure that the crop will still be available to that farmer in the future. Another challenge in this regard is roaming cattle that eat the crops on these lands. Somehow the sector needs to overcome this problem and one solution is the fencing that has been erected in certain areas, like the Eastern Cape. The rule of thumb regarding investment is R10 000 per hectare. Farmers cannot afford to invest R10 000 on a hectare and then have the neighbour’s cattle run through it and eat the crop because who was going to pay for that crop? So land reform is sorely needed to make insurance available to farmers who do not own land. That would enable sustainability of the programmes that Grain SA run.

On the question of when did Grain SA know about the drought; when it is the middle of November in Mpumalanga it is outside of the ideal planting window. If one has to plant outside of that window then one needs to worry about the frost in April. Grain SA knew by 30 November on the Eastern side of the country that they were trouble, even though farmers had already planted 95% of their seeds. On the Western side of the country, farmers realized that they were in trouble at the end of December. That is the date when the farmers realized that they were not going to have a full crop, and that if the rain came, then they would have to plant many hectares in a short space of time. So by the end of December the sector knew that the planting window had passed and that it was too late.

On migration to the Eastern Cape, the Eastern Cape does not have silos, so if a farmer harvests surplus, they do not have any way to store it. Farmers had only enough storage to cater for their own family’s grain needs for a year but not enough to store surplus grain that they could then sell. In addition to this, there are no proper roads and as a result transport companies do not want to operate in the Eastern Cape. Infrastructure is therefore a big problem in the Eastern Cape. Grain SA had approached Sasol and asked them to assist with storage and Sasol had said that they would manufacture a silo that looks like a jojo tank that can be taken into the deep rural areas of the Eastern Cape. In the Eastern Cape there is a toxin that causes cancer that grows on maize if it is not stored properly. Therefore, if farmers in the Eastern Cape did not have proper storage facilities they were exposing people to disease causing toxins. So there are numerous problems related to the lack of storage in the Eastern Cape and the sector really needs to improve on silos and storage there. The input providers will come to the area as soon as the farmers start planting, they will start supplying and they will move in, but the sector needs transportation to suppliers out there. But the roads in the Eastern Cape are not in a good state and the trains have not been available for a long time. But farmers are ready for the migration and will be able to make it successful.

On the lack of irrigation on farms and the effect that it has on maize production; the more irrigation maize the sector has the more stable the production is, as it is not only a lack of water that the crops suffer from but also heat. Even when electricity is available on a farm load shedding still causes a problem because if a farmer is pumping water into channels and load shedding happens, the water that has already been pumped into the channels runs back into the river and the farmer has to start the process again. Load shedding therefore puts the whole irrigation system at risk, and not just because of the spikes in electricity when the electricity is turned back on that cause equipment to break down. And in December, when it is so hot and the maize is growing, farmers cannot afford to have these issues with electricity because they need to use the irrigation systems to provide the plants with a lot of water, to keep the many hectares of plants going.

Relating to what government should help maize farmers with, there are a number of issues; one of these is research. But in general the industry does not need a lot of assistance from government.

On  how to fix the maize and wheat production; Grain SA worked on the APEX programme with DAFF. Grain SA got some funds from the Department of Science and Technology to improve on yields. There has also been a lot of focus on wheat to try and improve wheat production, to ensure that the country is not so dependent on importing wheat. The maize production is usually high enough for the county to have surpluses and Mr de Villiers was therefore not as concerned about the maize production as he was about the wheat production. The farmers had intended to plant 2.5 million tons of maize last year but would not do so as the rain did not arrive.

On how much profit farmers are making from one slice of bread, he joked that it was probably the very thin slice of the four slices of bread in the image that they had shown the Committee that represented the farmer’s profit. The four slices of profit in the image included the farmer’s costs like fertilizer and diesel so the four slices represented the farmer’s gross profit rather than his net profit. Grain SA did have information on the net profit that farmers make from their crops but unfortunately Mr de Villiers did not have that information at hand, but he could make it available to the Committee.

On support from the Land Bank, at the moment the Land Bank has got a product in which a farmer can become an intermediary and can borrow from the Land Bank at 0% interest and can lend at 4% interest. However they say that our development farmers are too risky an investment for this programme so there are not a lot of farmers that are getting money from the Land Bank. When farmers do not own the land there is no security for banks and these farmers therefore cannot get a loan. In the cattle industry the Land Bank has done some work through NaProTechnology, but they do not provide much assistance to grain farmers. However, Mr de Villiers was aware that the Committee was putting pressure on the Land Bank to provide more assistance to grain farmers as they had approached Grain SA and asked how they could assist grain farmers. He therefore asked the Committee to keep up the pressure on the Land Bank as they were making progress with the Land Bank because of the Committee’s pressure on them.

On the moisture levels, Mr de Villiers explained that not all land is water table land. For example the soil in Mpumalanga is sandy soil, in which the water leaves the ground almost as soon as it gets there. But in the heart of the country’s grain production area, especially for white maize, is water table land. Mr de Villiers had showed the Committee photographs of some of this land taken during his road trip. There is water at lower levels in the ground in those areas, what was needed was enough water to allow the plants’ roots to grow through the first few levels of soil to reach the water table moisture. Farmers in these areas also used a farming practice in which they rest the land and do not plant on it in a particular season to maintain the moisture of the land. The farms in these areas therefore just need a little bit of rain to be able to plant on that land the following season. The country used to be almost self-sufficient in its supply of wheat, but then the farmers in the Free State stopped growing wheat because it was more profitable to grow maize and soy beans. However, he said that he did not think that this is necessarily a bad thing as the country has enough land to plant wheat on in order to ensure sufficient wheat supplies, so he was not too concerned about that specific issue.

On the effects of the drought on farm workers, in the Western Cape farmers asked the government for assistance in not having to retrench farm workers. Even organized agriculture appealed to government because they did not want to have to retrench farm workers, and asked the government if it could subsidise farm workers’ wages, even if it was from the Unemployment Insurance Fund, because there is a lot of money available there. While the organized agricultural sector realized that Treasury would not like this, it would help them not to retrench farm workers. So the organized agricultural sector asked government if it could subsidise farm workers wages for six months, just to get them through the season because the farmers were not getting an income this season but were still having to pay farm workers’ wages. However, Mr de Villiers said that he knows that farm workers will be retrenched going in to the next season. This is incredibly problematic because the agricultural sector is one of the sectors that can give employment to people with no education and people with little or no skills. He gave the example of one young Coloured farmer who had been assisted by Grain SA to become a commercial farmer and had been educated through various courses that the organisation runs. Although this particular farmer is in his third season as a commercial farmer and employs farm workers, he is now also going to have to retrench his workers as he cannot afford to pay them due to the money that he is losing through the drought. Subsistence of farm workers wages would definitely help him to not have to retrench his workers.

On the imports and the exports to the Southern African Development Community (SADC), SADC will only buy from SA if they cannot get maize cheaper elsewhere. SADC countries normally buy maize from SA but they buy it at the prices that SA buys it at. Mr de Villiers thought that SADC countries would therefore not buy maize from SA this year and next year because SA’s prices are too high and those countries would probably be able to source their maize somewhere else at a cheaper price. They might also receive some food aid from other countries which is free, and so they would probably take one of those options, rather than import from SA.

He emphasised that there is no difference between white maize and yellow maize in their nutritional value, they only differ in colour, but South Africans like white maize. He said that like Mr Sihlobo, he had grown up in the Free State where he ate pap every day. But although people did not like yellow pap, it would not in any way disadvantage them to eat yellow pap rather than white pap. The other SADC countries might decide not to import white maize as it is more expensive and not readily available. Zimbabwe had done this in the past when the region experienced high food prices in 2007 and 2008. SA could do this but South Africans do not like yellow pap.

On how the country should deal with the droughts that will come in the future, stakeholders in the sector need to sit down and determine what the steps will be when it looks like there is a drought coming. Research needs to be focused on yield and on drought tolerance and heat tolerance. In addition, to ensure food security, Black farmers need to be brought into production by providing them with finance, as they have been trained, and they have got land but they cannot get finance.

Grain SA wants to achieve the National Development Plan goals and therefore had a meeting with DAFF on APEX to consider how SA can import maize from America without disadvantaging farmers but at the same time also not penalizing the country. Grain SA knew that the drought was going to be bad but it has turned out to be worse than they expected. He said that as grain farmers they are optimists, because they have to just keep on hoping the rain will come. However, the sector needs to sit down with various stakeholders and develop a proper plan to ensure food security. The market will ensure that there is enough food in the country but the challenge is ensuring that people will be able to afford to buy food, which would be a difficult challenge this year. He acknowledged that this is not the sole responsibility of the agricultural sector and that many other sectors and government departments also need to work on this, but he said that the country is going to be in trouble in terms of food prices later this year and next year. He thinks that the agricultural sector needs to talk with the private sector and ask them what they could do to help in this regard. The private sector’s help will not be needed over the long-term, as the agricultural the sector just needed to get through this year’s yield. He said that Grain SA had been talking to the government for a long time about transporting grain via rail and the government needs to ‘step up’ now and make it happen. Even if they needed to cross-subsidise coal, and take money from the coal sector to make the transportation of grain cheaper, then this needs to be done. Making rail transportation for grain possible will also provide competition to trucking companies, which at the moment were able to set their prices as high as they wanted to because they did not have any competition.

He said that Grain SA are willing to share details on the 8000 farmers that they have in their organisation, so that DAFF could create a database of farmers, as Grain SA has information on these farmers and is not losing anything by sharing this information with DAFF. This is an area in which Grain SA can really work well with DAFF. He assumed that some of the other commodities have also got some good data that they could share with DAFF.

On research, the Agricultural Research Council (ARC) is not doing well, the money that they are allocated is not sufficient, the capacity for research is not there any longer and they are not providing cutting-edge research that could take farmers forward. There is lots of money flowing around the ARC at the moment as they are still the primary source of research, but Grain SA is establishing research networks or consortiums. Grain SA chooses the best three people in a particular field and links them and they make up the consortiums that are funded, Grain SA does not just give money to the ARC and say just go ahead and do whatever you like. Grain SA also needs a bit of a revamp and the DST is helping them a lot with that by making funds available and saying, “go ahead and manage it so that the farmers can benefit by increasing their yield, or use less pesticides and so on”. The protection of our agricultural land is of utmost importance in ensuring food security. If the sector did not take this seriously, then the next generation will not have food and they will blame us for that. If the sector did not protect agricultural land from the mining sector then the next generation would have to eat coal instead of pap.

He said that if the Committee wanted to visit any of the farmers that they should just let Grain SA know and they would arrange the visit, the Committee could contact them any time and Grain SA would take them to visit those farmers.

The organisation has very frequent study group meetings in which they train farmers and help them to become commercial farmers and get commercial yields. He said that Grain SA do not have all the answers but they have the will to make the sector work and want to make the country successful when it comes to food, because if people have enough food then they can go and get an education. He wondered about the government’s consideration to give people free education when they did not have enough food and Eskom’s decision to give electricity to the mining sector but not the mills because people need to have eaten before they can go and work in the mines.

Mr Sihlobo said that on the pricing side, one of the first fundamental things to remember is that towards December the stocks are already low because that time is towards the end of the agricultural year, which is at the end of April. That alone would mean that prices would be higher at this time of the year. Even in a normal year in which the country was not experiencing drought one could expect prices to be at slightly higher levels at this time of the year. What it is important to note though is that if a country is going to be a net importer for a particular year, it means that the prices are going to remain at the import parity price, they are not going to increase. The sector is already experiencing these higher prices at the moment and Grain SA do not expect that there will be further increases, unless the exchange rate changes or there is a change in supply from what has been estimated, but having factored these possibilities in, Grain SA expects to see a sideways movement on the current prices, rather than an upwards movement.

Mr P Mabe (ANC) thanked Grain SA for the presentation and said food security is very important. While he had enjoyed their presentation which was very enriching and empowering, there seemed to be a part lacking. The Department of Water Affairs has a number of interventions for the drought, including how to deal with the lack of rain and two of these are desalination and rain harvesting. It is important for Grain SA to consider these because if the sector is desalinating or harvesting water only to ensure that there is enough food to save hungry stomachs, the sector is not really addressing the problem of miners who are going down to work in the mines without having any food. Similarly with the problem of the lack of electricity on farms, there are many alternative forms of energy which can be used by farmers such as green energy space and solar panels that can be used to run irrigation systems. Some of these interventions have been included in the National Development Plan. He said that the Committee had been trying to have joint engagements with other Portfolio Committees, especially those Portfolio Committees that impact on the Committee’s work. He felt that some of the problems that Mr de Villiers had raised were being dealt with by other departments. For example, the natural problem of a lack of rain is something that the Department of Water Affairs is trying to deal with. There had also recently been an energy summit in the country. There were probably government departments that were dealing with the logistics of importing grain. He was annoyed that Grain SA had not discussed these in their presentation as it was important for Members to be educated on these alternatives.

Ms Steyn’s question focused on cost cutting of prices to the consumer. She wanted to know if Grain SA had done a study to determine whether moving maize via rail, rather than via road, would make a big impact to the price of food for the consumer. She was concerned that there would be a huge increase in the price of food later in the year that would result in a massive crisis of consumers not being able to afford to buy food. She was therefore trying to find to find ways in which the crisis could be contained. She acknowledged that the sector can do nothing about the price of imports and the weak rand and so on, but that there are factors that the sector can influence. She asked if there was anything that the Committee could consider proposing that will cut the cost of food for consumers.

Mr Mncedisi said that he had asked a specific question regarding when the sector got to know that SA was going to be hit by this intense drought and Grain SA’s response seemed to be in approximately October last year. He said that the sector would have known earlier than that and he therefore did not know if Grain SA had misunderstood his question, however he still wanted to get an answer to that question. A critical thing that Mr de Villiers had mentioned in his presentation is that if government would guarantee Black farmers’ loans to the tune of a billion rand that would help circumvent the situation that the sector is currently facing.

He said that Grain SA needed to be working with the local development agencies and asked if they had a relationship with the regional development agencies.

Ms Carter said that she also serves on the Portfolio Committee on transport and that the amount of goods being transported by road rather than by rail is something that the Portfolio Committee on Transport continuously discusses. She therefore proposed that the Committee should have a joint meeting with the Department of Transport.

She said that she could clearly remember in the early 1990s that there was also a major problem with the low production of maize. When that happened, the price of maize to the consumer went up a lot, very quickly, and the market never really recovered after that. So the effect of that was not short term. It was exactly the same with the coffee plantations in Brazil that burnt down, when coffee went up from R9 a tin to approximately R20 a tin, and the prices never came down. She therefore wanted to know if the effects of the drought and maize shortage would be long-term and if the country was going to experience a problem of unaffordable food prices for a long time.

The Chairperson said that part of the problem that we have in SA and indeed in the rest of the world is the lack of putting in place measures to deal with climate change. The whole world is dealing with issues of climate change, drought, el Niño similar and kinds of things. So what needs to happen in this country is for all sectors, not only agriculture, to look at  climate change and take it very seriously and adapt and mitigate the challenges that we might face in the near future as a result. DAFF and the agricultural sector in SA need to sit down and consider  climate change and determine how they are going to deal with  climate change and what kinds of adaptations need to be put in place in order to make progress on this issue, as does the world. She said that the United Nations and similar organisations were putting money aside to help countries that have plans to deal with climate change. It is therefore the responsibility of the sector to ensure that it makes fast progress on these matters in order to deal with climate change.

The issue of research is important in the sense that, as you adapt, you have to have developed new technology and new kinds of farming techniques such as conservation agriculture. She wanted to know how the sector could assist farmers to understand all the new concepts and techniques. This is something that the sector needs to work on.

Responses from Grain SA
Mr de Villiers said that regarding rain harvesting and desalination, he was not a specialist in that area and he was therefore maybe not the best person to respond to that question. However he said that he believed that there are moral issues involved in rain harvesting as it harms someone else when you steal their rain. If one is able to get a cloud to rain over their land earlier than it would have, so that it then does not rain over the neighbour’s land; then this is a moral issue as it is essentially rain theft. He considers it a moral issue because it benefits one farmer at the expense of another. However, he said that he understood the point that Mr Mabe was making and he agreed that the country needs to look more carefully at its water resources and how they can be used for food. SA should also be importing those commodities that require a lot of water because the country can save water by doing this. Egypt already does this as they do not have a lot of water. Grain SA has not yet done a study to determine which commodities require a lot of water but these should be done so that the sector can consider importing commodities that require a lot of water.

He said that biofuel is another element that the sector needed to consider. When the oil prices had shot up to between 80 and 100 dollars a barrel in the past, the sector had been ready to implement a programme of producing biofuel using sorghum. At that point the Minister was ready to sign and implement the biofuel policy, and the sector was almost ready to start implementing that policy and then the oil price came down. When that happened the sector realized that the biofuel policy was not going to be implemented overnight. As grain farmers, Grain SA is sensitive to  food versus fuel, and that different people have different opinions on which is more important, but there are options for using certain plants for fuel which will not affect the crops needed for food consumption. For example sorghum can be used for fuel instead of maize as sorghum is indigenous to the country and is tougher than maize so it can grow in the drier, North West, probably better than maize can. The country does not yet have a market for biofuels but they are something that could definitely help the country.

He said that he would also appreciate a joint meeting with the Department of Transport to help Grain SA to get more grain out of the trucks and on to the trains.

On the question of what the impact will be on food prices if the country switched back to transporting 85% of grain via rail, Grain SA has not done a study to quantify if it would make food prices lower, but they know from the past that there is traditionally a 25% gap between road transportation and rail transportation costs. And when the cost of transport is factored into the price of a basket of groceries, the price of fuel makes up roughly half the cost. So it will definitely make a difference to the price of food goods although Grain SA did not have the specific numbers available at that point.

To answer the question of when did Grain SA know that SA was going to face this severe drought; way before the season started, the banks came to Grain SA and said that they were making money available to the farmers but warned that there was a below average rainfall predicted for the planting season. The banks said that there might be some rain in March, based on the sea temperatures and the models that they were using, and Grain SA and the farmers believed that the rain would come. The rain came very late in Mpumalanga and so the farmers did not plant all the maize and wheat they had. However, they did plant sunflowers because sunflowers can be planted later, and Grain SA had sold all their sunflower seed way before the season started, so the farmers did do some preparation for the drought in that way. The sector knows that it is in trouble when the window of opportunity for planting is over. Christmas is the date by which the sector needs to have planted, and it is the date when the sector knows whether it is trouble for that year or not.

The guarantee of R1 billion from government would provide security for loans for people who do not own land as land is usually needed as security against these loans. Doing this would allow the Land Bank to unlock loans for farmers who do not own land. These loans would provide money for necessary equipment such as tractors and pesticide sprayers, or enable farmers to mechanize their farming processes. These farmers will be able to easily pay back these loans as they have been trained well and are doing all the right things to ensure good yields. The rain obviously needs to arrive but all the other factors are right.

On how long the insufficient supply of maize would affect prices for, Mr de Villiers said that there is evidence that prices will come down but it takes time. Grain SA did a survey in SA to find out how many farmers are on the conservation agriculture programme and the results were that 40% are on it. A specialist in this area is forming all sorts of study groups and people are doing trials on conservation agriculture so that the farmers can adapt it quicker. And the drought makes it even more important to ensure that farmers are on this programme. Grain SA also teaches farmers to use conservation right from the beginning of their planting process so that they can preserve moisture. These techniques are part of conservation agriculture and they refer to it as moisture management.

Monsanto is currently running drought tolerance variety tests in SA, which is one of only two countries in the world where they are running these tests. They said that if the results of the tests were positive that the sector could start expecting to be able to plant the seed in the 2018/2019 season. So there is some ‘light at the end of the tunnel’, but the sector would just have to wait for those tests to be conducted and deal with the drought as best they could in the meantime. The sector also had to keep believing that the rain will come next year, but at the same time the country needed to prepare better for climate change, as it knows that climate change is coming. Production also needs to be moved to the East of the country, into coastal areas where there is more rain and good soil. He also said that the sector has to get communal land into production, and asked the Committee to please help Grain SA with that.

The Chairperson thanked Mr de Villiers and Mr Sihlobo for availing themselves to come and brief the Committee and for their responses to the Committee members’ questions, and said that the meeting had been very informative. She said that the Committee would discuss the issues that Mr de Villiers and Mr Sihlobo had raised in their presentations with the Department of Agriculture, Forestry and Fisheries and would continue to question the Department on these issues.

The meeting was adjourned.