South African grain farmers are entering the new planting season amid rising input costs, large domestic grain supplies and uncertainty around export markets.
A recent grains and oilseeds webinar hosted by the National Agricultural Marketing Council (NAMC) and the department of agriculture unpacked the many challenges the industry faces.
Heleen Viljoen, an economist at Grain SA, said farmers are having to weigh several factors as they decide what to plant, particularly for major crops such as maize, soybeans and sunflower.
Maize surplus for domestic demand
South Africa produces a wide range of grain and oilseed crops, with maize remaining the country’s largest crop at more than 17 million tonnes in a good season. Soybeans have also expanded significantly over the past decade, while sunflower remains an important alternative to maize in the summer grain production areas.
For maize producers, however, large supplies are creating uncertainty heading into the new season.
Viljoen said farmers were considering whether the current maize surplus could be exported quickly enough, particularly if an El Niño event resulted in lower production during the coming season.
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“If we sit with a massive surplus locally, even if we have lower production, there will still be enough stock in the market,” she explained.
This could limit the price response that farmers would normally expect from lower production during an El Niño season, as substantial carry-over stocks could continue to meet domestic demand.
Input costs weigh on planting decisions
Input costs are another major concern. Viljoen said fertiliser prices had increased by about 140% since 2019, while herbicide prices had risen by approximately 15% and diesel by 83%.
Commodity prices have not increased at the same pace, putting pressure on producer margins.
“This is raising quite a bit of concern in terms of local production trends because it is definitely having an influence on what producers are considering to plant for both white and yellow maize,” Viljoen said.
The cost environment could encourage some producers to reconsider their crop mix. Viljoen said soybean production could benefit from its comparatively lower fertiliser requirements, while sunflower was currently showing stronger profitability than maize and soybeans.
“The crop at the moment that shows the most potential is sunflower, and so sunflower is a crop that we need to look out for going into this next summer growing season.”
Heleen Viljoen
Pressure on domestic markets
Grain SA’s budgets showed that several crops were struggling to cover fixed costs, with some operating around variable-cost levels. This raises concerns about producers’ ability to meet financial commitments such as machinery and other fixed expenses.
The pressure on domestic markets also makes exports increasingly important.
Jean-Pierre Kotzé of the South African Cereals and Oilseed Trade Association (Sacota) said, “For maize and soybeans, we generally trade closer to export parity, and for wheat, we generally trade closer to import parity.”
The soybean industry illustrates the challenge created by growing production. According to Kotzé, local soybean supply has increased by an average of about 20% over the past nine to 10 years, while domestic demand has grown by around 10%.
The difference must either be carried as stock or exported, making access to export markets increasingly important for the sustainability of production growth.
Maize faces a similar dynamic, with long-term supply growth of about 6% compared with demand growth of around 2%.
Kotzé said efficient infrastructure is critical to moving surplus grain into domestic and international markets.
Rail, in particular, remains important because it can be significantly cheaper than road transport. Many grain storage facilities were also originally designed around rail-based logistics.
“Having access to infrastructure that is effective and cost-efficient is very important,” he said.
Becoming finance and market-ready
For farmers, the coming planting season will therefore involve more than simply comparing crop prices. Input costs, expected production, existing stocks, export opportunities, exchange rates and the cost of moving grain will all influence planting decisions and risk management in the season ahead.
Litha Kutta, head of partnership and ecosystem coordination at the Land Bank, said farmers also needed to address issues such as water rights, compliance and market access before finance could be unlocked.
“Funding is not the first challenge that you get. You see that there is a lot more that you need before you even get funding,” Kutta said.
He said the Land Bank’s partnership team supports farmers with market readiness, business planning, access to finance and post-investment support, while partnerships with private-sector buyers and provincial governments are being used to help link farmers to markets and funding.
Kutta said the bank had approved about R83 million for black farmers during the current financial year at the time of the presentation, with approximately R70 million linked to the grains and oilseeds sector.
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