4.

Sources of protein

4.1

General

This research report relates to the period 1 March 2009 to 28 February 2010, whereas the marketing year related to the demand and supply statistics for fishmeal and oilcake, is for the period 1 April 2008 to 31 March 2009. At the time of preparing this report, the statistics relating to the 2009/2010 marketing year were not yet available (See Annexure III).

In terms of the marketing year, from 1 April 2008 to 31 March 2009, the fishmeal demand was 77 500 tonnes and the demand for oilcake was 1 664 927 tonnes. These reflect the quantities consumed mainly in the commercial market. In contrast to the same period in 2007/2008, fishmeal consumption was 55 000 tonnes and oilcake consumption 1 758 185 tonnes, which represents an increase in fishmeal consumption of 22 500 tonnes, or 40.9%, but a decrease in oilcake consumption of 93 258 tonnes, or 5.3%.

International market factors played a significant role, with the price ratio between fishmeal and soya oilcake, as well as the exchange rate, forming the basis of the substitution effects between fishmeal and oilcake. During the first months of 2008 the international soya oilcake price was more than 500 US dollars per tonne, but in the second half of that year the price dropped to below 400 US dollars per tonne. The average price in 2008 was about 450 US dollars per tonne.

In terms of fishmeal, prices quoted in Peru at the beginning of 2008, were just below 1 000 US dollars per tonne, followed by a period during which the price was about 1 000 US dollars, before dropping to below 900 US dollars by the end of 2008. The average international fishmeal/oilcake ratio was about 920 US dollars per tonne. This gave rise to a fishmeal/soya oilcake price ratio of just above two which explains the relatively higher consumption of fishmeal locally. During 2007, the fishmeal/soya oilcake price ratio had been more in favour of soya. During the 2008/2009 marketing year, 48% less fishmeal was consumed locally, this being governed by the amount of locally produced fishmeal and the profitability of selling on the export market.

4.2

Fishmeal

Local production of fishmeal, including that from Namibia, amounted to 82 500 tonnes in the 2008/2009 marketing year. Namibia's contribution was 7 500 tonnes. Production for the 2009/2010 marketing year is estimated to be 99 500 tonnes. During the reported marketing year more than 5 000 tonnes of fishmeal was exported and according to estimates about 41 500 tonnes will be exported during the 2009/2010 marketing year.

The average domestic fishmeal price in 2008 was about R7 000 per tonne even going as high as R8 500 per tonne at one stage. In 2009 the average local fishmeal price was about R8 000 per tonne.

As in the past, securing the total allowable catch (TAC) remains a problem. In 2009 only 173 174 tonnes of anchovies were caught despite an allocated TAC of 569 000 tonnes. The sardine TAC of 90 000 tonnes was reached. Non-quota fish (red-eye and others) caught amounted to 48 491 tonnes. The anchovies catch in 2009 was 35% below that of 2008, being only 30% of the TAC. Poor weather conditions and limited production capacity of factories contributed to the situation.

Catches started well in the 2010 season with about 10 to 15% more fish being caught compared with the same period last year. Currently, domestic prices are very high. At a certain point in January 2010, the fishmeal price was as high as R10 000 per tonne, but it is likely to drop to about R7 000 per tonne later in the year. As a result of many factors, including the strong Rand, oilcake prices are relatively low at the moment and it is likely that there will be considerable substitution of fishmeal, using soya oilcake, especially in the poultry industry which is a large consumer of protein.

4.3

Oilcake

4.3.1

International

In terms of international markets, the grain and oilseed prices, as well as product prices were exposed to market variations in 2009. This was mainly due to the bear and bull markets at the time. Bull factors in terms of soya followed the expected shortages of soya and soya products in South American, as well as the longer than expected buying pressure from China. Sentiments that encouraged higher prices included external factors such as the increasing crude oil price. At one stage, investment funds found their way into the grain and, particularly, the soya markets. Factors that dampened the price increases and bull factors were the steps taken by the Chinese to limit liquidity in the market as well as favourable harvest estimates in South America. The soya harvest estimates in the Southern Hemisphere will be about 129 million tonnes, 31.5 million tonnes more than the previous season's drought-damaged harvest. Large downward pressure on all oilcake prices is expected in the forthcoming season which will continue the downward trend since December 2009. In the April/June 2010 quarter, oilcake prices at the Rotterdam market will be about 300 US dollar per tonne, 20% lower than the February 2010 prices.

Expected world production of soya oilcake for the period April/September 2010 will increase sharply, by 7,3 million tonnes, compared to that for the previous year. The increased demand for soya oilcake will not keep pace with the increased supply, due to lower poultry and livestock numbers in many countries. The expected consumption of soya oilcake will be 83,2 million tonnes for April / September 2010, 5,8 million tonnes more than the comparative period on 2009, but it will only be realised if soya oilcake were to be offered at significantly lower prices. According to estimates, global consumption of the seven other oilcakes will stagnate between October 2009 and September 2010.

The biodiesel market will have a significant impact on the international oilcake supply. Increased production of biodiesel in South America due to, inter alia, exports from Argentina to the EU and the expected increase of about 33% in biodiesel consumption in Brazil, will play a significant role. The latter may be ascribed to the Brazilian government's mandate for the compulsory inclusion of biodiesel that has been increased from 3% to 4% with effect from 1 July 2009.

4.3.2

Locally

As mentioned earlier, oilcake consumption decreased from the 2007/2008 to the 2008/2009 marketing year, reflected by an increase in fishmeal consumption. Oilcake consumption by AFMA members, of 1 093 339 tonnes, was 65,8% of the total used in South Africa in 2008/2009, compared to 62,3% for the previous marketing year. Soya oilcake was the most important component of the total oilcake consumed which, including full-fat soya, was 74% of their total oilcake consumption. AFMA's total oilcake consumption in the 2008/2009 marketing year, which was about the same as that of the previous year, will, according to estimates, increase by 7.7% to 1 177 095 tonnes in the 2009/2010 marketing year. The joint growth of soya oilcake and full-fat soya for the same period is estimated at 2,3%. A significant increase, of 25.1%, in the use of sunflower oilcake is indicated for AFMA members from the 2008/2009 to the 2009/2010 marketing year.

Of the total local oilcake demand of 1 664 927 tonnes for the 2008/2009 marketing year the local market can provide only 565 181 tonnes. This means that 1 099 746 tonnes, or 66% of the total consumption, had to be imported. Soya oilcake, valued at about R2.6 billion, made up 84.1% of the imported quantity. During the 2007/2008 marketing year, oilcake imports totalled 1 263 628 tonnes, or 71,9% of the total needs. According to estimates there will be a small improvement in local supply in the 2009/2010 season, but the global quantity to be imported would still exceed 1 million tonnes.

4.3.3

Projections – 2010, 2020

New projections of oilcake needs for the periods 2010 and 2020 are not yet available, but according to expectations the projections for 2015 and 2020 would be available in 2010. The March 2008 projections show that oilcake demand for 2010 and 2020, respectively, amount to 1 918 763 tonnes and 2 681 414 tonnes. At this stage it seems as if the demand for 2010 could have been overestimated. Even if the projections were to be adjusted downwards there remains a large gap between projected demand and local production of oilcake. A positive aspect is the return to soya production currently being experienced in South Africa. In the 2007/2008 production season 282 000 tonnes soya were produced, but in 2008/2009 this increased to a phenomenal 516 000 tonnes, an increase of 83%. It is expected that the harvest for the 2009/2010 production year will be 587 950 tonnes.

4.4

Local protein consumption

4.4.1

General

It is difficult to obtain a more detailed picture of protein use for animal consumption in South Africa. Information is supplied in the form of total usage or, as in the AFMA annual report, by animal species and type of protein. More detail on both aspects would enable the PRF vision and mission to be better understood and appreciated, and would also show how glibly we refer to food security in South Africa.

The animal feed industry is probably one of the largest branches of agriculture. The tonnage for organised animal feed manufacturers (AFMA) in 2009/2010, amounted to 5.8 million tonnes (refined concentrates included), while the informal home mix industry, including feedlots, is estimated at 5 million tonnes – a total of 10.8 million tonnes feed.

Table 1 shows the national animal feed production for 2009/2010, referring to different species. This shows that AFMA produced 96.8% and 72.1% of the total broiler chicken and laying hen feeds respectively, a total of 40.2% of the national animal feed production. On the other hand, the home mix industry, including feedlots, is responsible for more than 77% of the 3.3 million tonnes of cattle and sheep feeds (excluding poultry feeds) produced. It represents 30.9% of the national animal feed production. Therefore, AFMA is the largest supplier of animal feeds to the poultry industry and therefore AFMA is the largest consumer of soya and sunflower oilcake. During 2009/2010 about 1.1 million tonnes soya oilcake was available in South Africa of which 79.9% was utilised by AFMA. Of this, 73.1% was used for poultry consumption. The information was prepared and supplied by Dr M Griessel, member of the PRF Board and honorary AFMA Chairman.

Source.  Dr Erhard Briedenhann

4.4.2

Poultry industry

The importance of the poultry industry in South Africa cannot be overemphasised. Statistics from the egg industry shows that South Africa consumes only about 130 eggs per capita per annum compared to some countries that consume more than 300 eggs per capita per annum. This offers a huge opportunity for expansion.

The broiler chicken industry has achieved significant success over the past 10 years. In 2000, it took 42 days to produce a broiler of 1,8 kg with a feed conversion of 1,85. In 2009 it took only 35 days to produce a similar broiler, with a feed conversion of 1,68. This figure improves annually. South Africa uses more than 1 billion broilers per annum, being a per capita consumption of 30 kg per annum. It is important to note that 200 million broilers are imported annually, the value of these imports in 2009 amounting to R1,565 billion. This offers a significant opportunity to expand the local broiler chicken industry which could also lead to the consumption of more locally-produced protein and maize, with a commensurate exchange rate saving.

The improved utilisation of protein, one of the PRF objectives, is particularly valid in the broiler industry. This opportunity is discussed briefly in this document.

4.4.3

Pigs

The pig industry in South Africa consumes about 10% of the total national animal feed production. In 2009, global production of pork was 106,5 million tonnes, so it is a very important industry globally, but not locally. According to estimates, global pork production will increase in 2010, the most significant increase likely to be in China where pork production increases by about 2 million tonnes per annum, where an expected 50 million tonnes will be produced in 2010. Pork amounts to 37,8% of the total meat consumption in the world, while poultry amounts to 32,6%, the second most important source of meat in the world.

South Africa continues to import pork, mainly (70%) in the form of ribs that are used in restaurants. It is also reported that local pork producers are spending significant amounts of capital on mechanisation which will lead to an increase in local productivity and increased international competitiveness.

4.4.4

Dairy, etc

From Table 1 it is clear that dairy plays an important role in the consumption of animal feeds. The three largest sources of protein consumed by the dairy industry are sunflower oilcake, soybean oilcake and cottonseed oilcake, comprising more than 90% of the total protein sources used. More information about this branch will be provided in a future report.

4.4.5

Other

As indicated earlier, one of the PRF objectives is to fund research to promote better utilisation of protein. Prof Rob Gous, internationally recognised poultry researcher and PRF Board member, has developed broiler and pig simulation models, using PRF funding, that improve the utilisation of protein in poultry and pigs. The past year was a busy year for Prof Gous as he received an invitation to address a Nutreco Conference in the Netherlands, another in Edinburgh and he also delivered the JM Bell Memorial Lecture at the Western Nutrition Conference in Canada. He visited Australia twice, addressing the Australian Poultry Symposium in Sydney and a PIX 2010 meeting on the Australian Gold Coast. In addition, he presented two papers in New Zealand and spent two weeks at the University of Sao Paulo in Jaboticabal, Brazil. He visits the latter university annually, assisting with training of postgraduate students. The PRF acknowledges Prof Gous' particular contribution both locally and internationally, in promoting the PRF objectives.

4.5

Local production of protein

4.5.1

General

Although the PRF objectives include the better utilisation of protein by animals, far more emphasis is placed on research directed at producing more protein locally for animal consumption, thereby replacing imported protein. After spending millions of Rands on research relating to various sources of protein the PRF has decided that the only potential and viable protein sources worth pursuing presently are soybeans and canola.

4.5.2

Soybeans

Graph 1 shows the impressive growth of the soybean industry in South Africa over the past 22 years. Before 1997/1998 the industry seldom produced more than 100 000 tonnes soybean per annum and since the establishment of the PRF Soya Task Group in 1996 the industry has never produced less than 100 000 tonnes soybean. As Graph 2 shows, the only year since 1996 in which soybeans were planted on less than 100 000 ha was in the 1999/2000 season.

RSA: Soybean (commercial)

Production: 1987/1988-2008/2009

*Crop estimates committee-figure of 23 September 2009

RSA: Soybean (commercial)

Surface planted: 1987/1988-2008/2009

*Crop estimates committee-figure of 23 September 2009

During the 2008/2009 season 237 750 ha soybean were planted to soybeans and a record yield of 516 000 tonnes was achieved. This average yield of 2,17 tonnes per ha is the highest thus far obtained in South Africa. This is the first time since soybeans have been grown in South Africa that the average yield exceeded 2 tonnes per ha and it is the first time that more than 500 000 tonnes soybeans have been produced locally.

According to the Crop Estimates Committee this crop was more than 80% higher than the previous crop, and also almost 120% higher than the average over the previous 10 years, of 234 216 tonnes. The Crop Estimates Committee also estimated that the gross value of soybeans produced during 2008/2009 was R1.623 billion, compared to R1.134 billion for the previous season, an increase of 43%. Indications for the 2009/2010 season are that about 311 000 ha will be planted, with a possible yield of about 580 000 tonnes.

The PRF is proud of the progress made and the potential for further increases in soybean production. In an attempt to give maximum drive to the generic soybean marketing programme, a special soybean planning task team was convened to pay attention to detailed aspects of the programme.

In addition, discussions with seed companies indicated that promising cultivars are being developed with appropriate technology that will be available in South Africa within the foreseeable future. Representatives of two of the three seed companies, Dr A Jarvie at Pannar and Mr W Engelbrecht at Pioneer, addressed the soybean work groups during the past year. The third company, Linkseed, has already undertaken to provide similar information during 2010/2011. This is the first time in the past 14 years that seed companies have openly provided information about developments that will further improve the potential for soybean production in the country.

Progress with the evaluation of a variety of cultivars from INTA in Argentina and from Embrapa and the University of Viçosa in Brazil was described in paragraphs 2 and 3 above.

The PRF contracted Mr Jan du Preez to perform quarterly web studies relating to the latest developments in the soybean industry in the USA, using reports by seed companies and universities, the American Soybean Association (ASA) and the United Soybean Board (USB). The value and quality of this work is appreciated and highly valued.

The rust and Sclerotinia task groups still function effectively, and meetings are well attended.

Probably one of the most important technology transfer techniques used by the PRF to promote soybeans involves cost and income budgets for the respective regions which are calculated and presented annually under the guidance of Mr JSG Joubert, vice-chairman of the PRF. The idea that soybeans are cash crops in their own right may be ascribed directly to this exercise. In addition, the benefits of crop rotation and reduced soil preparation as well as the success stories from producers have placed soybeans irrevocably on the road to success.

Other contributions that have made a difference during the past year include the successful soybean think tank, attended by high profile producers and researchers. Agreements with companies to use the same codes for identification of cultivars, as well as the categorisation of soybean planting areas in identifiable climatic zones, were handled by PRF contractors Messrs W van Wyk and G de Beer.

The soybean rust pamphlet was revised by Dr Pat Caldwell, PRF contractor, while a comprehensive document to promote the production of soybeans was prepared by Mr GduT Keun, PRF Chief Executive Officer and Mrs Erna Harmse, soybean planning task team contractor.

We thank the press, particularly Landbouweekblad, for publishing information about almost all the above incentives, reaching the broad soybean industry and contributing significantly to the success of the soybean industry to date.

4.5.3

Canola

Although production of canola grew for several years, it has stagnated over the past few years. Lupin research funding was cancelled due to the lack of growth, but after serious consideration, taking into account the success of the soybean generic marketing programme, the PRF Board decided to implement a five year programme to regenerate growth in the canola industry, taking into account the international growth pattern and global production that has reached the 60 million tonne mark. An additional incentive is the low and uneconomical wheat price which places that industry under significant pressure.

The 2009 planting was set at 35 060 ha, compared to 34 000 ha in 2008. The expected yield is 40 310 tonnes compared to 30 800 tonnes in 2008.

The PRF Board provided funding, like that for soybeans, for a canola generic marketing programme. As mentioned earlier, Prof André Agenbag of the University of Stellenbosch was contracted to co-ordinate the project, and Mr Johan Loubser will help with various other activities. The PRF also appointed Mr Kobus Schonken, well-known and extremely successful producer of, inter alia, canola, to serve as a member of the canola planning task team. His particular expertise will be used to promote canola production.

The results of the income and cost budgets were refined, and sensitivity analyses showed that an increase of 250 kg of canola per ha could establish it as a cash crop in its own right. In principle, the PRF decided to embark on an advertising programme entitled, "The extra quarter tonne", but the results will only be noticeable next year.

In Paragraph 3 mention was made of the survey to identify problems and obtain other information relating to the disillusionment within the canola industry, under the guidance of Mr JSG Joubert, and assisted by Prof Agenbag, Mr Loubser and others. The information will be used by the canola planning task team to promote canola production, but more information about this will also only be available next year.

In the same vein, the canola development plan previously prepared by Dr de Kock, was adjusted during the past year to take account of current circumstances, and this was followed by the publication of a canola manual edited by Prof André Agenbag. The manual is available in English and Afrikaans, in book format and on CD. Both are available on the PRF web site.

For some time it has been known that the canola industry in South Africa has had to struggle with older cultivars from Australia. These cultivars are no longer available on the cultivar lists in Australia. Dr J de Kock and others have visited Australia several times recently and during those visits liaison with respective seed companies has been established. There are strong indications that these initiatives will lead to an assortment of new lines and cultivars becoming available in South Africa in the forthcoming season. This should contribute immediately to the "Extra quarter tonne".

The Canola Focus continues to be published regularly. The PRF sincerely thanks the editorial team under the guidance of Mr Piet Lombard, as well as all co-workers, for their efforts in keeping the contents of this publication both educational and interesting.

4.5.4

Other

Comprehensive agronomic requirements have been suggested to the PRF as guidelines for the production of plant protein for animal use. This has been briefly referred to in paragraph 2 of this report.

The disciplines represented on the Board are determined on the basis of the most urgent needs at any particular time. Input from Board members representing the agronomy portfolio includes, inter alia, the following disciplines: agronomy, plant breeding, soil science, plant nutrition, weed science, plant physiology and pathology and entomology. Although the person in office does not need in-depth knowledge of all these disciplines, to serve the needs of the PRF it is necessary to have a working knowledge and to know where to obtain in-depth information.

A range of congresses that should, wherever possible, be attended by agronomists relate to plant pathology, entomology and nematology, as well as the annual symposium on soilborne diseases held in Stellenbosch and the joint congress of the South African Association of Crop Production, the Soil Science Association and the Southern African Association for Weed Sciences, among others.

The PRF also leans heavily on the agronomists to liaise with institutions such as SANSOR, the Fertiliser Association of South Africa, AVCASA and others. They also assume responsibility, to a large extent, for PRF contractors involved in cultivar trials, own research and international soybean trials referred to earlier. Although the research capacity at Universities, Provincial Departments of Agriculture and ARC is limited, the PRF agronomists must liaise with these institutions as far as possible, to keep up to date with the latest developments.