2.

General overview

Another below average year in the agricultural sector placed ever-increasing pressure on all producers. In addition, negative international opin­ions about the South African economy caused enormous fluctuation in the Rand which placed additional cost pressures on the agricultural community. These aspects also put the PRF's financial resources, and those of research funding in general, under pressure.

The impact of the severe drought over the past year will be remembered by all South Africans for a long time to come. Officially it has been the driest summer season in more than 100 years and the economic and social consequences are dire. The drought has hit the economy at a time when ratings agencies were reviewing the country's credit status and the concern around the ability of the economy to grow and to generate jobs remains at the forefront. This also raises the question of the performance of the agricultural sector and its ability to contribute to the growth of the economy. The National Development Plan (NDP) is officially regarded as the blue-print for growth and transformation, where very ambitious targets have been set for the agricultural sector. Although these are all long-term tar­gets for 2030 it is worthwhile taking stock of the performance of the sector following the launch of the NDP in 2011.

Agricultural performance: growth in production 2011-2016

Figure 1 presents the average annual growth rate in production of a range of agricultural industries and their share of the total value of agri­cultural production. The first important observation is that most of the industries that have been identified as potential winners, according to the NDP's growth and employment matrix, have performed well. From a PRF perspective it is most encouraging to find that canola is the industry that has come out as the top performer in the agricultural sector; growing production by an average annual rate of 6% p.a. Soybeans is in third position, growing production at more than 5% p.a. Sunflower production has stagnated over this period.

Over the years BFAP has consistently monitored the relative competitiveness of our industries with the leading global agricultural producers. Figure 2 compares South Africa's average yields for the main field crops over the past five years to those of our main competing countries on the export and import markets. It also compares the average annual growth rates of the past decade to the projected rates of the next decade as generated by the BFAP Baseline.

South Africa versus International yield comparisons 2005-2025

For maize and wheat, average annual growth rates have been in line with our main competitors. In fact, if it wasn't for the drought, the average annual rise in maize yields in South Africa would have exceeded 5% p.a. and therefore in line with Brazil. Overall, the growth in yields and therefore relative productivity has enabled the South African maize sector to be globally competitive at an export parity level, which implies that over the long run, domestic maize prices will also tend to trade closer to export parity levels. This is a critical driver for the competitiveness of all down­stream industries, for example the feed and broiler industries.

For wheat, the growth rate might be slightly misleading since much of the marginal areas under dryland wheat production in the Free State has ceased production over this period. Some of this area has been planted to maize and soybeans whilst some has reverted to grazing. Yet growth rates of oilseed yields seem to have been lagging. In the case of soybeans the rapid expansion in hectares under production, as well as the drought that started in 2015 in the western parts of the country, did have an impact on average yields. There has also been little growth in the average yield of sunflower.

One can argue that these are very crude and simplified comparisons. However, it becomes far more interesting when the historic actual yields are compared to the projected global and local yields. The BFAP baseline projects a very bullish outlook with a rapid increase in oilseed yields over the outlook period due to significant investments and advances that are currently taking place in these industries, where the PRF also plays an impor­tant role. Comparing the projected growth rate for local soybeans of 4% p.a. over the next decade to the actual and projected growth rates (from the OECD Outlook 2016) for the USA, Argentina and Brazil, one realises that there is a big challenge that lies ahead for this industry. A projected growth rate of 4% p.a. will raise the average soybean yields from 1.54 t/ha over the past five seasons to 2.3 t/ha over the next 10 years.

In order to guide the research that is required to boost the overall productivity and competitiveness of an industry it is not only the average yields that matter but also the inputs required for every ton that is produced and the quality of the product that is delivered and further processed. Hence, a holistic approach of the full value chain is needed. To this extent, BFAP has been participating in a global benchmarking exercise for the past decade where farm level data related to the costs of production, farming practices, yields and revenue are collected annually over a wide range of countries. Figure 3 provides a detailed cost breakdown for canola (per ton produced) in various countries. The South African farm that is included in this analysis is a 2500 ha prototype/typical farming unit in the Overberg area with a mixed cropping system of wheat, barley, canola and a livestock enterprise. Figure 3 presents only an overview of the production costs and revenue related to the canola enterprise. From the analyses it is evident that despite the higher yields achieved in countries like Canada and Germany the South African farm is on par and competing on an average cost per ton basis. The market revenue that our producers are receiving also compares well with the revenue received by the Cana­dian farmers, yet in Europe the market prices are generally higher. One of the main drivers behind higher canola prices in Europe is the biodiesel industry. In a sense, this analysis only tells part of the picture because in order to project the future expansion potential of canola in South Africa one has to compare the relative profitability of canola with alternative crops like wheat and barley in the various production regions.

International benchmarking of canola production in the Overberg

As mentioned earlier, the highlights of the year were definitely the two functions in Pretoria and Stellenbosch, organised to celebrate the PRF's 25th anniversary. Special honorary awards were given to the first PRF Chairman, Dr R Bigalke as well as two EEAOC (Argentina) representatives, Dr D Ploper and Mr M Devani. The latter two have been very active contributors to the PRF. Two EMBRAPA representatives, Drs N Neumaier and M de Oliveira could not attend the gala function and the necessary recognition awards were handed to them at a subsequent meeting.

After 25 years of service to the PRF Board, the second-last founding member of the PRF, Mr JSG Joubert, retired in May. He has left many lasting impressions of his tenure with the Board and the PRF respectfully honours him for his work.

In the previous research report mention was made of the possibility of publishing our own Oilseeds magazine. We are particularly pleased to report that the first issue was published in March 2015, with consecutive quarterly issues having followed. The PRF acknowledges the work of the editor, Dr E Briedenhann, and the editing team for realising the vision.

The need for a corporate video had been identified some time ago, especially in view of the number of foreign visitors to the PRF. The first quo­tation has been approved and the PRF trusts that the corporate video will see the light early next year.

A significant amount of time has been spent tracing former bursary recipients thereby allowing the PRF to maintain contact with students who have completed their studies with financial assistance from the PRF. In the process, guidelines for awarding bursaries and project applications, including all commensurate aspects, were revised and updated.

Pamphlets about the crops that affect the PRF are updated regularly and the information is available, with significant volumes of associated information, on the PRF website.

The PRF wishes to refer to three standing items on the Board's meeting agenda. Firstly, the PRF compliments the Crop Estimates Committee be­cause this committee always manages to implement new initiatives to keep the figures it publishes interesting and stimulating. Secondly, the PRF expresses considerable gratitude to SAGIS because it plays such an important role in crop production, and because of its willingness to assist and provide information. Thirdly, the PRF acknowledges the work done by Dr Lourens Du Plessis in publishing his quarterly reports on the biofuel in­dus­try and related matters. Unfortunately it seems as if the RSA missed the biofuel bus and, as a consequence, it was decided to cancel these very very informative reports after the first quarter of 2016, due to a lack of progress in this sector. Another industry that suffers under severe pressure is the broiler chicken industry. The PRF has no doubt that the chaotic situation in that industry will continue for an extended period before re-establishing stability. We wish this very important and comprehensive industry a speedy recovery.