4.   Sources of protein

4.1   International

Global environment

World compound feed production manufactured in 32 241 feed mills in 131 countries increased by 1.6% in 2015 to 995.57 million tons compound feed, which includes on farm mixing estimated at 300 million tons.

Poultry feed continues to dominate the market with an annual 3,2% growth rate and a 47% market share of global feed production.

China at 180 million tons remains the number 1 feed producing country with the USA at 174 million tons closely behind. Brazil at 69 million tons fills the 3rd position. South Africa is ranked 22 in global feed production volumes.

The trend is for the number of feed mills to decrease while feed volume continued to increase indicating a consolidation to capitalize on economies of scale.

The production of the main raw materials for animal feed namely maize and soybeans remained at high levels and this trend is expected to continue. Global maize production reached levels of 969 million tons in 2015-2016 but is expected to increase in 2016/17 to over a billion tons.

The production of soybeans in 2015-2016 is forecast at 312 million tons down from 320 million tons in the previous year. Production in 2016-2017 is expected to increase, global consumption is however also likely to increase to as much as 324 million tons which could cause a slight firming in prices.

South Africa

The business environment in 2016 was extremely difficult for the grain and oilseed sector with ramifications filtering through to the feed industry, the severe drought caused by El Niño resulting in very low crop productions. The two main ingredients of the feed industry namely maize and soybeans increased dramatically in price due to the shift in supply and demand dynamics. Increases in import volumes of soybeans, soybean meal and maize resulted in prices considerably higher than the previous year. The feed industries volumes also came under threat with the implementation of the African Growth and Opportunity Act (AGOA) requiring 65 000 tons to enter South Africa duty free in addition to the escalating duty-free volume entering South Africa from Europe.

Imported poultry meat was 560 155 tons for 2016 as compared to 2015: an increase of 17% year on year, negatively affecting local poultry production requirements with consequent reductions in feed production.

Feed volumes reported by Animal Feed Manufacturers Association (AFMA) was down year on year in December by 5.3%, extrapolated to end of March 2017 this would result in an annual feed production of 6.6 million tons compared to 6.9 million tons for 2015-2026, which would reflect a 4.3% reduction year on year. National feed production is expected to decrease by over 5% year on year. The updated national feed consumption figures will be available last half 2017.

Maize consumption in animal feed decreased up to April 2017 to 5 million tons from 5,52 million tons the previous year: a decrease of 10,4% (SAGIS).

Oilcake consumption for AFMA members has decreased from 1.044 to 1.008 million tons from December 2015-2016 to December 2016-2017. Soybean meal consumption likewise decreased from 708 thousand to 687 thousand tons, a decrease of 3%.

4.2   Local protein production

4.2.1   General

For several decades plant protein remains the largest source of animal feed protein in South Africa. Sunflower remained a mainstay for many years, while soybeans now fill the same scope as sunflower. During the past year the record soybean harvest of 1,3 million tonnes surpassed the best sunflower harvest ever for the very first time. Based on yield per hectare, sunflower remains in a better position than soybeans. Cotton and canola complement these well, while fish meal is used only where truly necessary, mainly due to price.

4.2.2   Soybeans

The soybean industry experienced three extreme years (see Graph 1). In 2014/15 soybeans were produced on 687 300 hectares, then the largest area ever in South Africa. Production was more than one million tonnes for the first time ever (1 070 000 tonnes). That year was followed by an abnormally dry year, resulting in a yield of only 742 000 tonnes. Then, in 2016/17, all previous records were broken with a harvest of 1 316 370 tonnes produced on 573 950 hectares. That is a yield of 2,29 tonnes per hectare, the highest yield ever. The only other time where the average yield per hectare exceeded 2 tonnes per hectare, was 2,17 tonnes per hectare in 2008/09 (see Graph 2).

The relationship between soybeans and maize planted as rotation crops provide a good indication of the potential expansion of soya production per specific region. The PRF feels that the first objective should be a 70:30 ratio (see Figure 3). This figure provides a good indication of the current position, both per province and for South Africa as a whole. Although KwaZulu-Natal and Mpumalanga can handle expansion, the biggest potential remains in the Free State and North West Province. An increase from 17% to 34% in the Free State implies doubling the hectares and tonnage, requiring an additional 240 000 hectares and 500 000 tonnes soybeans. If the current 82:18 ratio (2017) were increased to 70:30, it will mean a production of 956 666 hectares soybeans. However, the North West Province attracts most attention and after the success achieved over the past year, we expect a significant expansion of soybean planting in the North West Province (see Figure 3).

Weigh & Win Competition

This maize and soya competition was presented and managed by Du Pont/Pioneer in the summer rainfall area. It was supported and strengthened by the participation of John Deere, Syngenta, Sanlam, Santam, First National Bank and Senter 360. It was also supported by the PRF.

In spite of an extremely dry year (driest in 93 years) in South Africa, various producers participated in the competition. For soybeans there were four (4) categories and large prizes.

The soybeans winners were:

This competition encourages producers to think innovatively to achieve the highest yield per hectare.

The competition will be continued in 2017/18.

4.2.3   Canola

Introduction

The 2016 canola production season was marked by insecurities, expectations and a "grand finale" for the Western and Southern Cape regions. It certainly was a year that showed and reconfirmed canola's ability to recover from extreme drought conditions. The highlight was the highest average yield ever of 1,82 tonnes per hectare for the Southern Cape and 1,71 tonnes per hectare for the Swartland. It brought the total delivered tonnes to 105 460 tonnes.

Plantings

The 2016 canola planting was lower than that of the 2015 season, mainly due to the increased demand for barley in the Southern Cape area and uncertain rainfall in the Swartland. A total of 68 075 hectares was planted, compared to the 78 050 hectares of 2015. A comparison of the rainfall figures for the two areas confirm the exceptional canola ability to survive drought conditions and recover sufficiently to deliver record yields. Figures 2 and 3 respectively show the rainfall figures for Langgewens and Tygerhoek. Irrespective of good rainfall in March and April, which ensured good planting conditions and establishment opportunities between 1 May and 8 June, very little rainfall occurred. The canola survived these conditions and recovered extremely well.

Cultivar evaluation and seed yield results

The information for Swartland and Rûens in 2016 confirms the exceptional yields achieved.

The variety of highly competitive cultivars, conventional, TT (Triazine Tolerant) and CL (Clearfield) made available to producers, was a milestone for the PRF. It improved relationships built with institutions in Australia, Europe and Canada. It also produced the desired results. South African producers certainly no longer depend on second best cultivars.

The competitive yields of the TT and particularly the CL cultivars, including the conventional cultivars were particularly noticeable. Focus is definitely on CL hybrid cultivars, not only for better yield ability, but also for better vitality and weed control characteristics.

Roundup Ready cultivars will no doubt be capable of playing a significant role, particularly in the Swartland where the management of herbicide resistant rye grass is fast becoming an increasing problem.

Seed availability

The availability of sufficient seed of the best achieving cultivars no longer seems to be such a big problem. Seed orders are and remain a challenge for the seed companies as orders need to be placed at least a year in advance. Canola assumed its rightful place as cash rotation crop at the most canola producing farms. For those farmers advance seed orders are no longer a big problem.

Disease management

Producers are continuously informed of disease control through articles and Canola Focus. Producers are being informed of the use of cultivars with good black stem resistance. It did not seem to be a big problem in 2016.

The management and control of Sclerotinia are significant factors that contribute to yield reduction. Spraying the crop with Prosaro is done prophylactically and a follow-up spraying is determined by climate/rainfall. Various articles were published in the media and Canola Focus. Producers are also informed during training discussions with chemical representatives. Sclerotinia training is a focus area of the Canola Planning Committee and it remains a huge challenge.

Canola Symposium – 2016

The Canola Symposium held on 19 July 2016 at Agri Mega in Bredasdorp and on 20 July 2016 at Kronenburg, Paarl, were the canola highlights of 2016. The complete programmeand all papers are available here. The presentations were excellent, educational and provided guidelines. All role players submitted positive comments.

Technology transfer and training

Six issues of Canola Focus were published in 2016, each containing articles and information relevant to successful canola growing. This work handled by Prof André Agenbag, Messrs Piet Lombard, Jannie Bruwer and Ms Izane Leygonie is invaluable for canola producers.

Various articles appeared in Landbouweekblad, Landbou Burger and other popular media publications. These publications are used very successfully to address current issues that may affect production. Prof André Agenbag's articles on fertilisation and surface fertilisation for canola, Mr Chris Cumming's articles on weed control and Sclerotinia control are but a few examples of the information in Canola Focus. The results achieved with canola production follow sustained education, training and the distribution of information.

The training and relationships with chemical representatives is of critical importance and in 2016 a training opportunity was arranged for the Southern Cape. The interest and attendance was very positive, with lively interaction.

Canola in the summer rainfall area

The PRF started official canola trials in the summer rainfall area. The localities, Groblersdal and Beestekraal were selected for this new action.

The trials involve four cultivars and three planting dates under irrigation. These are handled by Mr Willie Jonker (PRF contractor). The four cultivars are the best chosen from a previous cultivar trial planted as pilot trial. The cultivars cover different growing season durations (one short growing season, two medium to short growing seasons and one medium growing season). The planting dates represent a planting window that could fit the current crop production system.

In the 2016/17 season a high yield of 5,8 tonnes/ha was achieved and the 2017/18 season promises even better yields.

If these trials are successful, it could lead to new crop choices for producers and it could contribute largely to a higher income per hectare.

The results of the canola yield competition are included under projects mentioned elsewhere in this report.

4.2.4   Sunflower

Last year's research report indicated that sunflower is a crop with a yield increase or decrease that depends on climate conditions. The past two years are typical examples of this trend. In 2015/16, 755 000 tonnes sunflower was produced on 718 000 hectares, while 2016/17 was a good year that followed the previous averages and 874 595 tonnes were produced on 635 750 hectares. It is shown in Graph 1. The same graph shows that there was very little deviation in the yield averages for the previous five years and 10 years. This is also clear from Figure 2 that shows yield per hectare over several years.

The Free State remains the province with the larges area planted under sunflower, at about 400 000 hectares in 2015/16 and 330 000 hectares in 2016/17. In both cases more than 50% of the total area had been planted under sunflower. North West Province is in the second place, but no other province comes close to these two provinces, irrespective of surface or yield per hectare.

4.2.5   Other sources of protein

During 2016-2017 South African soybean production was 741 550 tons and sunflower seed 755 000 tons. The industry for the year ending February 2017 processed the local soybean crop plus the imported 271 098 tons, with 852 308 tons soybeans going to oilseeds crushing (average of 71 000 tons per month), 98 718 tons to full fat soya and 23 875 tons to human consumption.

Soybean prices for the year trended to import parity rather than export parity mainly due to drought affecting the soybean crop size. Crush margins for soybeans was extremely poor during 2016. The soybean crushing industry went through a difficult year. The large estimated soybean crop size of 1 340 370 tons for 2017-2018 will relieve this situation and healthy crush margins can be expected.

The South African feed industry except for one single feed milling company has embraced the quality of many local oilseed crushers, experiencing good results with soybean meal at a considerable discount to imported soybean meal. This scenario results in significant benefits to an ailing animal feed and poultry industry in South Africa.

The sunflower crushing industry crushed 695 470 tons for the year ending February 2017 (average of 58 000 tons per month average). Crush margins for sunflower were on average significantly better than soybeans. The large crop estimate of sunflower for 2017 of 821 970 tons will eliminate the requirement for sunflower oilcake imports as well as increase crush margins and lower sunflower oilcake prices to feed mills.

4.3   Oil Crushing Industry

4.3.1   Producers of full fat soya

The use of full-fat soya in the animal industry remains a given. The quantities vary from year to year, depending on the total availability of mainly protein sources. During the past year, 98 722 tonnes full-fat soy was produced, 18,9% less than the 121 763 tonnes produced for the corresponding previous period.

4.3.2   Oil Crushing Industry

Oilseed processors

During 2016/17 the South African soybean production was 741 550 tons and sunflower seed 755 000 tons. The industry processed for the year ending February 2017 the local soybean crop plus the imported 271 098 tons, 852 308 tons soybeans going to oilseeds crushing (average of 71 000 tons per month), 98 718 tons to full fat soya and 23 875 tons to human consumption.

Soybean prices for the year trended to import parity rather than export parity mainly due to drought affecting the soybean crop size, crush margin for soybeans was extremely poor during 2016. The soybean crushing industry went through a difficult year. The large estimated soybean crop size of 1 340 370 tons for 2017/18 will relieve this situation and healthy crush margins can be expected.

The South African feed industry except for one single feed milling company has embraced the quality of many local oilseed crushers, experiencing good results with soybean meal at a considerable discount to imported soybean meal. This scenario results in significant benefit to an ailing animal feed and poultry industry in South Africa.

The sunflower crushing industry crushed 695 470 tons for the year ending February 2017 (average of 58 000tons per month average). Crush margins for sunflower were on average significantly better than soybeans. The large crop estimate of sunflower for 2017 of 821 970 tons will eliminate the requirement for sunflower oilcake imports as well as increase crush margins and lower sunflower oilcake prices to feed mills.

4.4   Protein consumers

4.4.1   Animal feed manufacturers

World compound feed production manufactured in 32 241 feed mills in 131 countries increased by 1.6% in 2015 to 995.57 million tons compound feed, including on farm mixing this figure is estimated at 1.4 billion tons.

Poultry feed continues to dominate the market with an annual 3,2% growth rate and a 47% market share of global feed production.

China at 180 million tons remains the number 1 feed producing country with the USA at 174 million tons closely behind. Brazil at 69 million tons fills the 3rd position. South Africa is ranked 22 in global feed production volumes.

The trend is for the number of feed mills to decrease while feed volume continued to increase indicating a consolidation to capitalize on economies of scale.

The production of the main raw materials for animal feed namely maize, meat and soybeans remained at high levels and this trend is expected to continue. Global maize production reached levels of 969 million tons in 2015/16 but is expected to increase in 2016/17 to over a billion tons.

The production of soybeans in 2015/16 is forecast at 312 million tons down from 320 million tons in the previous year. Production in 2016/17 is expected to increase, global consumption is however also likely to increase to as much as 324 million tons which could cause a slight firming in prices.

South Africa

The business environment in 2016 was extremely difficult for the grain and oilseed sector with ramifications on filtering through to the feed industry. The severe drought caused by El Niño resulting in very low crop productions. The two main ingredients of the feed industry namely maize and soybeans increased dramatically in price due to the shift in supply and demand dynamics. Increases in import volumes of soybeans, soybean meal and maize resulted in price considerably higher than the previous year. The feed industries volumes also came under threat with the implementation of African Growth and Opportunity Act (AGOA)requiring 65 000 tons of chicken to enter South Africa duty free in addition to the escalating duty-free volume entering South Africa from Europe.

Imported poultry meat was 560 155 tons for 2016 as compared to 2015 an increase of 17% year on year. Negatively affecting local poultry production requirement and consequent reduction if feed production.

Feed volume reported by Animal Feed Manufacturers Association (AFMA) was down year on year in December by 5.3%, extrapolated to end of March 2017 this would result in an annual feed production of 6.6 million tons compared to 6.9 million tons for 2015/26, this would reflect a 4.3% reduction year on year. National feed production is expected to decrease by over 5% year on year. The updated national feed consumption figures will be available last half 2017.

Maize consumption in animal feed decreased up to April 2017 to 5 million tons from 5,52 million tons the previous year a decrease of 10,4% (SAGIS).

Oilcake consumption for AFMA members has decreased from 1.044 to 1.008 million tons from December 2015/16 to December 2016/17. Soybean meal consumption likewise decreased from 708 thousand to 687 thousand tons, a decrease of 3%.

4.4.2   Poultry, pigs and other consumers of protein

4.4.2.1   South African Poultry Association (SAPA)

Prof Gous reported that the local poultry industry is collapsing and that many negative factors were having a negative impact on the poultry industry. He said that the operational organisation was suffering in a difficult period. The Chief Executive Officer resigned from his position and the acting head struggles to cope. He mentioned that both Rainbow and Astral suspended their membership of the organisation.

4.4.2.2   Broiler Organisation

The South African Poultry Industry has had arguably the worst year in its history. Final import numbers for 2016 were 560 000 tonnes of poultry products, amounting to R5.5 billion, and 240 000 tonnes of bone-in portions, worth R3.6 billion. The total imports are 1.3 times the size of Astral, our largest broiler producer. As a result, RCL Foods (Rainbow Chicken Limited) had to close a third of its production facilities and retrench 1300 of its employees. Many of the smaller broiler producers who were selling non-specialised products have now exited the Industry also, leading to many more job losses.

It has been proven that the South African broiler industry can produce slaughtered whole broilers for less than most of the European countries, in spite of the higher cost of maize and soybeans paid by our producers. It is therefore not that we are less efficient in producing broilers, but that the EU countries are dumping unwanted meat on us. The imported meat is being sold at the same price, and higher, as that being charged by local producers, so not even the general public is benefiting from these imports.

The Poultry Industry worldwide has been in turmoil. Avian Influenza (AI, or Bird Flu) first made an appearance in Europe at the end of October 2016 and soon spread to 17 European countries. Compulsory culling of poultry first took place in Hungary, France and Ireland, and then Russia. Millions of birds have also been culled in Japan and China to try and prevent the spread of the disease. And then in the early part of 2017 four states in the US, including Georgia, reported outbreaks of AI. Brazil exports were also hit hard by a scandal involving the export of salmonella-contaminated meat as well as broiler meat containing pig heads, acid to hide the smell of rotten meat, and cardboard.

One wonders whether the imports of chicken meat into South Africa will continue if these countries cannot eradicate the disease; in which case the cost of broiler meat will soar given the decline in local broiler production.

Legislation to limit the amount of brine added to processed broilers to 15% placed a further burden on the Industry.

The situation in the poultry industry could have been very different had there been a concerted effort on the part of the industry to export chicken breasts to the rest of the world. The beef industry appears to have been successful in its export initiative, and the pork industry also is increasing the amount of meat being exported from South Africa.

Unlike the poultry industry, the pork industry has had a profitable year and this is likely to continue into 2017. Pork prices have increased as a result of a reduction in the number of pigs slaughtered (from about 240 000 pigs in November 2015 to about 215 000 in October 2016) and the reduced cost of maize and soya has resulted in lower feed prices. High beef prices have enabled pork prices to remain high, and this situation is likely to continue whilst the cattle herd is being rebuilt after the drought experienced over the past three years. Internationally the price of pork fell during the year, but because of the weaker Rand the amount of pork imported into the country remained constant, and exports increased by 5% during the year.

4.4.2.3   South African Pork Producers Association (SAPPA)

In contrast with the poultry industry, the pork industry had a profitable year that is likely to continue in 2017. Pork prices increased due to the reduction in the number of slaughtered pigs (about 240 000 in November 2015 to about 215 000). The lower maize and soybean prices also gave rise to lower feed prices. Higher beef prices helped to keep the pork price high and this trend will probably continue while farmers re-establish their cattle herds after the drought of the past three years. The international pork price fell during the year, but due to the weaker rand value, the imported pork quantities remained constant, while exports increased by 5% during the year.

4.4.3   Human consumption

During 2016 the Marketing of Agricultural Products Act of 1996 (Act 47 of 1996) was amended. Statutory measures were implemented to enforce the submission of monthly production reports to SAGIS. The reports are required for oilseed production for both human and animal consumption. According to the SAGIS article entitled, "Soybean Flours and Meals / Textured Vegetable Protein", it is clear that the generally accepted number of just over 2 000 tonnes products per month that was mainly earmarked for the bakers' industry, really amounts to just more than 3 000 tonnes per month. As such it is safe to assume that soybean products for human consumption (excluding edible oil), is between 36 000 and 40 000 tonnes per year. The Oilseeds Advisory Committee (OAC) and the Oil and Protein Seeds Development Trust (OPDT) currently fund several projects to promote soybean products for human consumption.