Johannesburg - South Africa's agricultural sector is buckling under the strain of balancing domestic supply and demand for food crops, according to a Standard Bank agricultural overview.
The report, delivered last week at the Nampo agricultural trade show in Bothaville, Free State, highlights the country's agricultural situation in the face of increasing worldwide demand for food and high prices.
According to the report, worldwide consumption of maize was expected to increase to a record 772 million tons this year, due to a spike in feed use and biofuel production.
However, good rains in South Africa ensured a bumper maize crop to meet local demand of 9 million tons. The report warns farmers against farming more maize as this would result in lower prices.
Marthinus Loock, Standard Bank's senior manager of agribusiness support, said no nation had achieved economic growth and improved prosperity without building a profitable agricultural sector.
To cope with the changing economic climate, farmers must look at increasing the extent of their land to spread the overhead costs over a larger unit, or intensify production, Loock added.
The Free State and the Western Cape accounted for 72.05 percent of the estimated total production of wheat for the current and previous years.
About 632 000ha were currently planted with wheat, a 51 percent decrease since 1997.
The decrease was a result of producers downscaling or discontinuing production as input cost inflation outpaced prices, despite significant increases.
The report estimates wheat imports at 1.5 million tons for the 2007/08 season, while exports are estimated at 192 000 tons, a 9 percent decrease from the previous season.
As South Africa depends on imports to balance supply and demand, prices can be expected to be closer to import parity than export parity, the overview says.
Brazil is expected to remain the world's largest beef supplier, with 2.6 million tons of exports forecast for this year. Australian and Argentinian beef exports are expected to decline by 5 percent and 11 percent, respectively.
The report says South Africa is becoming more reliant on lamb and mutton imports from Australia and New Zealand, which results in high price increases for meat.
The total imports of sheep meat amounted to close to 50 000 tons last year, compared with 40 000 tons in 2006.
The report attributes the declining numbers of sheep herds in the country to theft and early drought in some sheep farming areas.
Loock admitted that the industry was still facing challenges, such as the implementation of black economic empowerment.
"The current spate of price increases has impacted significantly on input costs in agriculture," said Loock. "Partnership agreements with agencies such as Khula Enterprise Finance, the French Development Agency and the Small Enterprise Development Agency are well positioned to assist farmers transform their business. Smaller and emerging farmers can still remain viable."
The Nampo exhibition, which is organised by Grain SA, is the largest agricultural machinery and livestock show in the southern hemisphere, attracting more than 500 exhibitors from major farming countries. It was scheduled to finish yesterday.