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October 19, 2009

High costs, poor rain drive South African small scale cane growers off farms

by Samntha Enslin-Payne

Small sugar cane growers are finding it increasingly difficult to farm profitably due to rising input costs and a lack of rainfall, resulting in many abandoning cane production.

Gareth Groom, the regional manager in Zululand for the SA Cane Growers' Association, said the continued steady decline in small-scale grower production was a major concern for the sugar industry.

The Umfolozi region in Zululand in KwaZulu-Natal has been particularly hard hit as poor rainfall has compounded other problems.

Jackonia Mhlanga, a small grower farming in Umfolozi, said that farmers had stopped producing due to a lack of rain, but they "are willing to continue if the rain comes."

In this area the thousands of small farmers will, for example, jointly hire a tractor for ploughing, but by the time it reaches a farm their ground may be too dry to plant.

According to the SA Cane Growers' Association, in the Umfolozi region cane production from small-scale growers has more than halved over the past eight years to an estimated 142 846 tons in the 2008/09 season. In 2000/01 small farmers in this area produced over 400 000 tons of cane.

But it is not just farmers in Umfolozi that have seen production decline. Pongola has also seen a sharp decline, with production more than halving in just a year.

A small grower on average farms on 4.74 hectares and the majority do so on land owned by tribal authorities.

In total 1.73 million tons were harvested from small growers in South Africa in 2008/09 compared with 1.83 million tons the year before.

Cane production can have a positive socioeconomic benefit, injecting between R450 million and R600m into the economies of deep rural areas. This is particularly the case with sugar prices performing strongly.

The world sugar price surged to a 28-and-half-year high of 24.85 US cents (R1.82) a pound last month. This has been driven by demand substantially outstripping supply, due to crop failures in India and lower production in the EU, among other things.top.

World sugar demand will outpace supply by 6.9 million tons in the year to September 2010, according to Macquarie Bank, which means that sugar prices should remain firm. But small farmers may not see the benefit of high prices.

Groom said the decline in volumes from small farmers was a vicious circle as contractors who hauled cane to mills had increased their prices due to the lower volume of cane. The deteriorating condition of roads as well as the fact that some contractors use old equipment affects efficiency.

Fertliser prices have come down after rising sharply last year, but the levels remain relatively high.

This affects small farmers more than commercial growers, due to the volumes ordered in relation to the cost of transport, Groom said.

For example, the cost of transport for a small grower buying a few bags could be R10 extra a bag, but for a big farmer that places a large order the transport cost might only be an extra R1 a bag.

Mhlanga said the cost of transporting the fertiliser could even exceed the base cost of the fertiliser.

Another issue is that small farmers close to industrial areas battle to find labour. Although they do pay the minimum wage, industries often pay higher salaries. Groom said increases in social grants also meant that some people did not want to work.

In a bid to revitalise this sector, the sugar industry in 2006 launched the R22m a year Supplementary Payment Fund, which helps bolster the revenue stream for small growers.

This initiative gives small growers breathing space while they restructure their farming initiatives to benefit from economies of scale through consolidated farming projects.

Mhlanga said the cane growers programme was not sufficient as it had limited resources and the government should get involved in looking after the small farmers.

Business Report

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