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February 16, 2010

Wheat farming declines in South Africa, Zimbabwe

Wheat growing is being reduced in Southern Africa by low prices, which are deterring South African farmers and, in Zimbabwe, by the economic paralysis which has dried up farm credit.

Wheat production in Zimbabwe, once termed the region's breadbasket, has fallen to 18,000 tonnes in 2009-10, a fraction of the 300,000 tonnes or so the country produced a decade before and low even by the standards of the country's recent tumultuous political and economic period.

The decline reflected a liquidity squeeze prompted by the country's switch, in the face of hyperinflation, from the Zimbabwe dollar to legalising use of a number of foreign currencies, US Department of Agriculture's staff said.

"A large proportion of wheat famers failed to secure funding for production," a report from the USDA's Pretoria bureau said, noting that farmers bought only a small portion of the 6,000 tonnes of seed wheat available for planting.

Zimbabwe wheat dynamics 2009-10
(year-on-year change)

Area harvested: 10,000 hectares (+1.1%)

Production: 18,000 tonnes (-53%)

Imports: 200,000 tonnes (+14.3%)

Consumption: 238,000 tonnes (-8.5%)

Year-end stocks: 80,000 tonnes (-20%)

Source: USDA attache report

"Financial institutions could only offer short-term - predominantly 30-90 day - credit at high interest rates that was unsuitable for agricultural projects."

Meanwhile, the risk of power cuts deterred farmers relying on irrigation for healthy crops.

The decline leaves Zimbabwe's wheat crop below both a government target of 100,000 tonnes and domestic requirements for 238,000 tonnes.

"Wheat imports in the region of 200,000 tonnes will have to be made in order to meet national requirements," the report said.

Wheat production in South Africa too is in the grips of a 20-year decline, blamed on low prices which have prompted farmers to switch to rapeseed, oats or livestock.

South Africa wheat dynamics 2010-11 (year-on-year change)

Area harvested: 600,000 hctrs (-7.4%)

Production: 1.80m tonnes (-7.5%)

Imports: 1.60m tonnes (-14.3%)

Consumption: 3.07m tonnes (+3.0%)

Year-end stocks: 673,000 tonnes (-2.9%)

Source: USDA attache report

Wheat plantings for 2010-11 are expected to fall to 600,000 hectares, the lowest for at least 40 years and one-third of the annual area sown in the 1970s and 1980s.

"Farmers argue that they cannot continue to produce wheat in South Africa profitably anymore, and are even asking for subsidies," the bureau said. "However, the farmers' arguments are considered weak when compared to the low-income status of the majority of South Africans, for whom bread is an important food source."

South Africa, which was self-sufficient in wheat until late 1980s, looks on course to import 1.6m tonnes of wheat in the 2010-11 year, which starts in October.

"The decrease in the wheat price and the improvement in the disposable income of households due to the improvement of economic conditions will increase the demand for wheat products," the report said.

Agrimoney

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