Johannesburg - For table grape farmers in the Western Cape, who were faced with substantial increases in labour costs as well as widespread protest-related disruptions, last year turned out to be an “extraordinarily good” year for them.
Unlike many other agricultural sectors across the country, where weather conditions and the weak rand had mixed consequences, for most of the grape farmers in the Western Cape the 52 percent hike in the minimum wage to R105 a day was easily absorbed by a coincidence of three positive factors – good volume crops, good quality crops and, thanks to the weak rand, good prices.
Ernst Janovsky, the head of Absa AgriBusiness, told Business Report that last year there was “a triple whammy” for the table grape farmers who export large portions of their crop.
“The weakening exchange rate meant they received a good price and the crop was high in terms of both quality and quantity,” he said.
This meant that last year table grape farmers in the Western Cape were able to build up their depleted bank deposits. Wine farmers in the Cape also benefited from the same coincidence of factors.
However, although the renewed plunge in the rand will help the farmers again this year, they will not get a repeat of last year’s strong conditions.
“Price-wise things continue to look strong but last November’s rain and hail has adversely affected the quality and quantity of this year’s grape crop,” Janovsky said.
In addition, as with farmers across the country, Cape grape farmers are facing a 6 percent increase in labour costs with effect from next month. This increase is expected to see a continuation of the reduction in the employment of unskilled farm labour across the country.
For the country’s citrus farmers, the benefits from the weaker rand may be countered by the EU’s decision regarding a possible ban on citrus imports from South Africa because of incidences of black spot. The EU, which takes about 40 percent of the local citrus crop, is expected to announce its decision this month.
The weak rand has not been all good news for South African farmers. The impact depends on the product being farmed and where it is being farmed.
Jan van Zyl, the head of agricultural information and marketing at FNB, points out that the weaker exchange rate will only benefit the exported portion of some sectors.
“Where commodities are priced in dollars such as maize, this will boost the import parity price. However, the actual market price will depend on the domestic ‘over or under’ supply situation,” Van Zyl said.
He noted that higher wages had added to the burden of increasing farm production costs and further reduced margins.
“Depending on the size of specific farming enterprises and the enterprise type, farmers are dealing with increased labour costs as best they can, and as appropriate to their specific situation,” Van Zyl said.
He noted that most farmers saw their input costs increasing at a faster rate than the prices they achieved for their output. The cost of oil, fuel, fertilisers, plastics, equipment and transport have all risen as a result of the weakening rand.
Nedbank agricultural economist John Hudson said poultry producers, who face higher feed costs, were hoping to see some relief from a combination of the increased import tariffs secured late last year and the weaker rand, but he noted that because the tariff increase did not apply across the board it was difficult to work out the net impact. Poultry imports from the EU were expected to fall but it was unclear what would happen to imports from Brazil.
Similarly, local sugar producers will have to see what happens to global output before determining the extent of the benefit from a weaker rand.
“Our farm sector is one of the most deregulated in the world; over the years it has learnt to adjust to cost-price pressures by increasing the level of efficiency and the size of farms,” Hudson said. - Business Report