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November 2015 Executive summary The Crop Estimates Committee (CEC) released figures for the intentions to plant summer crops for the 2015/16 production season. The total hectarage under maize is expected to decrease while that of oilseeds is expected to increase on a year-on-year (y/y) basis. In October 2015, the average monthly exchange rate was R13.51 to the United States (US) dollar. This was 0.89% stronger month-on-month (m/m) but still 22% weaker y/y. On 2 December 2015, the domestic price of petrol increased by only one cent while diesel decreased by four cents. If the rand had not weakened, fuel prices could have gone down by as much as 30 cents. The diesel price decrease will come as a relief to farmers during their field operations. In October 2015:

The average monthly prices of yellow and white maize, wheat, sunflower seed and soya beans were up m/m and y/y.

The price of lamb and most mutton classes went down on a monthly basis. The price of lamb and mutton traded mixed on a yearly basis.

The prices of beef and weaners showed mixed movements m/m, but they went up y/y.

There was an increase in the monthly price of porkers and baconers due to increasing demand towards the festive season and tighter supply. Both porker and baconer prices were down on a yearly basis.

In October 2015, vegetable prices showed the following movements:

Onions up m/m, down y/y.

Potatoes down m/m and y/y.

Tomatoes down m/m, up y/y.

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1 Weather forecast and dam levels Current conditions

Figure 1: Current rainfall conditions Source: National Agro-meteorological Committee, 2015 Figure 1 shows that in August 2015 rainfall was below normal countrywide. In September 2015, rainfall increased to above normal over the north-eastern and southern coastal areas of the country. For the period 11 to 20 October 2015, rainfall was below normal, with some patches of above normal rainfall in some parts of the country. From July 2015 to September 2015, rainfall was reportedly above normal over most of the country, with patches of near normal to below normal rainfall mainly in the Free State and the Northern Cape. The veld condition is generally poor in most areas while livestock condition ranges from reasonable to poor. The recent rainfall from mid-November 2015 is expected to slightly improve veld condition; however, more rainfall is urgently needed. Incidents of veld fires were reported in Gauteng and the Free State. Livestock mortality was reported in the Free State due to drought, in Mpumalanga due to plant poisoning and naval bot flies, and in the Eastern Cape due to suspected plant poisoning. Whitefly infestation on tomato and mortality in poultry due to Newcastle disease were reported in the Eastern Cape (National Agro-meteorological Committee, 2015).

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Rainfall forecast The rainfall forecast for November 2015 to March 2016 (Figure 2) shows chances of above normal rainfall in the north-eastern parts and below normal rainfall in the southern parts of the country for the beginning of summer. There is a high chance of below normal rainfall for mid and late summer countrywide (National Agro-meteorological Committee, 2015). Dam levels Table 1: Provincial dam levels

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Figure 2: Rainfall forecast – November 2015 to March 2016 Source: National Agro-meteorological Committee, 2015

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2 Exchange rates

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Figure 3: Rand–dollar exchange rate Source: Standard Bank Research, 2015 The rand came under renewed pressure from the prospects of a US Federal Reserve (Fed) interest rate hike. The renewed pressure on the rand came from reported growth in US job numbers which strengthened the case for the Fed to hike interest rates in December 2015. US job growth surged in October 2015 and the unemployment rate hit a seven and a half year low of 5% in a show of economic strength. The rand strengthened against the dollar on the morning of 20 November 2015 in the wake of a decision by the South African Reserve Bank (SARB) to raise the repo rate by 25 basis points to 6.25%. However the momentum only lasted a few days.

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Figure 4: Domestic prices of fertilizers Source: Grain SA, 2015c In October 2015, the international price for urea was R3 418 a ton, down 2.8% m/m and 8% y/y, while MAP was R3 850 a ton, down 2% m/m but up 15% y/y.

In October 2015, the average monthly exchange rate was R13.51 to the United States (US) dollar. This was 0.89% stronger m/m but still 22% weaker y/y. The rand has been under pressure and by 17 November 2015 the exchange rate was R14.08 to the US dollar; 4.2% weaker than the average for October 2015.

In November 2015, domestic fertilizer prices were generally stable with slight downward movement. This was from a combination of slight fluctuations in international fertilizer prices, lower oil prices, as well as exchange rate movements.

Mono-ammonium phosphate (MAP): R9 620 a ton; down 0.07% m/m but up 10% y/y.

Limestone ammonium nitrate (LAN): R5 627.50 a ton; up 0.01% m/m and 4.66% y/y.

Urea: R6 211.50 a ton; down 1.3% m/m and 2.96% y/y.

Potassium chloride: R7 222 a ton; down 0.76% m/m but up 1.87% y/y (Figure 4).

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3 Fuel

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Figure 5: Monthly Brent crude oil price Figure 6: Monthly fuel prices Source: The Star Business Report, 2015 Source: The Automobile Association of South

Africa, 2015 Both the Brent crude oil price and exchange rate movements influence the price of fuel. The domestic price of fuel went down on 4 November 2015 (petrol down 22 cents and diesel down 9 cents) mainly because of low international oil prices. On 2 December 2015, the domestic price of petrol increased by only one cent, while diesel decreased by four cents. If the rand had not weakened, fuel prices could have gone down by as much as 30 cents. The diesel price decrease will come as a relief to farmers during their field operations. Figures 5 and 6 show the average monthly prices of Brent crude oil and fuel respectively. On 4 November 2015, the price movements of fuel were as follows:

Petrol: o Reef – unleaded 95 cost R12.39 a litre, down 1.74% m/m and 5.85% y/y. o Coast – unleaded 95 cost R11.96 a litre, down 1.81% m/m and 6.2% y/y.

Diesel: o Reef – 0.05% cost R10.85 a litre, down 0.82% m/m and 8.44% y/y. o Coast – 0.05% cost R10.52 a litre, down 0.85% m/m and 8.92% y/y.

In November 2015, Brent crude oil cost USD47.17 a barrel, down 4.36% m/m and 40.76% y/y.

Most analysts expect international oil prices to remain low for the rest of the year and into 2016 as global production continues to outpace demand.

4 Electricity According to chief executive officer Brian Molefe, a plan to reform Eskom and provide more electricity to South Africa and its economy is starting to show results. The plan is known inter-nally as Tetris. He reported that the company has been following a strict maintenance programme to avoid managed blackouts, and will be asking the national energy regulator for more certainty on the tariffs it could charge over the next decade in order to strategize better in the long-term. He also highlighted that Eskom is accelerating its delayed programme to build generation capacity to avert load shedding. While Eskom imposed power cuts on about 100 days earlier in the year, there have been no significant blackouts in the past three months. Reliable electricity supply is necessary for agricultural activities like irrigation and cold storage of commodities amongst many others.

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5 Labour According to South Africa’s largest farm workers’ union, the Food and Allied Workers Union (Fawu), the prevailing drought conditions and water shortages have not filtered into clear signs of job losses in the agricultural sector. Fawu reported that it had not yet been widely consulted by employers on retrenchments in the sector, which directly employs 680 000 people.

6 Grains and oil seeds

On 27 October 2015, the Crop Estimates Committee (CEC) released figures for the intentions to plant summer crops for the 2015/16 production season (see Table 2): Table 2: Intentions to plant summer crops for the 2015/16 production season

Intentions Area planted Final estimate

2016 2015 2015

Ha Ha Tons

As at mid Oct

2015

As at 29 Sept

2015

(a) (b) (c)

White maize 1 421 800 1 448 050 4 702 700 -1.8%

Yellow maize 1 129 000 1 204 800 5 238 950 -6.3%

Total maize 2 550 800 2 652 850 9 941 650 -3.8%

Sunflower seed 614 000 576 000 660 900 6.6%

Soya beans 696 400 687 300 1 059 850 1.3%

Change

(a ÷ b)Commodity

Source: Crop Estimates Committee, 2015 Table 3 shows the price trends of yellow maize, white maize, wheat, soya beans and sunflower seed on the Johannesburg Stock Exchange (JSE) Commodity Derivatives Market (Safex) in October 2015. Table 3: Monthly price movements in grain and oil seeds

Yellow maize 1 902.09R 2 857.82R 2 873.41R 0.5% 51.1%

White maize 1 881.87R 3 116.73R 3 139.76R 0.7% 66.8%

Soya beans 5 183.48R 5 371.00R 5 530.50R 3.0% 6.7%

Wheat 3 606.13R 4 154.09R 4 154.86R 0.02% 15.2%

Sunflower seed 4 666.00R 6 050.86R 6 572.09R 8.6% 40.9%

Change (y/y)Change (m/m)

Average SAFEX

spot pricesRand/ton

Commodity Category Units Sep 2015 Oct 2015Oct 2014

Source: Grain SA, 2015a Table 4 shows the price trends of commodity futures as at 20 November 2015.

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Table 4: JSE commodity futures prices per ton

Commodity Nov 2015 Dec 2015 Jan 2016 Mar 2016 May 2016 Jul 2016 Sep 2016 Jul 2017

White maize R 3 220 R 3 203 R 3 192 R 3 135 R 2 955 R 2 905 R 2 934 R 2 729

Yellow maize R 3 214 R 3 230 R 3 244 R 3 267 R 3 172 R 3 127 R 3 138 R 2 863

Wheat R 4 381 R 4 408 R 4 465 R 4 526 R 4 561 R 4 585 R 4 335 NA

Sunflower seed R 6 687 R 6 642 R 6 630 R 6 558 R 5 820 R 5 925 R 5 986 NA

Soya beans R 5 925 R 5 840 R 5 808 R 5 640 R 5 370 R 5 445 R 5 506 NA

JSE futures prices per ton as at 20 November 2015

Source: Grain SA, 2015b Maize

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Figure 7: Yellow maize monthly prices Figure 8: White maize monthly prices The average price trends (per ton) of yellow maize and white maize are shown in Table 3. Domestic maize prices up Domestic maize prices have maintained an upward trend because of:

concerns that El Niño will negatively affect maize production for the 2016/17 marketing year;

high import parity prices;

a weaker rand; and

South African Grain Information Service (SAGIS) reported South Africa’s intentions to plant maize at 2.551 million hectares, down 3.8% y/y.

Weather The eastern and north-eastern parts of the country received some beneficial rainfall towards the end of November 2015, with most of the eastern growing areas getting some much needed rainfall that commenced planting. The central and western summer grain areas are still in need of rainfall, but the western growing areas still have a bit of time before the planting season ends. The current weather forecasts could continue to provide some support to new crop prices. Domestic maize exports South African maize export figures for the week ending 20 November 2015 showed that 13 529 tons of maize were exported. This consisted of 8 986 tons of white maize and 4 543 tons of yellow maize. This brings the total maize exports for the season to date to 352 790 tons: 225 792 tons of white maize and 126 998 tons of yellow maize. The total maize imports for the season to date are 468 559 tons. 18 903 tons of yellow maize were imported in the same week (Unigrain, 2015).

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International maize prices Ample global maize stocks pressure prices International maize prices have generally been under pressure due to ample supplies and low buying and selling interest. The latest International Grains Council (IGC) maize production estimate was 967 million tons, down 3 million tons m/m (but supplies are still ample). A higher maize production estimate in the US is expected to get offset by drought-related reductions in Ethiopia, South Africa and China. US maize harvest complete International maize prices are not expected to rise much due to a stronger US dollar and from the US maize harvest pressure. The harvesting of US maize has been completed and US and world maize stocks are at elevated levels. As a result, US producers are not eager to sell their crops at the current market low prices which is expected to support the cash market for maize. The export progress of maize to date is running behind the average for this time of the year and the strength of the dollar is making US maize even less competitive. Maize outlook There has also been weakness in the US wheat market, and this is also expected to limit buying interest in maize from a spill-over effect and from the competition between the commodities in the feed market. Due to the completion of the US maize harvest, some of the world maize market attention will turn towards the South American maize crop with the growing season ahead. The South American weather conditions have been favourable up to 23 November 2015, which could keep downward pressure on prices. Wheat

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Figure 9: Wheat average monthly prices Domestic wheat prices up Wheat prices maintained an increasing trend as the weaker rand made inbound shipments more expensive for South Africa, which is a net importer of wheat. The CEC’s third winter grains production forecast also contributed to higher prices. Production was estimated at 1.542 million tons, down 11.9% y/y. The CEC’s fourth winter grains production forecast reported even lower production, estimated at 1.505 million tons, down 14% y/y (Table 3). Hence, prices are expected to remain high for the remainder of the 2015.

The average monthly price trends (per ton) of wheat are shown in Table 3.

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Table 5: Wheat area planted and fourth production forecast for 2015/16 Commodity Area planted Fourth forecast Third forecast Area planted Final crop

2015 2015 2015 2014 2014

Ha Tons Tons Ha Tons

(a) (b) (c ) (d) (e)

Wheat 482 150 1 505 290 1 542 350 476 570 1 750 000 -13.98% -2.40%

Y/y

production

change

(b ÷ e)

Change in

production

forecast

(b ÷ c)

Source: Crop Estimates Committee, 2015 International wheat prices lower US wheat prices have generally been under pressure as a result of a lack of buying interest for US wheat and this is being worsened by the stronger US dollar. Another factor that is limiting buying interest is that US winter wheat crop conditions have been improving, and more moisture is expected which should be beneficial for the US winter wheat crop going forward. This is expected to keep prices under pressure. Soya beans

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Figure 10: Soya bean average prices Domestic soya bean prices up In October 2015, domestic soya bean prices maintained an upward trend because of a weaker rand, which makes imported soya bean meal more expensive. Prices have been going up due to good buying interest and high parity prices. International soya bean prices down In 2015/16 world soya bean production is estimated at a record 321 million tons. Even though total crushing is expected to increase, it will still be below production levels, thus leading to a further accumulation of world stocks which will keep international prices under pressure. Although Chinese buying of US soya beans picked up and there were some drought-induced planting delays in South America, price support did not last long as the weather improved in South America. The rapid progress of the US harvest and record high yields has also been keeping prices under pressure. The USDA forecasts US soya bean production at 108.35 million tons, up 1.4% y/y. Over the next few months, the recent high US soya bean exports are likely to decrease as the interest of importers shifts towards the South American soya bean crop.

The average monthly price trends (per ton) of soya beans are shown in Table 3.

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Sunflower seed

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Figure 11: Sunflower seed monthly prices Domestic sunflower seed prices up In October 2015, domestic sunflower seed prices maintained an upward trend because of a weakening rand and concerns about availability. Also, SAGIS data showed that demand as at 30 October 2015 was 717 700 tons, up 2.3% from 5 October 2015. On 30 October 2015, ending stocks at 28 February 2015 were reported at 66 127 tons, down 19.5% m/m. Prices are expected to continue an upward trend because of low domestic stocks and increased demand. International sunflower seed prices remain high World sunflower seed production for 2015/16 is estimated at 39.69 million tons, down 0.75% y/y because increases currently expected for Ukraine and Russia will be offset by smaller crops in the EU and Turkey. This will limit any increase in crushing of sunflower seed in the 2015/2016 season, considering that little surplus stocks were carried over from last season. This is expected to keep prices high for the remainder of 2015. EU sunflower seed production will decline sharply in France, Bulgaria, Romania and Spain. Overall, the total crop in the EU is estimated at 7.75 million tons, 13.2% below last year.

The average monthly price trends (per ton) of sunflower seed are shown in Table 3.

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7 Livestock

Tables 6 to 8 show red meat and dairy price trends in October 2015. Table 6: Monthly price movements in lamb and mutton

Average price

Oct 2014 Sep 2015 Oct 2015

Class A2/A3 53.97R 56.13R 53.00R -5.6% -1.8%

Class AB2/AB3 47.37R 48.96R 46.83R -4.3% -1.1%

Class B2/B3 39.25R 43.04R 43.10R 0.1% 9.8%

Class C2/C3 39.28R 42.75R 42.10R -1.5% 7.2%

Lamb (R/kg)

Commodity Category UnitsChange

(m/m)Change (y/y)

Table 7: Monthly price movements in beef, weaners and dairy

Average price

Oct 2014 Sep 2015 Oct 2015

Class A2/A3 33.31R 34.98R 34.78R -0.6% 4.4%

Class AB2/AB3 30.77R 33.21R 33.19R -0.04% 7.9%

Class B2/B3 28.31R 30.10R 30.45R 1.2% 7.6%

Class C2/C3 26.67R 28.34R 28.89R 1.9% 8.3%

Weaner calf 20.48R 20.10R 20.11R 0.05% -1.8%

Dairy Class 1 (R/L) 4.35R 3.80R 3.70R -2.6% -14.9%

Beef

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(R/kg)

Table 8: Monthly price movements in pork products

Average price

Oct 2014 Sep 2015 Oct 2015

Porker 23.18R 22.29R 22.62R 1.5% -2.4%

Baconer 21.81R 20.97R 21.48R 2.4% -1.5%(R/kg)Pork

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The average monthly price trends (per kg) of lamb and mutton are shown in Table 6.

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Lamb and mutton prices will move sideways or decrease In October 2015, the price of lamb and most mutton classes went down on a monthly basis. The price of lamb and mutton traded mixed on a yearly basis. According to the Red Meat Levy Admin (2015), the total number of sheep slaughtered was 441 274, up 3.3% m/m, possibly because of the El Niño induced drought, which is affecting veld quality, but total slaughter was down 14.2% y/y. The ongoing drought is expected to undermine flock-rebuilding efforts from an increased slaughter of sheep. An expected short-term increase in supply over the next few weeks and gradually increasing market demand towards the festive season means the prices of lamb and mutton will decrease or move sideways over the next few weeks. The rand is expected to depreciate further against the Australian dollar, so the import parity price of sheep meat should increase over the next months. In October 2015, the import parity price of lamb from Australia was R66.46, up by 0.2% y/y and the price of mutton was R38.85, down by 13% y/y. In August 2015, South Africa imported 1 734 tons of mutton and lamb from Namibia (including live sheep), which was 60.7% more y/y. In August 2015, a total of 335 tons of mutton was imported from overseas, which was 61.8% more y/y. Beef

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Figure 13: Average monthly beef prices Source: RMAA, 2015 Beef and weaner prices to decrease or move sideways In October 2015, the prices of beef and weaners showed mixed movements m/m, but they went up y/y. According to the Red Meat Levy Admin (2015), the total number of cattle slaughtered was 250 248, up 5.3% m/m and 3.3% y/y due to the ongoing drought. An expected increase in supply as farmers destock due to drought, along with picking demand towards the festive season is expected to cause the prices of beef to decrease or move sideways for the rest of 2015. Weaner prices are also expected to decrease or move sideways as demand for weaners is not expected to increase much because of the drought. In October 2015, the derived import parity price of cow meat from Australia was R68.39 per kg, 43.4% higher y/y. This is in comparison to domestic beef class C2/C3, which was 8.3% higher y/y, at R28.89 a kg.

The average monthly price trends (per kg) of beef and weaners are shown in Table 7.

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Figure 14: Beef-to-maize price ratio Pork

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Jul-

13

Sep

-13

No

v-13

Jan-

14

Mar

-14

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-14

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14

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-14

No

v-14

Jan-

15

Mar

-15

May

-15

Jul-

15

Sep

-15

No

v-15

Ran

d/k

g

Porker Baconer

Figure 15: Average pork prices Source: RMAA, 2015 Pork prices to increase In October 2015, there was an increase in the monthly price of porkers and baconers due to increasing demand towards the festive season and tighter supply. Both porker and baconer prices were down on a yearly basis. According to the Red Meat Levy Admin (2015), the total number of pigs slaughtered in October 2015 was 212 229, down 4% m/m and 6.7% y/y. For the rest of 2015, the prices of pork are expected to increase due to tighter supply and growing demand towards the festive season. In October 2015, the derived import parity price of US barrows and gilts went down by 13.1% y/y. In comparison, in South Africa the average producer price of porkers went down by 2.4% y/y, to R22.62 a kg. The average producer price of baconers went down by 1.5% y/y, to R21.48 a kg.

The average monthly porker and baconer price trends (per kg) are displayed in Table 8.

Beef-to-maize price ratio In October 2015, the beef-to-maize price ratio was 12.10:1, weaker by 1.1% m/m and 17.5% weaker than the long-term average of 14.68:1. The ratio fell below the long-term average in February 2015 and it has been decreasing ever since. This is a concern for the beef feedlot industry.

15

Dairy

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Figure 16: Average monthly milk prices Source: Milk Producers Organisation, 2015 Milk producer prices down due to oversupply The drop in the milk producer price in October 2015 is a result of milk production being 9.5% higher in the first eight months of 2015. This is the highest level of milk production since 1983 and it has resulted in an oversupply since June 2015. Higher production, higher imports and lower exports caused the increase in total milk supply. From January 2015 to July 2015, total milk supply was 1.67 billion litres, 252 million litres more y/y (an increase in milk production of 152 million litres and decrease in net exports of 100 million litres).

0.00

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atio

Milk-to-Maize Price Ratio Long-term Avg Ratio

Figure 17: Milk-to-maize price ratio Fundamental factors to shape global dairy prices From February 2014 to August 2015, the Food and Agricultural Organisation (FAO) price index for dairy products decreased by 50.5% to reach a level in August 2015 lower than in the previous 72 months. This decrease of the FAO price index is the third major decrease in the last decade and the previous two major decreases were followed by major increases. The downward trend of the prices of dairy products in the international market has been the result of global supply outstripping demand. The downward trend was initially driven by high supply (production) in the world, but weak demand is lately also contributing to the imbalance between supply and demand in the international market

The average monthly milk producer price trends (per litre) are shown in Table 7.

Milk-to-maize price ratio In October 2015, the milk-to-maize price ratio was 1.29:1, weaker by 3.6% m/m and 29% weaker than the long-term average of 1.81:1. The ratio fell below the long-term average in June 2015 and it has been decreasing ever since. Higher feed prices and the falling milk producer price may result in slower production growth for the rest of 2015.

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From August 2015 to October 2015, the FAO price index increased by 14.7% to a level which is, however, still lower than the levels in the 69 month period from October 2009 to June 2015. The future prices achieved at the bi-monthly auctions of the Global Dairy Platform, increased strongly from 4 August 2015 to 6 October 2015, but the prices achieved at the auction on 20 October 2015 for delivery in the first months of 2016, are lower than the prices achieved at the auction of 6 October 2015. In addition, the prices achieved at the auction of 3 November 2015 for delivery in the first months of 2016, are lower than the prices achieved at the auction of 20 October 2015 The prices in the near future in the international market will be shaped by the fundamental factors, namely supply and demand. Available information shows decreased production in New Zealand and increased production in the EU, which are the major suppliers to the international market. On the demand side, demand from China, which is the major importer in the world, is not expected to increase strongly in the next few months.

8 Vegetables

Table 9 shows the price trends (per ton) and Table 10 total volumes traded (tons) in onions, potatoes and tomatoes. Table 9: Average monthly price movements in vegetables

Average price

Oct 2014 Sep 2015 Oct 2015

Onions R 2 537 2 182R 2 295R 5.2% -10%

Potatoes R 4 076 2 829R 2 694R -4.8% -34%

Tomatoes R 5 151 7 034R 6 603R -6.1% 28%

UnitsCommodityChange

(m/m)Change (y/y)

Rand/Ton

Table 10: Monthly volume movements in vegetables

Tons

Oct 2014 Sep 2015 Oct 2015

Onions 31 971 34 230 32 992 -3.6% 3.2%

Potatoes 95 986 102 782 114 207 11.1% 19.0%

Tomatoes 25 718 21 556 24 895 15.5% -3.2%

CommodityChange

(m/m)

Change

(y/y)

17

Onions

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Figure 18: Onion prices and volumes Source: Department of Agriculture, Forestry and Fisheries (DAFF), 2015 Potatoes

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Figure 19: Potato prices and volumes Source: DAFF, 2015 Tomatoes

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Figure 20: Tomato prices and volumes Source: DAFF, 2015

The average monthly price of onions is expected to move sideways or increase in the next few weeks due to slightly lower supply.

The average price of potatoes is expected to move sideways or increase in the next few weeks as supply goes down.

The average price of tomatoes is expected to increase in the next few weeks due to good demand.

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9 Other news and developments Economy Producer price inflation rises According to Statistics SA data, producer price inflation (PPI) was sharply higher y/y in October 2015 at 4.2% after a 3.6% y/y increase in September 2015. Analysts had expected a 3.8% y/y increase. The 4.2% y/y increase was the highest since December 2014 and reflected rising food prices mainly due to the drought. The PPI for finished manufactured goods increased 0.9% m/m in October 2015. Food products, beverages and tobacco products; wood and paper products; and metals, machinery, equipment and computing equipment were the main contributors to the annual rate of 4.2%. A weak rand makes food and metal imports more expensive. Weather Department of agriculture comes to the aid of subsistence farmers Provincial departments of agriculture across the country are reportedly coming to the aid of subsistence farmers affected by the nationwide drought. Funds are being made available for farmers in critically affected areas, strictly for the provision of fodder and water. Livestock associations and commodity organisations specialising in beef and dairy will benefit from a government subsidy which will result in subsistence farmers receiving 100% of the subsidy, while those in the ‘upper market’ will receive 20%. Economic development, tourism and environmental affairs Member of the Executive Council Mike Mabuyakhulu said the government subsidies were only aimed at subsistence farmers. They were not available for commercial farmers. The subsidy includes the drilling of boreholes where necessary, assistance in the purchasing of livestock and feed, and improved water distribution from the Jozini Dam to surrounding communities. Western Cape requests disaster status from government The Western Cape local government is planning to ask the government to classify the region’s water shortages as a disaster, which will enable farmers to apply for financial assistance. According to Anton Bredell, the minister of local government, environmental affairs and development planning, their assessment of the provincial water situation found that some district municipalities in the province were experiencing very dry and water-stressed conditions. International trade African Growth Opportunity Act update Around mid-November 2015, US embassy Economic Counsellor Laird Treiber reported that ‘significant’ progress had been made in narrowing the differences between South Africa and the US on the so-called ‘three meats’ issue. He was optimistic that the outstanding differences would be resolved before year-end and well ahead of the 4 January 2016, deadline. Treiber also concurred with South African Trade and Industry Minister Dr Rob Davies that the two countries were ‘tantalisingly close’ to addressing their outstanding differences on poultry, pork and beef. On 6 November 2015 Davies reported that South Africa would stick by its undertakings to improve market access for US chicken and that experts from the US and South Africa were making progress on the outstanding animal health issues. Treiber was speaking for the first time after President Barack Obama's 5 November 2015 announcement that the US would withdraw the Africa Growth and Opportunity Act (Agoa) benefits from South African agricultural exports from 5 January 2016, unless restrictions on the importation of the

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three meat products were eased. In 2014 about R2.5 billion worth of agricultural products were exported under Agoa. The two major exports were wine worth R580 million and fruit and vegetables worth R798 million. Russia and Turkey ties take a strain Russia began with trade retaliations against Turkey for downing one of its warplanes over Syria as President Vladimir Putin prepared to hold talks with French President Francois Hollande on combating Islamic State militants. Agricultural products from Turkey would be subjected to additional border checks and laboratory controls after 15% of goods were found to breach Russian requirements, Agriculture Minister Alexander Tkachev said in a statement on 26 November 2015. According to Tkachev, the clampdown followed complaints from customers and industry groups about ‘repeated violations of Russian standards by Turkish producers.’ Agribusiness Quantun Foods declares maiden dividend Agricultural commodities business Quantum Foods, which was unbundled from consumer brands giant Pioneer Foods in 2014, has declared a maiden dividend. Quantum Foods reported that revenue for the year to end-September 2015 was up just 2.4% to R3.5 billion. But a strong turnaround in its poultry and egg business saw operating profit up more than five-fold at R162 million. The feeds business pushed up operating profit 7.5% to R65 million, but the African businesses reported lower profit of R25 million (last year was R35 million). In an investment presentation, Quantum Chief Executive, Hennie Lourens said operating costs increased less than inflation due to focused cost control and efficiency improvements. He said the company also saw ‘good execution’ of price volume management. Headline earnings came in at 54 cents per share, covering the maiden dividend payout of 10 cents per share by a fairly conservative 5.4 times. Policy issues Minimum wage update Labour Minister, Mildred Oliphant has provided clarity on progress regarding a national minimum wage, saying its finalisation was imminent. Oliphant made the comments on the sidelines of the 12th congress of union federation Cosatu in Midrand, Johannesburg on 25 November 2015. She said that significant progress had been made on the matter at the National Economic, Development and Labour Council (Nedlac). According to Oliphant, by 2016 there could be a possibility that the process will be finalised. The skewed distribution of income in South Africa led to the proposal of a minimum wage in a bid to tackle inequality. Organised business had expressed misgivings over a proposal of a minimum wage of R4 000 a month, pushed by Cosatu. Oliphant did not mince her words when she insisted that socio-economic inequities would be used as a framework to formulate the wage.

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10 Conclusion The rainfall forecast for November 2015 to March 2016 shows chances of above normal rainfall in the north-eastern parts and below normal rainfall in the southern parts of the country for the beginning of summer. There is a high chance of below normal rainfall for mid and late summer countrywide. Dam levels are at a lower level compared to the same time in 2014. The veld condition is generally poor in most areas while livestock condition ranges from poor to reasonable. The recent rainfall from mid-November 2015 is expected to slightly improve veld condition; however, more rainfall is urgently needed. Incidents of veld fires were reported in Gauteng and the Free State. Livestock mortality was reported in the Free State due to drought, in Mpumalanga due to plant poisoning and naval bot flies, and in the Eastern Cape due to suspected plant poisoning. Whitefly infestation on tomato and mortality in poultry due to Newcastle disease were reported in the Eastern Cape Field crop commodity prices have generally been higher due to a weaker rand, drought-related concerns regarding availability to meet high demand, and high import parity prices. This trend is expected to continue for the rest of the year. The prices of lamb and mutton are expected to decrease or move sideways over the next few weeks. This is because of an expected increase in supply over the next few weeks and gradually increasing demand. An expected increase in supply as farmers destock due to drought, along with growing demand towards the festive season is expected to cause the prices of beef to decrease or move sideways for the rest of 2015. Weaner prices are also expected to decrease or move sideways as demand for weaners is not expected to increase much because of the drought. The total number of pigs slaughtered in October 2015 was down. For the rest of 2015, the prices of pork are expected to increase due to tighter supply and growing demand towards the festive season. The South African Reserve Bank took a decision to raise the repo rate by 25 basis points to 6.25% to prevent capital flight if the Federal Reserve raises interest rates in December 2015 and to keep anticipated inflation under control.

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11 References Crop Estimates Committee. (2015). Area planted and crop production figures . Crop Estimates

Committee. DAFF. (2015). Summary report for certain products for all markets. Department of Agriculture

Forestry and Fisheries. Department of water and sanitation. (2015). Daily state of dams and rivers. Department of

water and sanitation. Grain SA. (2015a). Price information (Domestic and International). Grain SA. Grain SA. (2015b). Safex feeds. Grain SA. Grain SA. (2015c). Domestic and international fertilizer prices. Grain SA. Milk Producers Organisation. (2015). Milk producer prices. Milk Producers Organisation

(MPO). National Agro-meteorological Committee. (2015). Advisory on the seasons. Department of

Agriculture Forestry and Fisheries,. Red Meat Abattoir Association. (2015). National South African price information. Red Meat

Abattoir Association. Red Meat Levy Admin. (2015). Red meat actual slaughter statistics. Red Meat Levy Admin. Standard Bank Research. (2015). Exchange rates. Standard bank. The Automobile Association of South Africa. (2015). Fuel Pricing. Retrieved from The

Automobile Association of South Africa: http://www.aa.co.za/on-the-road/calculator-tools/fuel-pricing.html

The Star Business Report. (2015). International oil prices. The Star. Unigrain. (2015). Weekly maize reports. Unigrain.

Compiled by: Brian Mahumani

Analyst, Agricultural Economic Insights Tel: +27 11 721 7903

Email: brian.mahumani@standardbank.co.za