1

February 2016 Summary Tables Commodity price summary table

Jan 2015 Dec 2015 Jan 2016

Average

Price

Average

Price

Average

Price

Yellow maize 2 026.82R 3 562.00R 3 876.14R 8.8% 91.2%

White maize 2 019.14R 3 994.77R 4 935.90R 23.6% 144.5%

Wheat 3 909.05R 4 652.23R 4 892.05R 5.2% 25.1%

Soya bean 5 667.95R 6 433.64R 7 014.76R 9.0% 23.8%

Sunflower seed 5 005.45R 6 979.23R 7 345.76R 5.3% 46.8%

Class A2/A3 33.56R 35.92R 35.30R -1.7% 5.2%

Weaner calf 19.93R 18.18R 18.03R -0.8% -9.5%

Lamb Class A2/A3 56.39R 55.68R 55.67R 0.0% -1.3%

Average porkers 26.28R 24.52R 23.99R -2.2% -8.7%

Average baconers 23.76R 23.05R 22.82R -1.0% -4.0%

Dairy Class 1 R/L 4.40R 4.20R 4.10R -2.4% -6.8%

CommodityChange

(y/y)

Change

(m/m)

R/kg

R/tonAverage Safex spot

prices

UnitsCategory

Beef

Pork

m/m: month-on-month y/y/: year-on-year JSE prices for crop commodity futures (per ton)

Commodity Mar 2016 Apr 2016 May 2016 Jul 2016 Sep 2016 Dec 2016 Mar 2017 Jul 2017

White maize R 5 041 R 5 037 R 5 096 R 5 142 R 5 193 R 5 226 R 4 901 R 3 356

Yellow maize R 3 401 R 3 396 R 3 399 R 3 380 R 3 404 R 3 439 R 3 390 R 2 968

Wheat R 4 690 R 4 717 R 4 783 R 4 858 R 4 863 R 4 603 NA NA

Sunflower seed R 7 600 R 7 339 R 7 110 R 6 950 R 6 935 R 7 180 NA NA

Soya beans R 6 215 R 6 095 R 5 900 R 5 971 R 6 061 R 6 150 NA NA

JSE futures prices per ton as at 2 March 2016

Second summer crop production forecast for the 2016/17 marketing year

Final crop

2015

Tons Tons Tons Hectares Hectares

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

Yellow maize 3 195 800 3 267 000 4 735 000 1 020 750 1 448 050 -32.5% -29.5%

White maize 4 059 950 4 171 250 5 220 000 945 000 1 204 800 -22.2% -21.6%

Total maize 7 255 750 7 438 250 9 955 000 1 965 750 2 652 850 -27.1% -25.9%

Soya beans 724 600 768 560 1 070 000 519 800 687 300 -32.3% -24.4%

Sunflower seed 687 150 622 000 663 000 687 500 576 000 3.6% 19.4%

Commodity

2nd forecast

2016

1st forecast

2016

Area planted

2016 Change

(a ÷ c)

Area planted

2015 Change

(d ÷ e)

Final wheat forecast for the 2015/16 marketing year:

Commodity Final estimate 6th forecast Final crop Area planted Area planted

2015 2015 2014 2015 2014

Tons Tons Tons Hectares Hectares

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

Wheat 1 457 015 1 501 190 1 750 000 482 150 476 570 -16.74% 1%

Change

(a ÷ c)

Change

(d ÷ e)

2

1 Weather forecast and dam levels Current conditions

Figure 1: Current rainfall conditions Source: South African Weather Service, 2016 Figure 1 shows that in November 2015 rainfall was below normal in most parts of the country, except for the southern coastal areas where rainfall was above normal. In December 2015, the trend of below normal rainfall continued in most parts of the country except for parts of Mpumalanga and Gauteng where rainfall was above normal. From 11 to 20 January 2016, many areas received above normal rainfall, but rainfall was near normal in the north-eastern areas, parts of KwaZulu-Natal (KZN) and the Eastern Cape. Rainfall was below normal in the south-western parts of the country. From July to December 2015, rainfall was below normal over most of the country, with above normal in the southern coastal areas. Temperatures have generally been above normal across much of the country. Dry to very dry conditions persist in all provinces. Livestock, veld and pastures are in a poor condition in most provinces and continue to deteriorate with reports of mortalities in some areas. Incidents of severe thunderstorms were reported in KZN, the Free State and the North West. Veld fires were reported in the North West and the Free State. Land preparation is underway in KZN for the planting of rye grass. The Southern African region has received poor and erratic rainfall as a result of the El Niño, the region is likely to experience significant reductions in crop production in 2016, a situation that will worsen food security during the 2016/17 consumption period.

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Forecast conditions The rainfall forecast for February to June 2016 (Figure 2) shows chances of below-normal rainfall across the country in late summer. There are chances of above-normal rainfall during autumn in some of the eastern parts of the country. Minimum and maximum temperatures are expected to be generally above normal across the country through late summer towards autumn in South Africa (National Agro-meteorological Committee, 2016). Dam levels Table 1: Provincial dam levels

74

54

81

5261

74

46 48

7687

100

72

92 92

68 68

0

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Dam

leve

ls (

%)

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Source: National Agro-meteorological Committee, 2016

In December 2015, dam levels in all provinces were significantly lower than in December 2014 (Table 1).

4

Figure 2: Rainfall forecast – February to June 2016 Source: National Agro-meteorological Committee, 2016

5

2 Exchange rates

0

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Exch

an

ge r

ate

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ds)

Dollar Euro Pound

Figure 3: Rand to US dollar exchange rate Source: Standard Bank Research, 2016 The rand has generally strengthened against the US dollar as stability seems to have been restored at the Treasury following the appointment of Pravin Gordhan as Finance Minister. The Finance Minister delivered his first budget speech on 24 February 2016, which included plans for reducing fiscal deficit and government debt, both of which are expected to bode well for the rand. However, the strengthening of the rand could be undermined as traders assess the risks associated with potential instability in the Treasury due to growing tensions with the South African Revenue Service (SARS).

3 Fertilizer prices

R 2 500.00

R 3 500.00

R 4 500.00

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R 6 500.00

R 7 500.00

R 8 500.00

R 9 500.00

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MAP LAN (28) Urea (46) Potassium Chloride (granular)

Figure 4: Domestic prices of fertilizers Source: Grain SA, 2016b In January 2016, the international price for urea was R3 441 a ton, down 6% m/m and 12% y/y, while MAP was R4 212 a ton, up 5% m/m and 19% y/y.

In February 2016, the average exchange rate was R15.83 to the US dollar. This was stronger by 3.42% m/m but weaker by 36.69% y/y.

In January 2016, domestic fertilizer prices showed an upward trend. Price changes were due to a combination of fluctuations in international fertilizer prices, oil prices movements, and exchange rate movements.

MAP: R9 957 a ton, up 1% m/m and 6% y/y.

Limestone ammonium nitrate (LAN): R5 821 a ton, up 3.4% m/m and 3.8% y/y.

Urea: R6 423 a ton, up 3.4% m/m but down 1.6% y/y.

Potassium chloride: R7 744 a ton, up 4.4% m/m and 2.9% y/y (Figure 4).

6

4 Fuel

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Ra

nd

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r l

itre

Reef Unleaded Coast Unleaded Reef Diesel Coast Diesel

Figure 5: Monthly Brent crude oil price Figure 6: Monthly fuel prices Source: The Star Business Report, 2016 Source: The Automobile Association of South

Africa, 2016 The international Brent crude oil price, international fuel prices and the rand to US dollar exchange rate influence the domestic price of fuel. The price of petrol went down significantly on 2 March 2016 by 69 cents a litre mainly due to lower international petrol prices and a stronger rand. However, the price of diesel went up by 15 cents a litre mainly because of rising international diesel prices. If the current international fuel market trend persists and the rand continues to strengthen, the price of fuel is expected to trend downward or move sideways on 6 April 2016. Figures 5 and 6 show the average monthly prices of Brent crude oil and fuel respectively. On 2 March 2016, the price movements of fuel were as follows:

Petrol: o Reef – unleaded 95 cost R11.74 a litre, down 5.6% m/m but up 4.2% y/y. o Coast – unleaded 95 cost R11.31 a litre, down 5.8% m/m but up 4.1% y/y.

Diesel: o Reef – 0.05% cost R9.58 a litre, up 1.6% m/m but down 4.2% y/y. o Coast – 0.05% cost R9.24 a litre, up 1.5% m/m but down 4.7% y/y.

In February 2016, Brent crude oil cost USD33.59 a barrel on average, up 4.8% m/m but down 42.9% y/y.

Most analysts expect international oil prices to rise slightly after Iran welcomed plans by Russia and Saudi Arabia to freeze output in an effort to reduce the global surplus, and as some industry experts expect a drop in US oil inventories.

5 Electricity On 1 March 2016, the National Energy Regulator of South Africa (Nersa) granted Eskom permission to increase tariffs by 9.4% for the 2016/17 year, instead of the 17% that Eskom had applied for. Eskom submitted an application to Nersa in November 2015 to recover R22.8 billion, which the utility reportedly used to avert load shedding. The decision is expected to add to the woes of the agricultural sector as it comes at a time when farmers and other agribusiness are already grappling with drought-related challenges.

7

6 Labour The Department of Labour announced that the minimum wages of workers in the farming and forestry sectors would increase with effect from 1 March 2016. The minimum wage increased to R2 778.83 from R2 606.78, and the hourly rate increased to R14.25 from R13.37. The weekly wage increased to R641.32 from R601.61. A daily wage for a farm worker is R128.26 for a nine-hour day. The previous daily wage was R120.32. The official unemployment rate dropped from 25.5% in the third quarter of 2015 (Q3: 2015) to 24.5% in Q4: 2015. From Q3 to Q4: 2015, employment in the financial and business services sector grew by 113 000, 80 000 jobs were created in the retail sector and 42 000 in the community, personal and social services sector. Job creation in the retail, financial and business services sector can largely be attributed to seasonal (holiday period) fluctuations. Nevertheless, the outlook for jobs remains weak due to the general economic slowdown. The on-going drought and associated financial strain on farmers is resulting in job losses in the agricultural sector, despite the fall in the official unemployment rate in Q4: 2015. Statistics South Africa reported that agriculture shed 37 000 from Q3 to Q4: 2015.

7 Grains and oil seeds

On 25 February 2016, the Crop Estimates Committee (CEC) released figures of the revised area planted and second production forecast for summer crops for the 2016/17 marketing year (see Table 2). Out of all the crops, production and area planted is expected to only increase in sunflower seed as it is more drought-tolerant and farmers opted to increase the area planted. Table 2: Second summer crop forecast for the 2016/17 marketing year

Final crop

2015

Tons Tons Tons Hectares Hectares

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

Yellow maize 3 195 800 3 267 000 4 735 000 1 020 750 1 448 050 -32.5% -29.5%

White maize 4 059 950 4 171 250 5 220 000 945 000 1 204 800 -22.2% -21.6%

Total maize 7 255 750 7 438 250 9 955 000 1 965 750 2 652 850 -27.1% -25.9%

Soya beans 724 600 768 560 1 070 000 519 800 687 300 -32.3% -24.4%

Sunflower seed 687 150 622 000 663 000 687 500 576 000 3.6% 19.4%

Commodity

2nd forecast

2016

1st forecast

2016

Area planted

2016 Change

(a ÷ c)

Area planted

2015 Change

(d ÷ e)

Source: Crop Estimates Committee, 2016 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 January 2016. The prices of all these crop commodities have been following an upward trend due to drought-related concerns about availability.

8

Table 3: Monthly price movements in grain and oil seeds

Yellow maize 2 026.82R 3 562.00R 3 876.14R 8.8% 91.2%

White maize 2 019.14R 3 994.77R 4 935.90R 23.6% 144.5%

Wheat 3 909.05R 4 652.23R 4 892.05R 5.2% 25.1%

Soya beans 5 667.95R 6 433.64R 7 014.76R 9.0% 23.8%

Sunflower seed 5 005.45R 6 979.23R 7 345.76R 5.3% 46.8%

Commodity Category Units Dec 2015 Jan 2016Jan 2015Change

(y/y)

Change

(m/m)

Average SAFEX

spot pricesRand/ton

Source: Grain SA, 2016 Table 4 shows the price trends of commodity futures as at 2 March 2016. Table 4: JSE commodity futures prices per ton

Commodity Mar 2016 Apr 2016 May 2016 Jul 2016 Sep 2016 Dec 2016 Mar 2017 Jul 2017

White maize R 5 041 R 5 037 R 5 096 R 5 142 R 5 193 R 5 226 R 4 901 R 3 356

Yellow maize R 3 401 R 3 396 R 3 399 R 3 380 R 3 404 R 3 439 R 3 390 R 2 968

Wheat R 4 690 R 4 717 R 4 783 R 4 858 R 4 863 R 4 603 NA NA

Sunflower seed R 7 600 R 7 339 R 7 110 R 6 950 R 6 935 R 7 180 NA NA

Soya beans R 6 215 R 6 095 R 5 900 R 5 971 R 6 061 R 6 150 NA NA

JSE futures prices per ton as at 2 March 2016

Source: Grain SA, 2016a Maize

R -

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Figure 7: Yellow maize monthly prices Figure 8: White maize monthly prices Domestic maize prices up The average price trends (per ton) of yellow maize and white maize are shown in Figures 7 and 8 respectively. Domestic white and yellow maize average prices have been trending upward and have been more than import parity price since December 2015. In the next few weeks, maize prices are expected to move sideways due to:

downward revision of maize production by the CEC;

slight strengthening of the rand; and

chances of above-normal rainfall during early autumn in some of the eastern parts of the country.

Domestic maize supply In the week of 20 to 26 February 2016:

A total of 34 292 tons of maize were delivered, including 22 478 tons of white maize and 11 814 tons of yellow maize. This brings the cumulative maize deliveries for the season (from May 2015) to just over 9 million tons.

9

A total of 150 545 tons of yellow maize were imported. This brings the total yellow maize imports for the season to 1 165 676 tons, and total maize imports to 1 237 904 tons.

International maize price down Chicago Board of Trade (CBOT) maize prices have been trading lower mainly because:

there are expectations of favourable weather conditions across South America’s maize producing areas;

the United States Department of Agriculture (USDA) forecasted an increase in the 2016 US maize area planted at 90 million acres, which is 0.45% higher than expected; and

the International Grains Council (IGC) estimated the 2015/16 global maize production at 969 million tons, which is 1% higher than the previous estimate due to upward revision in South America’s production estimates.

Wheat

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Jan

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Wheat Safex Wheat Import parity Wheat Export parity

Figure 9: Wheat average monthly prices Domestic wheat price up In January 2016, wheat prices maintained an upward trend as the weaker rand made inbound shipments more expensive for South Africa, which is a net importer of wheat. The CEC’s final winter grains production estimate (made on 25 February 2016) also contributed to higher prices, with production estimated at 1.46 million tons, down 16.7% y/y (Table 5). The wheat price is expected to remain high for the next few weeks due to high import parity prices. Table 5: Final wheat estimate for the 2015/16 marketing year

Commodity Final estimate 6th forecast Final crop Area planted Area planted

2015 2015 2014 2015 2014

Tons Tons Tons Hectares Hectares

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

Wheat 1 457 015 1 501 190 1 750 000 482 150 476 570 -16.74% 1%

Change

(a ÷ c)

Change

(d ÷ e)

Source: Crop Estimates Committee, 2016 Domestic wheat supply In the week of 20 to 26 February 2016, 11 355 tons of wheat were imported from Russia. This brings the cumulative imports for the season (from October 2015) to 894 915 tons. International wheat prices lower The US and global wheat stocks continue to keep wheat prices under pressure on the market. The USDA estimated that 59% of the Kansas winter wheat crop could be ‘good/excellent,’ which is up from the 55% estimated previously. This improvement could put more pressure on wheat prices. Prices are expected to get support in the following weeks from generally low

Figure 9 shows the average monthly price trends of wheat (rands per ton)

10

selling interest as sellers fear that shipments may be rejected (especially in Egypt) due to contamination with ergot (fungus), even if the levels fall below thresholds specified in the tender. Soya beans

R -

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Soya Safex Soya Import parity Soya Export parity

Figure 10: Soya bean average prices Domestic soya bean prices up Domestic soya bean prices have continued to go up for the following reasons:

the weaker rand made imported soya bean meal more expensive.;

concerns about the ongoing drought;

good buying interest; and

high parity prices. The second CEC soya bean production estimate was lower than the first at 724 600 tons, lower by 32% y/y. International soya bean prices down International soya bean prices have generally been under pressure as weather conditions in Brazil and Argentina are reportedly favourable with record production expected this season. Soya bean exports from Brazil are reportedly increasing on the global market, and Oilworld estimates that they could reach 6 million tons in March 2016 and 7 million tons by April 2016. Analysts expect the South American crop to shift demand away from the US soya bean, which could further put pressure on soya bean prices. Sunflower seed

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Sunflower Safex Sunflower Import parity

Sunflower Export parity

Figure 11: Sunflower seed monthly prices

Figure 10 shows the average monthly price trends of soya beans (rands per ton).

Figure 11 shows the average monthly price trends of sunflower seed (rands per ton).

11

Domestic sunflower seed prices up Domestic sunflower seed prices maintained an upward trend because of the weaker rand, concerns about availability and good demand. International sunflower seed prices down International sunflower seed prices came under pressure in the Black Sea region and Europe partly due to lower buyer demand caused by higher Argentinian exports. Oilworld estimates that 45 000 tons of Argentinian sunflower seed has been sold to Europe. The increased sunflower seed sales by Argentina come in response to the elimination of export taxes. In addition, the Buenos Aires Grain Exchange indicated that Argentina’s 2015/16 sunflower seed harvesting was 27% complete versus 18% the same week a year ago, and yields are reportedly better than then previous year.

8 Livestock

Table 6 shows the volumes of red meat slaughter in January 2016. Table 6: Red meat slaughter volumes

Jan 2015 Dec 2015 Jan 2016

Cattle 210 597 306 123 193 075 -36.9% -8.3%

Sheep 383 793 666 324 321 550 -51.7% -16.2%

Pigs 215 671 252 294 196 647 -22.1% -8.8%

Change

(m/m)

Change

(y/y)

Red meat Head

Commodity Category UnitsSlaughter numbers

Source: Red Meat Levy Admin, 2016 Figure 12 represents the trend in red meat slaughter volumes on a monthly basis. The 2015 festive season peak in slaughter (December 2015) and January 2016 slaughter were both lower y/y because of the drought that has reduced the availability of livestock.

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Figure 12: Red meat slaughter trends Source: Red Meat Levy Admin, 2016

12

Lamb and mutton

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A2/A3 AB2/AB3 B2/B3 C2/C3

Figure 13: Average monthly lamb prices Source: Red Meat Abattoir Association, 2016 Lamb and mutton prices could go up In January 2016, the price of lamb and most mutton classes generally went down m/m and y/y (Table 7) due to the cyclical drop in demand associated with January. According to the Red Meat Levy Admin (2016), 321 550 sheep were slaughtered, down nearly 52% m/m as supply becomes tighter due to the El Niño-induced slaughter. Total slaughter was down 16% y/y. Table 7: Monthly price movements in lamb and mutton

Average price

Jan 2015 Dec 2015 Jan 2016

Class A2/A3 56.39R 55.68R 55.67R -0.02% -1.3%

Class AB2/AB3 44.99R 47.82R 47.57R -0.5% 5.7%

Class B2/B3 42.42R 42.67R 42.08R -1.4% -0.8%

Class C2/C3 40.95R 40.49R 39.52R -2.4% -3.5%

Lamb and

mutton(R/kg)

Commodity Category UnitsChange

(m/m)

Change

(y/y)

Sheep meat supplies are expected to shrink in the medium to longer term as the industry enters a flock-rebuilding phase when production conditions improve. In the following weeks, demand is expected to increase following the January slump. With the tighter supplies and higher feed costs that farmers are facing, lamb and mutton prices are expected to trend upward. The import parity price of lamb and mutton from Australia (based on the exchange rate) was R78.48 and R42.99 a kg respectively in January 2016. The rand is expected to firm slightly against the Australian dollar in the next few weeks, so the import parity price of lamb and mutton could move sideways or decrease slightly.

Figure 13 shows the average monthly price trends (rands per kg) of lamb and mutton.

13

Beef

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-15

Mar

-15

May

-15

Jul-

15

Sep

-15

No

v-1

5

Jan

-16

Ran

d/k

g

A2/A3 AB2/AB3 B2/B3 C2/C3 Weaner calf

Figure 14: Average monthly beef prices Source: RMAA, 2015 Beef and weaner prices could go up In January 2016, the price of beef decreased m/m due to subdued demand associated with the January period, but they increased y/y due to rising feed costs and tighter supply. The weaner price decreased m/m and y/y (Table 8) as high feed costs discourage buyers. According to the Red Meat Levy Admin (2016), 193 075 cattle were slaughtered, down 37% m/m and 8% y/y due to tighter supply following drought-induced slaughter. Table 8: Monthly price movements in beef and weaners

Average price

Jan 2015 Dec 2015 Jan 2016

Class A2/A3 33.56R 35.92R 35.30R -1.7% 5.2%

Class AB2/AB3 30.91R 34.45R 33.67R -2.26% 8.9%

Class B2/B3 28.93R 31.42R 30.55R -2.8% 5.6%

Class C2/C3 27.73R 28.83R 28.47R -1.2% 2.7%

Weaner calf 19.93R 18.18R 18.03R -0.83% -9.5%

Beef

Commodity Category UnitsChange

(m/m)

Change

(y/y)

(R/kg)

Demand for beef has been growing following the January slowdown, and this, along with tighter supply (as the industry enters a herd-rebuilding phase), is expected to see the price of beef trend upward in the following weeks. Weaner prices are expected to increase slightly or move sideways as demand for weaners from anticipated higher beef prices is kept in check by high feed costs. In January 2016, the derived import parity price of cow meat from Australia was R70.72 a kg. The rand is expected maintain its firmness against the Australian dollar in the following weeks, so the import parity price of cow meat could stay much the same or decrease.

Figure 14 shows the average monthly price trends of beef and weaners (rands per kg).

14

14.43

0

5

10

15

20

25

Jan

-11

Ap

r-1

1

Jul-

11

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Be

ef-

to-m

aiz

e p

rice

ra

tio

A2/A3 beef-to-maize ratio Long-term average A2/A3 beef-to-maize ratio

Figure 15: Beef-to-maize price ratio Pork

R -

R 5.00

R 10.00

R 15.00

R 20.00

R 25.00

R 30.00

Jan

- 1

3

Mar

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-13

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v-1

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-14

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-14

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v-1

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-15

May

-15

Jul-

15

Sep

-15

No

v-1

5

Jan

-16

Ran

d/k

g

Porker Baconer

Figure 16: Average pork prices Source: RMAA, 2015 Pork prices to increase In January 2016, the monthly prices of porkers and baconers went down m/m and y/y due to weaker demand associated with the post-festive season period (January). According to the Red Meat Levy Admin (2016), 196 647 pigs were slaughtered in January 2016, down 22% m/m and 9% y/y. Table 9: Monthly price movements in pork products

Average price

Jan 2015 Dec 2015 Jan 2016

Porker 26.28R 24.52R 23.99R -2.2% -8.7%

Baconer 23.76R 23.05R 22.82R -1.0% -4.0%(R/kg)Pork

Commodity Category UnitsChange

(m/m)

Change

(y/y)

Over the next few weeks, the price of pork is expected to increase due to lower availability, growing demand (pork is a cheaper red-meat option) and escalating feed costs. In January 2016, the derived import parity price of US barrows and gilts was R26.92 a kg. If the rand maintains its firmer trend import parity prices could tend lower in the following weeks.

Figure 15 shows the average monthly porker and baconer price trends (rands per kg).

Beef-to-maize price ratio In January 2016, the beef-to-maize price ratio was 9.1:1, weaker by 9.7% m/m and nearly 37% weaker than the long-term average of 14.43:1. The ratio fell below the long-term average in February 2015 due to rising feed prices and it has been weakening ever since. This is of great concern to the beef feedlot industry (Figure 15).

15

Dairy

R -

R 0.50

R 1.00

R 1.50

R 2.00

R 2.50

R 3.00

R 3.50

R 4.00

R 4.50

R 5.00

Ra

nd

/lit

re

Dairy

Figure 17: Average monthly milk prices Source: Milk Producers Organisation, 2016 Lower milk producer prices persist Total milk production in 2015 was 5.5% higher y/y, which resulted in an oversupply and falling milk producer prices. In January 2016, production was 252 million litres, 4.9% lower y/y. This is the second month of negative growth in milk production. The slowdown in production is due to a combination of higher grain prices; expected increases in electricity costs; scarcity of roughage and lower-quality silage; lower producer prices; and the enforcement of production quotas. Table 10: Monthly price movements in dairy

Average price

Jan 2015 Dec 2015 Jan 2016

Dairy Class 1 (R/L) 4.40R 4.20R 4.10R -2.4% -6.8%

Commodity Category UnitsChange

(m/m)

Change

(y/y)

Announcements of producer price increases are expected in the following weeks to support the struggling dairy farmers.

1.79

0.00

0.50

1.00

1.50

2.00

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3.00

Jan

-09

Ap

r-0

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Jul-

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Oct-

15

Jan

-16

Mil

k-t

o-m

aiz

e p

ric

e r

atio

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

Figure 18: Milk-to-maize price ratio Global dairy prices still low Prices on the Fonterra Global dairy trading platform increased slowly in December 2014 and January 2015, and were up by 10% growth by the end of February 2015. From March to August 2015, international prices decreased to the lowest level in eight years. Concerns about supply resulted in a 63% increase in product prices at four consecutive sales. Since then prices decreased again but are still 24% above the lowest level at the beginning of August

Figure 17 shows the average monthly milk producer price trends (rands per litre).

Milk-to-maize price ratio In January 2016, the milk-to-maize price ratio was 1.06:1, weaker by 10.3% m/m and 41% weaker than the long-term average of 1.79:1. The ratio fell below the long-term average in June 2015 due to rising feed costs and it has been weakening ever since. Higher feed prices are expected to cause slower milk production growth in the first half of 2016 (Figure 18).

16

2015. The weaker rand has buffered the South African market from the decrease in product prices.

9 Vegetables

Table 11 shows the price trends (rands per ton) and Table 12 total volumes traded (tons) in onions, potatoes and tomatoes. Table 11: Average monthly price movements in vegetables

Average price

Jan 2015 Dec 2015 Jan 2016

Onions R 2 683 3 094R 4 191R 35.4% 56%

Potatoes R 2 649 4 263R 5 236R 22.8% 98%

Tomatoes R 3 660 7 940R 7 256R -8.6% 98%

UnitsCommodityChange

(m/m)

Change

(y/y)

Rand/Ton

Table 12: Monthly volume movements in vegetables

Tons

Jan 2015 Dec 2015 Jan 2016

Onions 28 920 35 053 26 523 -24.3% -8.3%

Potatoes 94 438 89 140 68 948 -22.7% -27.0%

Tomatoes 25 237 21 631 17 930 -17.1% -29.0%

CommodityChange

(m/m)

Change

(y/y)

Onions

0

5 000

10 000

15 000

20 000

25 000

30 000

35 000

40 000

R -

R 1 000

R 2 000

R 3 000

R 4 000

R 5 000

R 6 000

To

n

Ran

d/t

on

Tons (RHS) Price (LHS)

Figure 19: Onion prices and volumes Source: Department of Agriculture, Forestry and Fisheries (DAFF), 2016

The average monthly price of onions is expected to move sideways in the following weeks and steadily increase towards late autumn, as demand increases and supply slows down. Figure 19 depicts the current price trend.

17

Potatoes

0

20 000

40 000

60 000

80 000

100 000

120 000

R -

R 1 000

R 2 000

R 3 000

R 4 000

R 5 000

R 6 000

To

n

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d/t

on

Tons (RHS) Price (LHS)

Figure 20: Potato prices and volumes Source: DAFF, 2016 Tomatoes

0

5 000

10 000

15 000

20 000

25 000

30 000

R -

R 1 000

R 2 000

R 3 000

R 4 000

R 5 000

R 6 000

R 7 000

R 8 000

R 9 000

R 10 000

To

n

Ran

d/t

on

Tons (RHS) Price (LHS)

Figure 21: Tomato prices and volumes Source: DAFF, 2016

10 Other news and developments Economy South Africa records a trade deficit South Africa’s trade balance went from a surplus in December 2015 to a deficit in January 2016, with the rand bucking the trend and closing stronger at the release of the data. The January trade deficit was estimated at R17.9 billion compared to the December 2015 surplus of R7.6 billion. This negative development would have been expected to cause rand weakness, however, markets seemed to overlook the volatile monthly data. Instead, sentiment appeared to have been encouraged by the longer-term trade data, which reflected an improvement in export performance at a time when imports were slowing. International trade High hopes for Agoa renewal South Africa and the US welcomed the renewal of South Africa’s eligibility into the African Growth and Opportunity Act (Agoa) after the arrival of the first US consignment of poultry on the shores of Durban at the end of February 2016. Trade and Industry Minister Rob Davies confirmed that US President Barack Obama would no longer invoke the suspension of South

The average price of potatoes is expected to increase in the following weeks due to tighter supply. Figure 20 depicts the current price trend.

The average price of tomatoes is expected to move sideways in the following weeks as supply and demand reach equilibrium. Figure 20 depicts the current price trend.

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Africa’s Agoa benefits in agricultural commodities on 15 March 2016. According to Minister Davies, despite the tough negotiations, they had come out with a sound deal for both parties. Agribusiness Timber exports grow The South African timber industry performed well over the past 12 months, with exports reaching a record R26.3 billion and imports closing at R21.5 billion. The weakening rand and the higher prices for international wood and related products saw producers realising a y/y increase in producer prices of up to 21%. Production cost increases were limited to the rate of inflation. Consequently demand for plantations and profitability supported an increase in land value of 15%. Clover cautious about Nigerian investment According to dairy producer Clover, solid festive season demand domestically resulted growth in interim earnings, but warned of risks elsewhere in Africa and said it would make no more investments in Nigeria. The company reported that heat wave conditions towards the end of 2015 resulted in an exceptional performance by its beverage portfolio. In the six months to 31 December 2015, headline earnings per share (HEPS) rose 7.1% y/y to 117c, operating profit grew 5.8% to R340.3 million and revenue climbed 7.9% to R5 billion. Clover declared an interim dividend of 24.2c per share, 7.1% higher y/y. The beverage maker said the weakened global economy posed a significant risk to the company’s business in Africa, and the current financial crisis experienced in Nigeria, which is fuelled by the low oil price, is a further cause of concern. Thus the group has decided to withdraw from future investments in Nigeria. The group reported that it would continue to expand its operations within the Botswana, Namibia, Lesotho and Swaziland region, and pursue export opportunities in Africa, where currency risks could be managed. Policy issues Budget allocation for drought relief Finance Minister Pravin Gordhan made a Budget allocation of R15 billion towards agriculture as the government makes an effort to relieve the effects of the ongoing drought affecting thousands of farmers and posing a threat to regional food security. Stakeholders of the agricultural sector welcomed the gesture, but lamented that the amount was not enough. Over the next three years R15 billion will be allocated for land acquisition, farm improvements and expanding agro-processing capacity. The government has also prioritised R1 billion for drought relief in the disaster areas for the drilling of boreholes, buying of water tankers and distribution of animal feed.

11 Conclusion The rainfall forecast for February to June 2016 shows chances of below normal rainfall across the country in late summer. There are chances of above normal rainfall during autumn in some of the eastern parts of the country. Minimum and maximum temperatures are expected to be generally above normal across the country, through late summer towards autumn in South Africa. In December 2015, dam levels in all provinces were significantly lower than in December 2014. Dry to very dry conditions persist in all provinces. Livestock, veld and pastures are in a poor condition in most provinces and continue to deteriorate with reports of mortalities in some areas. Incidents of severe thunderstorms were reported in KZN, the Free State and the North West. Veld fires were reported in the North West and the Free State. Land preparation is

19

underway in KZN for the planting of rye grass. The Southern African region has received poor and erratic rainfall as a result of the El Niño, the region is likely to experience significant reductions in crop production in 2016, a situation that will worsen food security during the 2016/17 consumption period. Field crop commodity prices have generally been higher due to a weaker exchange rate, drought-related concerns about availability to meet demand, and high import parity prices. This trend is expected to continue for the next few months. Sheep meat supplies are expected to shrink in the medium to longer term as the industry enters a flock-rebuilding phase when production conditions improve. In the following weeks, demand is expected to increase following the January slump. With the tighter supplies and higher feed costs that farmers are facing, lamb and mutton prices are expected to trend upward. Demand for beef has been growing following the January slowdown, and this, along with tighter supply (as the industry enters a herd-rebuilding phase), is expected to see the price of beef trend upward in the following weeks. Weaner prices are expected to increase slightly or move sideways as demand for weaners from anticipated higher beef prices is kept in check by high feed costs. Over the next few weeks, the price of pork is expected to increase due to lower availability, growing demand (pork is a cheaper red-meat option) and escalating feed costs. Announcements of producer price increases are expected in the following weeks to support the struggling dairy farmers.

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12 References Crop Estimates Committee. (2016). Area planted and crop production figures. Crop Estimates

Committee. DAFF. (2016). Summary report for certain products for all markets. Department of Agriculture

Forestry and Fisheries. Department of water and sanitation. (2016). Daily state of dams and rivers. Department of

water and sanitation. Grain SA. (2016). Price information (Domestic and International). Grain SA. Grain SA. (2016a). Safex feeds. Grain SA. Grain SA. (2016b). Domestic and international fertilizer prices. Grain SA. Milk Producers Organisation. (2016). Milk producer prices. Milk Producers Organisation

(MPO). National Agro-meteorological Committee. (2016). Advisory on the seasons. Department of

Agriculture Forestry and Fisheries,. Red Meat Abattoir Association. (2016). National South African price information. Red Meat

Abattoir Association. Red Meat Levy Admin. (2016). Red meat actual slaughter statistics. Red Meat Levy Admin. South African Weather Service. (2016). Current rainfall conditions. South African Weather

Service. Standard Bank Research. (2016). Exchange rates. Standard bank. The Automobile Association of South Africa. (2016). 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. (2016). International oil prices. The Star. Standard Bank South Africa accepts no responsibility for any application, use or interpretation of the information contained in this report and disclaims all liability for direct, indirect or consequential damages resulting from the use of this report.

Compiled by: Brian Mahumani

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

Email: brian.mahumani@standardbank.co.za