Govt must do more to help the grain industry

Increased government support for South Africa’s soyabean and maize producers is among the key recommendations of a draft report on grain pricing, increasing production and reducing costs for the poultry industry.

The report was commissioned by the Industrial Development Corporation, in terms of the 2019 poultry master plan. Maize and soya are the principal components of poultry feed, which makes up about 70% of the costs of rearing a chicken.

The master plan said “IDC to partner with Grain SA and SAPA (the SA Poultry Association) to explore possible arrangements to increase supply in targeted areas and to reduce costs”.

The IDC appointed Pretoria-based Urban-Econ Development Economists to conduct a benchmarking study on the price mechanisms of maize and soyabeans. Urban-Econ’s draft report includes a number of recommendations on how to achieve both objectives – more grain production and lower prices for the poultry industry.

The 89-page draft report surveys the worldwide production and export of both grains, including the measures various governments such as Brazil, the United States and the European Union have in place to support their grain industries. 

These measures include agricultural support mechanisms, subsidies such as direct payments, or indirect subsidies such as crop insurance and other programmes that help farmers manage price risks and ensure a stable income.

It says the South African government will have to “revisit agricultural policies” to support farmers in an age when production is threatened by factors such as the Covid-19 pandemic, extreme weather conditions and war.

The report has recommendations for both the private and public sectors, spread over short, medium and long-term timeframes.

Private sector recommendations include precision farming to increase yields, use of the latest cultivars of maize and soya, trading soyabean meal and oilcake on the SAFEX futures market and increasing the soyabean crushing capacity. 

It notes that the South African feed industry has 25% spare capacity and can increase the production of feed if local soyabean production rises, as it has been doing.

On government actions required, it says tax breaks on diesel and electricity would be aligned with World Trade Organisation rules. Removing red tape and associated fees would facilitate solar installations on farms and at ago-processing facilities.

The report says policy changes are needed so that government can provide crop insurance for small-scale farmers to promote crop production. Government should also provide a safety net for farmers affected by natural disasters such as floods and drought, as extreme weather conditions were becoming more frequent.

The report recommends increased government investment in agricultural research and development, key to the transformation and improvement of the industry.

It strongly supports infrastructure upgrades.

“It is the responsibility of the government to maintain and improve national infrastructure such as electricity supply, roads, railways, ports and water distribution. Infrastructure plays an important role in the facilitation of trade and other economic activities across the value chain,” the report says.