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Produk-inligting
April 2018
24
International export and value adding
opportunities for South Africa
G
uest speaker, Mr Ronald Jetten,
is head of China National Cereals,
Oils and Foodstuffs Corporation
(COFCO) South Africa, a member
of COFCO International, previously Noble
Agri.
Malthusian theory
on its head?
Jetten commented on the predictions of
Malthus (1798) who said, ‘short term gains
in living standards would inevitably be un-
dermined as human population growth out-
stripped food production, and thereby drive
living standards back towards subsistence’
i.e. food could never catch up with demand.
Clearly he was mistaken as the reverse actu-
ally happened and we now live in a world of
surpluses.
Malthus overlooked technological advance-
ment, which would allow human beings to
keep ahead of the population curve, be-
cause production doesn’t only depend on
access to land but also on innovation.
‘Producers have been incredible innova-
tors throughout the world – not the least in
South Africa – and the farming community
has outpaced the demand for goods.’ The
result is growing world stock levels which
are increasingly burdensome. With refer-
ence to maize and soybean production,
Jetten says producers are producing bet-
ter yields, but the problem is demand has
struggled to keep up with supply.
South African maize production is therefore
experiencing a ‘supply push’ and for South
African soybeans the ‘supply has caught up’
(
Graph 1
and
Graph 2
.)
What’s the future?
Jetten says what should happen when sup-
ply outpaces demand, you either have to
increase demand – which is difficult but not
impossible as was seen with the advent of
the biofuels industry, or supply needs to be
rationed.
The incredibly high cost of producing maize
and soybeans in South Africa compared
to the opportunity in the rest of the world,
makes competing in the market that much
harder. There is a huge gap.
So let’s carry the grain
Jetten said in attempting to resolve the
supply issue, traders decided to carry the
grain. He agrees the current 4 million tons of
carry-over stock is a lot, but insisted there
has been no incentive to sell grain around
the world.
What will change the
dynamic of world supply?
Argentina impacts world markets. Close
to 15 million tons of soybeans and about
6 million tons of maize are being written off
this season. Chicago Board of Trade (CBOT)
prices are responding accordingly but this
is not enough to change the dynamics of
world supply and demand and it is also only
a one-year solution. In years to come grain
trading will continue in a space where we
need to deal with in an environment of over-
supply. We need to learn to compete in an
economically hostile environment.
(Re)Balancing the equation
The wisdom of contracting
supply
Less supply means higher prices so the situ-
ation needs to be resolved with increased
exports (if price is low enough).
REVIEW
Congress
Special
JENNY MATHEWS,
SA Graan/Grain
contributor
Graph 1: South African maize production and demand (excluding exports).
Graph 2: South African soybean production and crush.