Located at the southern tip of the African continent, South Africa is the most diversified and financially integrated economy in Africa. It has a population of over 58 million and covers 1.22 million square kilometers. South Africa has the most industrialized and technologically advanced economy in the continent. It is a middle-income emerging market with a rich supply of natural resources, with well-developed financial, legal, communications, energy, and transport sectors. It is an attractive business destination due to its growing market and welcoming business environment. South Africa also serves as an entry point to other countries in southern Africa.

South Africa’s agricultural sector is one of the world’s most diverse, consisting of corporate and private intensive and extensive crop farming systems, including vegetable, fruit, nuts, and grain production. The well-developed commercial farming sector in South Africa is the backbone to the country’s agricultural economy.

South African climate ranges from subtropical to Mediterranean, allowing for a multitude of farming opportunities. The country’s biodiversity ensures that products such as grains, fruit and wine are exported and preferred for its exceptional quality. There is a growing demand to improve subsistence farming or informal small-scale farming in South Africa.

Compared to the rest of Africa, South Africa has by far the most modern, productive, and diverse agricultural economy. It has a well-developed agricultural sector, which will stand the country in good stead in the face of continuing uncertainty both economically and in terms of the weather. There are approximately 32,000 commercial farmers in South Africa, of which between 5,000 and 7,000 produce approximately 80 percent of agricultural output.

Forecasts show that the country’s economic growth will remain under pressure, as consumers continue to tighten their belts because of a contracted economy and higher inflation over the last year. Investment in agriculture is widely recognized as a key precondition in achieving goals related to improving food security, creating jobs, creating wealth, and thereby reducing poverty.

The grain industry is one of the largest agricultural industries in South Africa, contributing more than 30 percent to the total gross value of agricultural production. The industry comprises several key stakeholders including input suppliers, farmers, silo owners, traders, millers, bakers, research organizations, financiers, etc. The animal feed industry is an important client and role player in the grain supply chain. Around 6 million tons of grain and 1.6 million tons of oil cake are used by the animal feed manufacturing industry in South Africa annually.

Corn is the largest locally produced field crop and the most important source of carbohydrates in the Southern African Development Community (SADC) region for animal and human consumption. South Africa is the main corn producer in the SADC region, with an average production of around 15 million tons per annum over the past 5 years. Local consumption of corn amounts to more than 12 million tons per annum and surplus corn is usually exported.  

According to the U.S. Department of Agriculture (USDA), South Africa is on course to produce a fourth consecutive bumper corn crop in the 2022/23 season, which creates a bearish outlook on local corn prices and will limit growth in the area to be planted with corn in 2023/24. However, the USDA Foreign Agricultural Service (FAS) post in Pretoria forecasts that South Africa should maintain its status as a net exporter of corn in the 2023/24 season with 2.3 million tons of corn exports. “Assuming normal weather conditions, South Africa’s corn crop for the MY 2023/24 could reach 15.8 MMT on 2.9 million hectares (MHa), which is slightly lower than the expected corn crop of 16.2 MMT in MY 2022/23,” the post noted in his grain and feed annual report released on 3rd April.

During the past 10 years, South Africa maintained an average marginal growth rate of about two percent per annum in the consumption of corn. This trend is mainly driven by the increase in demand through population growth and expansion in the local broiler industry to serve the local market. Yellow corn is used as the primary ingredient for animal feed, especially in the broiler industry. Chicken meat has grown to be the most important protein source in the diet of the majority of South Africans over the past 20 years.

However, for the 2023/24 season, corn demand for animal feed is expected to flatten. South Africa’s economic growth outlook over the medium term remains lackluster due to prevailing policy uncertainty and structural constraints. The deterioration of infrastructure, including roads, rail, water and, most notably, the electricity supply will hinder significant investments to increase the capacity of the broiler and feed manufacturing industries. As a result, a major upsurge in the animal feed demand for corn in South Africa is unlikely in the near future.

Wheat is the second most important grain commodity consumed in South Africa after corn. The annual per capita consumption of corn, in the form of a meal, is the highest at 90kg/person, followed by wheat (60kg/person) and then rice (16kg/person). South Africa consumes around 2.4 billion loaves of bread per annum or 40 loaves of bread per person per year.

Wheat is produced mainly in the winter-rainfall areas of the Western Cape and the eastern parts of the Free State with considerable annual fluctuations in production. Average wheat production has been about 1.8 million tons a year over the past 5 years with local demand exceeding 3.5 million tons per year. Thus, South Africa is dependent on wheat imports to meet the local demand.

South Africa’s wheat area stagnated at around 500,000 ha per annum during the past 10 years. This is almost a million hectares less than 25 years ago, before the deregulation of the wheat market in the late 1990s. In a free-market environment producers plant more profitable crops such as canola, oats, corn, and soybeans. In many regions, farmers feel that wheat is no longer viable due to the climactic change of later rains. However, in some areas of South Africa, especially in the Western Cape province, wheat remains a competitive crop. As a result, more than 60 percent of South Africa’s wheat is planted in the Western Cape province.

Last year, local producers expanded wheat area by eight percent due to the Russia-Ukraine conflict that created uncertainty in the global commodity markets and pushed local wheat prices to record-high levels. However, an upsurge in wheat plantings in the 2023/24 season is unlikely. Local wheat prices fell by more than 20 percent from its historical high levels and, coupled with a 12 percent drop in yields realized in the previous season, optimism for an upsurge in wheat plantings is fading. In addition, with South Africa’s continuous power outages an expansion of wheat plantings under irrigation is unlikely. As a result, the USDA post forecasts a six percent drop in wheat area to 530,000 ha in MY 2023/24, which equates to the 5-year average. “Under normal climatic conditions and an assumed 5-year average yield of 3.8 MT/ha, an area of 530,000 ha could realize a wheat crop of about 2.0 MMT in MY 2023/24”.

During the past 10 years, population growth has driven the human consumption of wheat to grow by approximately one percent per annum. Post expects this trend to continue in MY 2023/24 with local wheat consumption marginally growing to 3.7 MMT. Investment in processing facilities is expected to be limited due to numerous economic challenges, including continuous power outages higher interest rates and amplified electricity costs. The struggling domestic economy will hinder any major upsurges in the demand for wheat. Post estimates wheat demand in the 2022/23 season at 3.6 MMT.

USDA post forecasts that South Africa’s wheat and wheat products imports for the 2023/24 season will rise to 1.9 MMT as local wheat production is expected to drop by four percent. For the 2022/23 season, post estimates that wheat imports could grow by five percent to 1.85 MMT on a nine percent drop in local production.

South Africa is dependent on duty-free rice imports to meet the local demand as rice production is insignificant in the country. In the 2023/24 season, South Africa’s rice imports are expected to flatten at 1.1 MMT as local demand is under pressure.

South Africa is currently experiencing unprecedented power outages, high utility costs, inflation, and rising interest rates. These challenges are likely to limit investment in the processing sector and push consumers to increase consumption of low-cost starches.