He also provides more information about the latest developments in the agricultural sector.

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This week, Sihlobo takes a look at soybean production and how it affects the poultry industry.

“One vital task in South Africa's quest to improve its poultry industry is booting soybean production, which is a crucial ingredient in poultry feed. Evidence shows that roughly 50-70% of broiler production costs in South Africa are attributed to the feed, 70–80% of which comes from maize and soybean costs.

“Yellow maize production has been a success story for South Africa for decades, as the country is usually a net exporter of the product. However, the opposite is true for soybeans. South Africa remains a significant net importer of soybean oilcake or meal, a major ingredient in poultry feed,” says Sihlobo.

He adds that South Africa's soybean oilcake imports have, however, shown a decline of 56% from the record levels of nearly a million tonnes in 2010 to about 420 000 tonnes in 2019. This is according to Trade Map.

“This decline in imports has coincided with an increase in domestic soybean production. South Africa's soybean planting has been on an upside trajectory since 2009/10 when plantings were just 311 450 hectares. Since then, plantings have increased significantly, with the 2020/21 plantings estimated at 806 000 hectares.

“This remarkable increase in soybeans plantings is underpinned by the growing domestic demand from the poultry industry, and the broader livestock subsector. South Africa's per capita consumption of poultry meat has almost doubled over the past two decades – currently estimated at 33 kilograms,” he further adds.

Sihlobo further refers to previous notes by Agbiz, saying that in order to service the growing demand for meat in South Africa, agribusinesses, with the support of the government, made investments to increase domestic soybean processing capacity from roughly 860 000 tonnes in 2012 to a level over 2.2 million tonnes. 

“This expansion was also aimed at stimulating domestic soybean production, as part of an import substitution strategy led by the Department of Trade, Industry and Competition. The farmers responded positively to these demand changes as evidenced by the growth in plantings over the past decade.

“The record 806 000 hectares of soybean plantings in 2020/21, combined with the higher-than-usual rainfall since the start of the season, suggest that South Africa could have solid soybean output. So far, the largest soybean harvest on record was in the 2017/18 production season, a crop of 1,54 million tonnes, with an average yield of 1,96 tonnes per hectare.

“There is still uncertainty about the potential size of the yield in the current season. But if we apply a five-year average yield of 1,82 tonnes per hectare on an area planting of 806 000 tonnes, South Africa's soybean harvest could reach 1,47 million tonnes.

“This would be the second-largest harvest on record. It is also plausible that South Africa's soybeans yields could reach 2,00 tonnes per hectare, as was the case in 2016/17, a year of higher rainfall and also in the 2008/09 production season. Under such a scenario, South Africa's soybean harvest would amount to 1,61 million tonnes, which would be the largest soybean harvest on record,” explains Sihlobo.

He further elaborated that the Crop Estimates Committee (CEC) will provide its first production estimates on 25 February. He says that it is only then that we will know the official view of the possible harvest.

However, Sihlobo says that the insights they are receiving from farmers about the crop conditions, combined with the estimated area plantings suggest that the 2020/21 production season, could be one of the best for South Africa's soybeans producers.

“The possible increase in soybean production would also mean that soybean oilcake imports would soften somewhat from the 2019 levels of 420 000 tonnes.  Still, the implications of increased domestic production on prices will remain marginal. South Africa is a small player in the global soybean market, accounting for a mere 0,5% of global soybeans production (even though this is roughly two-thirds of Africa's soybean production).

“The South African soybeans prices are primarily influenced by market developments in significant soybeans producing and consuming countries: the key producing countries are Brazil, the US, Argentina, India and Paraguay. Meanwhile, China is a significant consumer, as the country imports over 60% of globally traded soybeans. On Friday 5 February 2021, South Africa's soybeans spot price closed at R9 990 per tonnes, which is 65% higher than the corresponding period last year.

Sihlobo adds that this price increase was primarily strengthened by higher global soybeans prices, which are supported by China's growing demand, which in turn, is backed by a recovery in the country's pig industry from the devastation caused by the African swine fever outbreak in 2019.

“In sum, the increase in soybean plantings is a welcome development in a country that strives to boost its domestic poultry production. Nevertheless, the gains in production increase won't, at least in the near-term, translate into price changes for buyers of the product – poultry producers – as South Africa is still a small player in the soybean market with domestic prices influenced mainly by developments in the global market.

“Ultimately, the poultry producers input costs will remain elevated despite the increase in domestic soybean production. There is, however, a benefit in terms of the agricultural trade balance, as the increase in domestic soybeans production will ultimately lead to a decline in soybean oilcake imports,” concludes Sihlobo.

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