Day 3 of our South African tour started off with a visit to Senwes – a fully integrated agriculture business. Senwes has five different business units and is a leader in many segments of agriculture throughout South Africa. Their first business unit is input supply in which they manage retail farm supply stores, equipment dealerships in collaboration with John Deere, lime and gypsum mines, and seed supply. There goal is to help farmers maximize production with the tools that they need. Then subsequent business units ensure the farmers connect to the markets they need to sell their commodities.
The second business unit is input services through which they provide farmers lines of credit, finance strategy assistance, and brokerage services. They also provide value-add services like soil surveying, animal science consultation, agronomic advising, and new farmer assistance. In an average year with 500mm of precipitation, South Africa can expect to produce 5 tons / hectare of white maize (approximately 75 bushels / acre). They can expect to produce 6 tons / ha of yellow maize (approximately 90 bu. / acre). Soil samples help determine which nutrients the crops need. Much of the soil is alkaline and the lime helps neutralize it.
The third business unit is market access and focuses on grain storage, grain procurement, grain handling, online trading, and providing online certifications. In the U.S. many farmers have their own on-farm grain storage bins. In South Africa most grain storage is handled commercially. The country has the capacity to store 20 million tons of grains and oilseeds. Annual production is approximately 15 million tons of grains and oilseeds. Consider that Iowa produces approximately 62 million tons of corn alone. On-farm storage facilities are a must in the U.S. and are considered unnecessary in South Africa.
Senwes’ fourth business unit is soft commodity trading. South Africa has been doing online grain trading for a long time and have an efficient system. They trade white maize, yellow maize, wheat, soya, sorghum, and sunflower. And the fifth business unit is a trust (similar to a corporate foundation to do community service and outreach).
With the country’s current drought, expected yield of white maize is only 2.8 tons / ha (normally 5). Senwes is anticipating that South Africa will need to import at minimum 1.5 million tons of white corn. They have already negotiated some contracts and currently three ships of white corn are on their way. U.S. white corn has not been registered yet nor passed bio-safety testing regulations. At this point South Africa could only accept non-GMO white corn from the U.S. But the U.S. isn’t currently growing much white corn. South Africa will likely try to import their white corn from Mexico and Brazil. If the U.S. started producing more white corn they could in turn sell to Mexico. South Africa is also importing much of their wheat from Russia and the Ukraine. The U.S. is not competitive anymore in the wheat market.
All of this underscores the complexity and necessity of international trade.
Our second stop of the day was to a family farm – one of only a few that grow irrigated white maize. Planting began in October and 42 degree C temperatures (~110+ degrees F) in January emphasized the severity of the drought. They irrigated for 24 hours / day and still experienced stunted growth and consequently reduced yields. Unlike Iowa’s 30 day planting window, South Africa has up to a 120 day planting window. It is easy to tell that a later planting on the family’s farm will do much better because it missed the severe temperatures.
In visiting with the family we learned that many white farming families in the region suffer attacks and vandalism from blacks in the area. The family hires many blacks to help on the farm. This is partly because they need the hired help and partly as a gesture of goodwill to show that they are committed to the community and care about black interests. Despite a good relation with their staff they still shared concerns and even fears of being the target of future attacks. Racial tensions are still very much a part of daily life here.
Our last stop of the day was a visit with an agriculture economist who reinforced some of the earlier messages.
- Problem: Because of the drought South Africa will have to import up to 12 million tons of grain and seed oil crops.
- Cost: 12 million tons could cost the government 75-100 billion Rand.
- Reason: consumer preference for white maize is driving demand. White maize is nutritionally deficient and needs to be fortified. But consumers want the finely milled, pure white flour to make their staple porridge. U.S. white corn would not be a good substitute because it would be considered grade 2 or lower grade because of the moisture content and harvest techniques. South Africa is not anti-GMO, but U.S. corn has not passed the regulatory hurdles. Only 21 of the 120some GMOs approved in the U.S. have been approved in South Africa because of the lag time and lack of expediency.
- Potential solution: South Africa could waive the regulations of GMOs for a period of at least a year and accept U.S. white corn.