In summary, Janovsky's argument boils down to supply and demand. Overall, the African and Asian consumers are generally becoming richer and more, which is a strong stimulator of demand, especially as it is expected that 2 billion people will be added to these regions in the next 40 years. However, the price of substitute products, which are largely driven through consumer preferences and slow trend changes, will generally result in a more sideways movement in prices.

The cost of production remains the most concerning issue, shifting the supply curve upwards and ultimately leading to a decrease in production - with its own obvious consequences. Over the long term, farmers experience on average a cost curve of 3% per annum - cost of production increases faster than producer prices. The only solution to the problem is to become more productive and efficient. Technology is again the only option to increasing productivity. This includes storage, transport, information, biological and genetic technology, as well as economies of scale. Resource limitations reinforce the need for improved technology.

Commodity prices are expected to remain flat and will not drive food prices higher. Farmers are, unfortunately, going to absorb the cost increases and will probably experience lower margins in the immediate future. Food prices will be driven by the exchange rate risk, energy prices and labour cost. In the longer run, the stronger demand will have a recovering effect on producer prices.

Agbiz' take hereon can be summarised through the following 3 points:

1. The outlook is generally positive, yet realistic, regarding the well-known challenges. When related to the positive agribusiness confidence, it highlights the underlying long term opportunities the industry holds, provided the right approach to address the challenges is adopted.

2. There are a number of exogenous factors impacting negatively on investment, such as significant political and policy uncertainty, the cost effect of the weak and volatile exchange rate, dependency on energy and labour demands:

- Investment will be slow and reluctant until after the elections in 2014.
- The uncertainties created by certain policy developments, such as the restitution of land rights amendment bill, the expropriation bill, the property valuation bill, carbon tax, etc., are causing reluctance to invest.
- The weak exchange rate benefits the export industry, but in the long run has a detrimental effect on investment and cost of production.
- SA is a huge importer of energy and as agriculture is a massive utiliser of energy, at all different levels of the value chain, alternative local sources and more energy efficient operations should be incorporated to minimise the cost effect on the economy as a whole.
- Outrageous labour demands are a serious cost driver and influencer on the investment climate. Solutions should be found and implemented to address the social needs in the country whilst nurturing the business prospects, especially in agribusiness, as it has food security at stake.

3. The ultimate solution lies in increased efficiencies, through optimised utilisation of resources (both natural and human) and incorporation of technology. We depend on investments in and incorporation of relevant technologies to bring about the yields and productivity gains recorded in other parts of the world, and to decrease the cost of doing business.

Agbiz summary and perspective by Lindie Stroebel (lindie@agbiz.co.za)

This bi-annual, 672 page directory and guide to agriculture in South Africa is now available for free online viewing, searching and printing, or can be purchased in hard copy format.

The book is available in both English (print and electronic) and Afrikaans (currently electronic only).

To order a copy click here

To read the book online click here for English or here for Afrikaans

To visit the official website and blog of the publication, go to www.AgriHandbook.co.za

The newly established Bothaville Agri-College is launching its training programme with two high-level courses, viz:

2. National Certificate Course: SAFEX, Grain Hedging and Speculation, to be facilitated by Dr Mariette Geyser

Please click on links for course particulars.

6 August 2013 | PwC Sunninghill 

Mozambique is becoming a world priority investment destination, powered by recent discoveries and development of natural resources, with South African companies being key investors and suppliers.

PwC invites Agbiz Members to join them for a presentation that will cover issues like investment opportunities, taxation in Mozambique, regulatory requirements for setting up, and interacting with authorities. Additionally, they will highlight the South African tax and exchange control implications to be aware of when investing overseas, and more. More information»

10 - 11 September 2013, Shanghai and

Enquiries: Makana Gerald Mandiwana at the Department of Trade and Industry, e-mail: MGMandiwana@thedti.gov.za