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Commodity Profile A PROFILE OF THE SOUTH AFRICAN GRAIN SORGHUM MARKET VALUE CHAIN 2017 Directorate Marketing Tel: 012 319 8455 Private Bag X 15 Fax: 012 319 8131 Arcadia E-mail:[email protected] 0007 www.daff.gov.za TABLE OF CONTENTS 1. DESCRIPTION OF THE INDUSTRY ............................................................................... 3 1.1 Production Areas ..................................................................................................... 3 1.2 Production Trends ................................................................................................... 4 2. MARKET STRUCTURE .................................................................................................. 5 2.1 Domestic Market and Prices ..................................................................................... 5 2.2. Exports ................................................................................................................... 6 2.3 Imports ................................................................................................................. 11 3. STORAGE OF SORGHUM ........................................................................................... 13 4. MARKET VALUE CHAIN .............................................................................................. 15 5. MARKET INTELLIGENCE ............................................................................................ 16 5.1. Tariffs ................................................................................................................... 16 5.2. Performance of the South African grain sorghum industry ......................................... 17 6. ORGANIZATIONAL ANALYSIS ..................................................................................... 22 7. ACKNOWLEDGEMENTS ............................................................................................. 25 2 1. DESCRIPTION OF THE INDUSTRY Sorghum, like other grains, has two basic markets that it serves namely, the human component and the animal feed component. There are two types of sorghum, namely bitter and sweet sorghum cultivars. Preference is given to the sweet cultivars. Bitter sorghum is planted in areas where birds are a problem as it is considered to be unpalatable to bird. Sorghum grain is also used to perform ritual ceremonies mainly in African countries. The grain is mainly found in Nigeria, Ethiopia and Sudan in the African region whereas in the rest of the world is produced mainly in United State of America and India. Figure 1: Grain Sorghum gross value of production 900 000 800 000 700 000 600 000 500 000 400 000 300 000 Gross valueGross (R'000) 200 000 100 000 2006/07 2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 Production Years Source: Statistics and Economic Analysis The figure 1 above shows that the period under review opened with moderate gross value of sorghum grain production. The figure further indicates that gross value of sorghum production has been fluctuating throughout the period under analysis (2006/07-2015/16). The Gross value experienced a slight increase between the period 2006/07 and 2007/08 and was later followed by a sharp decrease in 2008/09 and 2009/10 production seasons. The grain sorghum value of production reached the highest in 2013/14 and later dropped drastically in 2014/15 and 2015/16. The period under analysis closed with the decreasing contribution to the gross value of production by the sorghum industry during 2015/16 as compared to the previous three production seasons. 1.1 Production Areas As shown in Figure 2 below, sorghum is mainly produced in the Free State (34 %), Mpumalanga (46 %), and Limpopo province (14 %). Other provinces that contribute small percentages to the total grain sorghum production in the country are the North West, Kwazulu-Natal and Gauteng, with North 3 West contributing respectively 4% and Kwazulu-Natal contributing 2% to South Africa’s total sorghum production. Figure 2: Grain Sorghum production by provinces 2015/16 North West 4% Free State 34% Mpuma-langa 46% KwaZulu-Natal 2% Limpopo 14% Source: Statistics and Economic Analysis 1.2 Production Trends Figure 3 below shows that the period under review opened with marginal volumes of sorghum production in the local market and this was followed by a sharp increase in production volumes during 2006/07 season in parallel with the increase in the area planted to sorghum. The production volumes increased marginally to levels above 200 000 tons between 2006/07 and 2010/11 production years mainly due to improved producer price levels. However, the production patterns of sorghum grain suddenly dropped to less than 200 000 tons in the period 2010/11. During the period 2014/15 the production for sorghum was recorded at 139 thousand tons which is relatively higher compared to what was produced during the preceding two seasons. However, in 2015/16, the period under review closed with a drastic decline in both area pnated and total sorghum production to 81 thousand tons and 48 thousand hectares respectively. 4 Figure 3: Grain sorghum total production vs area planted 350 100 90 300 80 250 70 200 60 50 150 40 100 30 20 Area planted('000 ha) Totalproduction ('000 ton) 50 10 2006/07 2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 Period (Years) Total production Area planted Source: Statistics and Economic Analysis 2. MARKET STRUCTURE 2.1 Domestic Market and Prices Producer price trends for sorghum for the period 2006/07 to 2015/16 are shown in Figure 6 below. Grain sorghum prices are highly volatile in nature depending on the demand and supply forces. Figure 4: Grain sorghum producer prices 4 000,00 3 500,00 3 000,00 2 500,00 2 000,00 Price Price (R/ton) 1 500,00 1 000,00 500,00 0,00 2006/07 2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 Period (Years) Source: Statistics and Economic Analysis 5 Presently the sorghum price is discounted against the cheapest white and yellow maize. As depicted in Figure 4 above, the period under analysis opened with very low producer prices for grain sorghum during the 2006/07 marketing season and this was followed by a dramatic increase in producer prices during 2008/09 season. The lowest producer price for grain sorghum was experienced during 2009/10 marketing season and this can be attributed to higher stock levels during the same period and the preceding marketing seasons. The period under analysis closed with higher average producer price for sorghum in 2015/16 marketing season. Figure 5 below depicts the domestic sorghum utilization/processing from 2006/07 to 2015/16 marketing season. Sorghum in South Africa is mainly used for human consumption such as malt and sorghum meal (also known as mabele). Malt is used mainly for the manufacture of traditional African beer commonly known as umqombothi. About 95% of the total domestic commercial sorghum processing is used for human consumption, of which about 47% is used for malting while 49% is used to make sorghum meal and rice. Sorghum meal competes directly with maize meal and is served as a breakfast cereal or as soured porridge “Ting”. There is also a culture in the African tradition to cook raw sorghum grain mixed with legumes and use it as a substitute for rice. Only 5% of the total commercial processing volume is used for animal feeds. It is also clear from Figure 5 that sorghum processing volumes in the malting and feed industries has been on a declining trend in recent years while sorghum remained popular and stable as raw material for food production. Figure 5: Grain sorghum consumption in South Africa 200 000 180 000 160 000 140 000 120 000 100 000 Tons 80 000 60 000 40 000 20 000 2006/07 2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 Marketing Season SA pro-cessed for human purposes SA pro-cessed for animal feed Source: Statistics and Economic Analysis 2.2. Exports Exports of sorghum are handled by means of contracts between buyers and sellers subject to the requirements of the Agricultural Product Standards Act no 119 of 1990. The volume of grain sorghum exports to the world from 2007 to 2016 are presented in Figure 6 below. 6 Figure 6: Volume of Grain sorghum exports to various regions 200000 180000 160000 140000 120000 100000 80000 60000 Export volume (ton) 40000 20000 0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Africa 1056 1029 5098 32992 187968 50110 59385 25766 25078 15861 Americas 538 302 224 1 0 0 0 0 0 0 Asia 21 0 2 24 0 0 0 38 101 20 Europe 231 21 0 2 0 0 0 0 0 15 Period (Years) Source: Quantec Easy Data Figure 6 indicates that the African continent is the major recipient of grain sorghum exports originating from South Africa. The South African exports of grain sorghum were very low between 2007 and 2009. Grain sorghum exports from South Africa to the African continent increased significantly during the year 2011 reaching the highest peak in the same year. Grain sorghum exports volumes to Africa continued to dominate until the end of the season in 2016. This is a reflection of greater export volumes to SACU countries which were not part of trade statistics before the year 2011. South Africa also exported sorghum to the Americas and Europe although in very small quantities. The volume of sorghum exports to Africa are shown in Figure 7 below. 7 Figure 7: Volume of Grain sorghum exports to Africa 200000 180000 160000 140000 120000 100000 80000 60000 40000 Export volume (ton) 20000 0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Eastern Africa Rest 0 3 1665 1204 512 0 0 6 7 0 Northern Africa 168 120 881 270 0 0 0 120 220 0 Western Africa 0 14 0 0 0 0 0 0 0 5 SADC (excluding SACU) 888 892 2553 1229 580 275 336 204 140 436 SACU (Excluding RSA) 0 0 0 30288 186876 49835 59049 25436 24711 15420 Period (Years) Source: Quantec Easy Data Figure 7 above indicates the exact regions on the African continent to which South Africa exports grain sorghum. It is clear from the figure that larger volumes of grain sorghum are exported to SADC and SACU regions on the African continent. This situation can be ascribed to the fact that there is Free Trade Agreement which allows free flow of goods and services within the SADC region.
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