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Potatoes South Africa by André Jooste
On the menu
• Overview of potato industry in South Africa
• Historical Context
• Potatoes South Africa
Historical Context
• Previous Control Boards
– Industry information
– Research and Development
– Market Development
• Control Boards abolished in 1997 with enactment of Marketing of Agricultural Products Act (1996)
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All agricultural producers
benefitted from these functions
Who will perform the previous activities of the
Control Boards?
The need for a modernised producer forum (Producer
Organisation)
Objectives of the MAP Act
• The objectives of this Act are- a) the increasing of market access for all market
participants; b) the promotion of the efficiency of the marketing of
agricultural products; c) the optimisation of export earnings from agricultural
products; d) the enhancement of the viability of the agricultural
sector.
• MAP Act makes provision for Statutory Measures – Method of funding of initiatives/activities to address
objectives of MAP Act
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The statutory levy in potato industry used to fund the following core functions:
• Transformation, inclusive of black economic empowerment, e.g. by creating market access for emerging farmers (small and medium scale) as well as development projects related to the potato production and marketing chain.
• Basic as well as applied agricultural research, including potato cultivar
evaluation, and the dissemination of all relevant technical information. • The gathering, processing, analysing and compiling of industry related
information, including market statistics, and the dissemination thereof. • Marketing, inclusive of the development of foreign markets for South
African potatoes and generic product promotion. • The administrative services rendered by the appointed administrator.
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Snapshot : Realities
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High Input Costs Environment
• Production costs – Irrigation: Ranges between R160 000 and R220 000/ha
• Production costs – Dryland: Ranges between R70 000 and R90 000/ha
Highly capital intensive (scale economies)
• Establishment of packhouse: Ranges between
R2.5 to R5 million
Mechanisation
Risk/Uncertainty
• Pests and diseases
• Climate change impacting dryland
• Highly volatile market prices
• Finance access challenges
High demand for land due to rotational requirements (1 in 4)
High hands on management requirements
Production costs 8-10
times higher than that of
maize
Some Interesting Information about Industry
2016 Harvest
Hectares Harvest Yield (10 kg bags)
1 Limpopo 10 873 50 738 800
2 Marble Hall 1 382 6 181 100
3 Mpumalanga 2 048 8 091 500
4 Gauteng 973 3 895 400
5 North West 2 263 13 767 400
6 Western Free State
7 292 35 017 760
7 Eastern Free State
11 533 23 541 064
8 South Western Free State
1 328 7 308 831
9 Kwazulu-Natal 2 792 8 981 817
10 North Eastern Cape
1 574 5 391 669
11 Eastern Cape 911 3 905 500
12 Southern Cape 247 1 127 200
13 Ceres 788 4 084 254
14 Northern Cape 1 681 9 610 380
15 South Western Cape
86 361 200
16 Sandveld 7 223 33 183 650
Total 52 994 215 187 525
Total Hectares & Harvest
Yield: 2016
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Technology: The growth in production was largely fuelled by the
introduction of higher yielding cultivars and better disease control
and resistance.
80% of production under irrigation
The compounded annual growth rate was between
2.9% since 2002.
Production down by 13.5% Y-on-Y
215
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Weeklikse lewerings aan markte (2003 - 2005)
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
J J J J F F F F M M M M M A A A A M M M M J J J J J J J J J A A A A S S S S S O O O O N N N N D D D D D
Mpumalanga
KZN
Eastern Free State Western
Free State
Limpopo
Sandveld
South Western
Free State
North West
Eastern Cape
Weekly deliveries on markets
SOUTH AFRICAN POTATO INDUSTRY: Determinants of SUPPLY
SUPPLY DEMAND
Production Processing
Imports Exports
Domestic use Open market
• Different regions overlap ito marketing windows
– Significant volumes to markets at the same time means pressure on prices
• Sandveld in the market all year round
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SOUTH AFRICAN POTATO INDUSTRY: Determinants of SUPPLY
SUPPLY DEMAND
Production Processing
Imports Exports
Domestic use
Open market
* Source: AgriInspec ** Coversion rate 1.75:1
• Substitutes and compliments: Expenditure on staple food
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SOUTH AFRICAN POTATO INDUSTRY: Determinants of DEMAND
SUPPLY DEMAND
Production Processing
Imports Exports
Domestic use
Open market
Source: BFAP calculations based on IES 2010 data, 2014
Expenditure on potatoes around
10% of total expenditure on
staple foods
Expenditure on potatoes more or
less the same across different income deciles
• Potatoes bought on fresh produce markets – for processing - included
SOUTH AFRICAN POTATO INDUSTRY: Determinants of DEMAND
SUPPLY DEMAND
Production Processing
Imports Exports
Domestic use
Open market
SOUTH AFRICAN POTATO INDUSTRY: Determinants of DEMAND
SUPPLY DEMAND
Production Processing
Imports Exports
Domestic use
Open market
• Size of the harvest vs real prices (Annual)
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SOUTH AFRICAN POTATO INDUSTRY: Price formation
SUPPLY DEMAND
Production Processing
Imports Exports Domestic use
Open market
PRICE OF POTATOES
Clear that when size of the crop increase that real prices drop = Law of supply and demand
Use real prices since this indicates the change in price excluding the effect of inflation, i.e. did prices beat inflation.
1. Supply of potatoes tend to increase from January to March, resulting in lower prices
2. Poor lasting quality 3. Dry land potatoes (Eastern FS
start lifting potatoes) versus irrigated potatoes to markets
• In South Africa “skin finish” is important
4. Producers in new regions sell more potatoes directly, meaning that the buyers now buy from the farm, not the market (obviously at a lower price)
5. Poor consumer spending after the festive season.
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• Take notice of the following when interpreting the graph:
1. Huge variation in prices on a particular market. Different sizes & classes.
2. Huge variation in prices between markets.
• Price barometer only an indication of the ‘’temperature” on the markets up to that particular point in time.
PSA`s “Price barometer’’ (Note: This price is for all markets, all grades & all sizes)
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CORE BUSINESSES ACTIVITIES REGARDED AS IMPORTANT TO THE
POTATO INDUSTRY
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Market Development
Product Promotion
Market Development and Generic Product Promotion Programme
R611 927
R5.9 mill
R9.5 mill
R10,8 mill
2004/05
2009/10 2015/16
R 0
R 2 000 000
R 4 000 000
R 6 000 000
R 8 000 000
R 10 000 000
R 12 000 000
R 14 000 000
Growth from 2004/05 to 2016/17 was 1666%
2016/17
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Market development
• Trade policy and interventions
• Liaison with Government regarding regulation
• Project rebirth to revitalise Fresh Produce Markets
• Packaging standards
• Market information and intelligence
Focus of Generic Product
Promotion • Less is more: Television, radio, print, PR & social
media; & content generation e.g. registered
dietician, chefs, etc.
• Focused targeting approached: LSM 3-7 black
consumers residing in urban areas;
• Clear product position: South African Food Based
Dietary Guidelines & monitoring lifestyle trends;
• Integrated communication approach: employing
multiple promotion tools to convey a singular
message that resonates with targeted audiences.
31
AIDA GUIDES 2016/17 STRATEGY
• The campaign theme for the 2016/17 FY is titled: #WTP
• It is a three pronged strategy that aims to ask three questions:
1. #WTP – Where is the potato?
» Incite consumer awareness and interest
2. #WTP – Why the potato?
» The consumer develops a favorable disposition
towards the brand
3. #WTP – Who’s the potato?
» The consumer forms a purchase intention, shops around,
engages in trial or makes a purchase
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PROJECT RESULTS
• 2 television adverts were launched in September and November, resulting in a combined reach close to 60 million viewers on SABC 1, 2 & 3 (Source eTelmar, Post Campaign en Tams);
• A radio campaign was launched in Sepetmber on SABC’s African language stations: Ukhozi, Umhlobo Wenene, Thobela and Lesedi FM garnering a listenership estimated at 30 million;
• Both the radio and television campaigns were supported by magazine advertising in You & Drum in September, October and December. The joint weekly readership of You & Drum is 6.3 million people;
• R4 million worth of free media exposure had been generated by 20 January 2017.
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Enterprise Development
Small Grower Development
Farm Based Training
Tertiary Skills Development Pipeline
Transformation Programme
R562 897
R5.3 mill
R8.1 mill
R10,1 mill
2004/05
2009/10
2015/16
R 0
R 2 000 000
R 4 000 000
R 6 000 000
R 8 000 000
R 10 000 000
R 12 000 000
Growth from 2004/05 to 2016/17 was 1696%
2016/17
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Enterprise Development To develop Black farmers to grow and produce potatoes commercially in a
sustainable way
ID farmers
Soil analysis; Pre-feasibility study; ID mentor Full business plan; ID
partners (e.g. input suppliers); Implementation
Seed purchase
Mentorship
Technical support &
training
Industry exposure
Y1 = 100%
Y2 = 75%
Y3 = 50%
Y4 = 25%
R822 969
R1.19 mill
R2.96mill R5,58 mill 2010/11
2012/13
2015/16 7 Farmers
16 Farmers
30 Farmers
2016/17
20 Farmers
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Small Grower Development Focus on food security, rural development and job creation
To disseminate production and business information through trials
To give farmers practical training on good potato production practices
Creating a source of food security through product and income generation
R71 108
R168 379
R162 359 R149 482 2012/13
2013/14
2015/16 55 Projects last 5
years
More than 4000 people reached
Partnerships with Government in KZN and
Eastern Cape
14 projects for 2016/17
2016/17
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Farm Based Training, Bursaries and Workplace experience
Uplift the skills of the Black producers with technical and business skills Development of young talent through college, technicon and university studies Give young individual workplace experience
Identify and develop new farmers’ skills; Bursary applications
Provide short courses; Select student
Financial Management, Record & Book Keeping, Plant Production; Undergraduate and Graduate student
2011/12
2012/13
2013/14
R1.18 mill
R1.81 mill
R2.00 mill R1.33 mill
R1.282 mill
R1.328 mill
2014/15 Bursaries for 15 student in 2017 (118
since 2008)
10 Internships and workplace experience
in 2015/16
Enterprise Development Farmer
training
2015/16 2016/17
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Research
Technology transfer
Research and Development
R2.6 mill
R5.9 mill R10.8 mill
R9,8 mill 2004/05
2009/10
2015/16
R 0
R 2 000 000
R 4 000 000
R 6 000 000
R 8 000 000
R 10 000 000
R 12 000 000
R 14 000 000
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04
/05
20
05
/06
20
06
/07
20
07
/08
20
08
/09
20
09
/10
20
10
/11
20
11
/12
20
12
/13
20
13
/14
20
14
/15
20
15
/16
20
16
/17
Growth from 2004/05 to 2016/17 was 277%
2016/17
Budget 2016-17
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post grad bursaries 4%
virus & aphids 13%
insect pest management
5%
nematodes 2% potato quality
9%
production systems 12%
fertilisation 2%
soil-borne diseases 19%
cultivar evaluation & maintenance
5%
knowledge transfer 14%
volunteer potatoes 3%
water use & quality 6%
Information and Knowledge Transfer • Website used to transfer
knowledge:
Fact sheets (10)
Final reports (14)
Posters (2)
Literature reviews (5)
Best practice booklets (3)
Chips articles (>200)
Workgroup trial reports (88)
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• Technical courses: move from centralised courses in 2013 and 2014, to regional events
2013: Young farmers course. Seed potatoes (Western FS) 2014: Soil health (Sandveld) 2015: Irrigation scheduling (Limpopo x2, SW FS, NW). Pack House sanitation: Limpopo (x2), SW FS, Eastern FS 2016: Sandveld (x2), Limpopo, Mpumalanga, Eastern FS, KZN.
• Research Symposium (25-26 July 2017; Club Mykonos
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Data & Information
Intelligence
Industry Information
R2.6 mill
R5.7 mill R7.2 mill
R7.5 mill 2004/05
2009/10
2015/16
R 0
R 1 000 000
R 2 000 000
R 3 000 000
R 4 000 000
R 5 000 000
R 6 000 000
R 7 000 000
R 8 000 000
R 9 000 000
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04
/05
20
05
/06
20
06
/07
20
07
/08
20
08
/09
20
09
/10
20
10
/11
20
11
/12
20
12
/13
20
13
/14
20
14
/15
20
15
/16
20
16
/17
Growth from 2004/05 to 2016/17 was 188%
2016/17
Going beyond just data and information
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Industry strategic information available for distribution
• DAILY INFORMATION
• Morning report
– Potatoes & Onions
• Afternoon report
– Potatoes & Onions
• SMS
• WEEKLY INFORMATION
• Weekly report
– Potatoes & Onions
• Crop year report (“Kop&Stert”)
• Crop estimates (bi-weekly)
• MONTHLY INFORMATION
• Inventory turnover – FPMs
• Age analysis of carry-over stock – FPMs
• Prokon analysis
• Market statistics
• Market comment
• SEASONAL INFORMATION
• Post seasonal crop report
• Production costs (main regions)
• Size of seed industry
• Size of processing industry
• ANNUAL INFORMATION
• Agri benchmark report
• Transport costs
• Buyers on FPMs
• Potato industry model
• FPMs trend analysis
• A Perspective on the Potato Industry
1
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4
3
2
• On the web page, in articles and in presentations various other information is reported as well.
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PSA
Regional Services
Potato producers
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Establishing and maintaining the necessary structures and platforms at regional level (see later)
Serve as an extension of PSA`s core businesses in terms of executing the core businesses-related activities within the potato production regions (communication & technology transfer)
…, thereby enhancing the sustainability of potato producers …
Regional Services
1
2
3 4
5
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Information
Producer Services
Marketing
Communication
Administration
Research & Development
Transformation
• Green tours and research days • Information exchange • Potato Workgroups
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• Enterprise development • Farm based training • Project support
2
•Training • Technical Support • Production Statistics • Information Exchange • Quality Assurance (IRD)
3
• Festivals • Market visits • Image Building • Marketing Related Queries
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• Tele-conferences • Information Exchange • Producer Structures • E-Newsletters • CHIPS • Website
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• Budget Management • Management Reports • Monthly Reports • Training
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• Information Exchange • Input Cost Surveys • Crop Estimates • Crop surveys
7
PSA CORE REGIONAL SERVICES ACTIVITIES
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• Electronically available on website
Communication
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www.potatoes.co.za
Total number documents on site:
3369
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NEWSLETTER
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• Market Commentary in video on your phone • Every 2nd Thursday just after 18:00 • How to install
1. If WhatsApp is not installed on your smart phone, find it under the download application.
2. IPhone and Nokia in the AppStore, Samsung in the PlayStore.
3. Store the number (0834602110) in the address list on your phone under a name of your choice (eg. PSA WhatsApp).
4. The reason why you have to store the number on your name is to ensure that your contact details are kept confidential.
5. If this number is not stored on your phone, you will not receive the message.
Governance
Potatoes South Africa Structures
PSA (NPC)
Board of Directors
Audit Committee HR Committee
Generic Product Promotion &
Market Development
Research & Development
Potato Industry
Forum (PIF) (DAFF)
Potato Industry Development Trust (PIDT) • Receive statutory levies and authorise
expenditure
Risk & Audit Committee
National Agricultural Marketing Council
(NAMC)
Potato Industry
Forum (PIF)
Industry Information Transformation
Seed Potato Growers Forum
Seed Potato Growers
Committee
Governance and Structure
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Thank you
