Soybean Business Flowering in South Africa

South Africa’s Oilseed area for MY 2022/23 (planted later in 2022) will continue its upward trend of the past ten years and expand by three percent to reach a record level of 1.7 MHa. The current upsurge in Oilseed prices and an expected flattening of corn area in the current high input cost environment support the growth of Oilseed plantings. The expansion of the Oilseed area will mainly be driven by Soybean plantings, with the Sunflower area expected to stay flat, albeit at relatively high levels.

For the past two decades, South Africa has experienced a positive trend in commercial area planted with summer rainfall field crops. As a result, South African farmers planted a 25-year high of 4.3 MHa with summer rainfall field crops in MY 2021/22. However, this positive trend is mainly driven by an increase in Soybean plantings, which grew more than seven-fold, while there is a definite decline in the areas planted with corn, peanuts, and sorghum. The Sunflower area stayed relatively flat for the past 20 years.

The key factors contributing to this positive trend in Soybean planting include investments in new Oilseed processing plants, an improved affinity by farmers to use Soybeans as a rotational crop with corn, and better Soybean prices. In addition, seed companies introduced higher-yielding cultivars after introducing a statutory seed levy. The seed levy is payable to the South African Cultivar and Technology Agency (SACTA) annually. SACTA was formed as a non-profit company to guarantee that breeding and technology levies are paid to seed breeding companies and plant breeder rights holders, ensuring continuous research and cultivar development.

South African Farmers planted a record area of 925,300 ha with Soybeans in MY 2021/22, an increase of 12 percent from the previous marketing year. As a result, Soybeans now represent more than 20 percent of the area planted with summer rainfall field crops, while 20 years ago, it was only four percent. Post foresees that this positive trend in Soybean plantings will continue in MY 2022/23. The current high input cost environment will also contribute to expanding Soybean plantings. In general, Soybeans use fewer farming inputs, especially fertilizer, than corn, so many producers will choose to plant Oilseeds in the next season.

The cost of fertilizer and herbicides more than doubled for South African producers, driven by increased global prices. The generally higher commodity prices, specifically grains, and Oilseeds, provide financial support to absorb some of these costs. South Africa uses around 2.2 MMT of fertilizer annually (one percent of global usage), of which about 50 percent is used by corn farmers.

South Africa imports more than 70 percent of its fertilizer annually. With Russia a leading exporter of fertilizer materials, the Russia-Ukraine war is adding upside risks to fertilizer prices and availability. This disruption could push fertilizer prices even higher than the spikes experienced in the past 18 months and limit an expansion in the corn area in favor of Oilseeds. Post forecasts an eight percent expansion to 1 MHa in the area planted with Soybeans in MY 2022/23. Under normal weather conditions, South Africa could realize a record Soybean crop of about 2 MMT in MY 2022/23.

The Sunflower market in South Africa is mature and finely balanced. When prices rise towards import parity levels, expansion occurs, which typically causes a correction in the market, and prices decline to export parity levels. As a result, profitability deteriorates, and producers start cutting back on the Sunflower area. However, due to rising global Sunflower prices pushing local export parity prices towards record levels, Post expects the Sunflower area to remain flat at a relatively high level of 650,000 ha in 2022/23 MY.