Since the initial ban on liquor sales, owing to Covid-19 regulations, there has been an accumulation of supply of raw materials, some of which could not be stored for extended periods and which also did not have any export opportunities, highlights agriculture industry body Grain SA.
Alcohol is produced from raw materials derived from agriculture, and involves various products, including malt sorghum, malting barley, maize, potatoes and grapes. Some of the products are directly dependent on breweries in terms of demand and any disruption has far-reaching consequences.
Malt barley is an important crop within the winter grain production area that has limited crop choices.
Grain SA explains that this season saw good malting barley plantings and the weather contributed to a good season so far. “Unfortunately, with the liquor ban in place, a substantial surplus can build up with limited export opportunities, which will result in significantly fewer plantings in the next season.”
This directly affects producers in terms of financing profiles, crop rotation systems and the control of ecosystems. This puts significant financial pressure on an area that has already experienced a lot of pressure with droughts over the past few seasons and where agricultural debt is at record levels, says Grain SA.
Additionally, the company notes that the subsequent second ban on liquor has only put more pressure on the system and has far-reaching financial and ecological consequences.
The ban further impacts small-scale producers, who are supported in various programmes by the liquor companies. Not only will the access to markets for producers reduce owing to surpluses, but the risk that support will be discontinued owing to financial losses are becoming a reality.
The producer organisation added that it is worrying that quick decisions such as the ban on liquor are being made with direct consequences on crops that were still affected by drought until as early as last year.
“South Africa's producers do not have subsidised crop insurance or drought relief programmes like competing countries, so a producer can only farm himself out of a difficult financial position. If the demand is taken away in good production years, the direct effect is the same as a drought – especially with limited export opportunities.”
Grain SA further points out that the ban is an instant decision that will be implemented rapidly with far-reaching consequences.
Meanwhile, the wheat industry in the same production area has been waiting since March for the announcement on the new wheat import tariff. This tariff is specifically in place to support producers without any disadvantageous impact on consumers.
The company concludes that when looking at competitor countries, they offer enormous support for their agriculture sector as a whole where similar decisions have been made owing to the pandemic.
“Going forward, it is important to consider how local producers will be supported as a result of this ban and whether the consequences of this decision have been consulted and researched. The current scenario is causing great concern among producers as single-buyer markets are now disappearing and the agriculture sector is suffering.”