The Bureau for Food and Agricultural Policy (BFAP) has warned that the South African fruit farming sector, which is the largest employer of farm workers in the country, was, over the next decade (2022 to 2031), facing a two-pronged challenge of falling incomes and rising costs. This would follow a decade of good prices recorded by most of the fruit types grown in the country.
During the decade 2012 to 2021, fruit farming enjoyed “excellent returns’, the BFAP pointed out. That had been the result of good prices in export markets plus increased efficiencies (which took the form of improving yields) and the ongoing depreciation of the Rand. This meant that fruit farms had been able to absorb increased labour costs, without having to reduce their workforces.
While general consumer price inflation of all goods during the past decade had been about 5%/y, for farm labour, nominal inflation had been 11.6%/y. There had been sharp increases in farm workers’ wages in both 2013 and 2021. The result had been “solid progress” in rural poverty alleviation.
“Based on the current market outlook we anticipate strong downward pressure on prices for most fruit exports from South Africa due to headwinds facing the global economy and increased competition from the likes of Peru and Chile,” cautioned the BFAP. “Farm income is however a function of price times quantity, which implies that price declines can still be offset by higher volumes sold. We do expect more fruit entering the market as more trees come into production, but not enough to beat the cumulative impact of price declines and continued increases in farm costs.”
Input costs were increasing and most were expected to continue to do so over the coming decade. Fertiliser prices had already recorded major increases and were expected to stay high through next year, before declining until 2025-2026 (but still remaining well above 2020 levels), after which they would start to rise again.
“Labour makes up 20%-45% of the total variable cost of fruit farming, depending on fruit type, and our analysis on farm profitability in many of South Africa’s major fruit industries suggest that gross margins will decline substantially compared to the previous decade,” reported the BFAP. “If these projected price declines are realised in conjunction with the expected cost inflation at farm-level, the most likely outcome will either be to employ fewer workers or cut back on wage increases for those who earn wages higher than the legislated minimum, or both. There is therefore a need for serious dialogue between the relevant stakeholders on how to continue the balancing act of sustaining the financial viability of farm businesses with the need to uplift and improve farm worker livelihoods.”