Potato session: agri benchmark Cash Crop Conference
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1 Potato session: agri benchmark Cash Crop Conference Des Moines, Iowa, USA, August 214 Article by Pieter van Zyl, Potatoes South Africa Background on agri benchmark agri benchmark is a global network of agricultural economists, advisors and farmers. It is managed by the Institute of Farm Economics of the Johann Heinrich von Thünen Institute, based in Braunschweig, Germany. The network is based on the principle: Put your country in and get the world back. Thus, all members have access to the data that has been collected throughout the world. Additional to the central analysis of the data in Braunschweig each member can carry out and publish own analyses. During the annual agri benchmark Cash Crop Conference these results are presented and discussed among all participating partners. This year s annual conference was held in Iowa, USA. As was the case last year a special session on the economics of potato production was held. The agri benchmark potato initiative provides a platform to compare typical potato farms across the globe. By taking a snapshot of the performance of the farm, producers can evaluate various elements in their production system and cost structures with other producers in South Africa and other countries. An added benefit of such a network is that key agricultural trends are captured and distributed across the network. Typically these trends include mechanisation trends, input related trends, productivity as well as other information and trends on production systems. Currently there are 13 typical potato farms in eight (mainly European) countries in the database. BFAP (Bureau for Food- and Agricultural Policy at the University of Pretoria) is the co-worker to the SA potato industry. Divan van der Westhuisen, agricultural economist at BFAP, extracted the raw data from the database and constructed the figures used in this article. agri benchmark: Potato session Background: Production processes in Europe: European potato farmers either sell their produce from the land during harvesting time (round about August/ September till October/November) or store it in storing facilities for up to nine months, depending on the movement in market prices. They sell potatoes in bulk. tons per hectare $42 $ $337 $ $ $133 $ Yield (t/ha) 213 Yield (t/ha) 212 Market price (US$/ton) $45 $4 $35 $3 $25 $2 $15 $1 $5 producer price: US$ per ton Figure 1: Yield per hectare versus Producer price per ton Page 46 CHIPS November/Desember 214
2 Ekonomiese Nuus Economic News $6, $5, $5,117 $5,334 $4,61 $4, US$ per hectare $3, $2, $1, $2,714 $2,122 $2,618 $1,438 Seed Fertilizer Plant protection Total Establishment Figure 2: Seed, fertilizer & plant protection cost per hectare (establishment cost) $14 $12 $117.5 $117.7 US$ per ton $1 $8 $6 $4 $2 $6.3 $53.4 $67.13 $45.94 $83.74 Seed Fertilizer Plant protection Total Establishment Figure 3: Seed, fertilizer & plant protection cost per ton In South Africa table producers are the owners their pack houses from where they market their produce. Produce are sold on the fresh produce markets whereas the European producer sells his produce at the farm, unpacked. The selected figures in this article were used during the session on the economics of potato production. (The German co-worker presented a much more detailed presentation.) Data from seven typical farms (producing table/fresh potatoes) in the following countries were used in the analysis: Germany Poland United Kingdom South Africa: four farms Eastern Free State: rain fed production (EFS in graphs) Limpopo (LIM in graphs) Sandveld (WC in graphs) KwaZulu-Natal: seed production (KZN in graphs) Results In Figure 1 the yield per hectare realised and producer prices are illustrated. It is clear that the yield per hectare realised in South Africa compares well with yields in Europe for both 212 and 213. The Limpopo farm (ZA9LIM) realised the highest yield in both years. Keep in mind that the farm in the Eastern Free State (ZA16EFS) is cultivating potatoes on rain fed production and therefor realise lower yields. The producer prices per ton in US dollar (213) received by South African farmers are higher, according to the figure. Their prices are being realised on the fresh produce markets (value adding is being done) whereas the European farmer sells his potatoes at the farm, in bulk and unpacked. CHIPS November/December 214 Page 47
3 US$ per ton $18 $16 $14 $12 $1 $8 $6 $4 $2 $ $ $11.44 $1.91 $88.67 $86.13 $78.56 Seed Fertilizer Plant protection Diesel Hired labor Total Figure 4: Establishment cost, Hired labour & Diesel cost per ton $25 $2 US$ per ton $15 $1 $5 Seed Fertilizer Plant protection Diesel Hired labor Marketing cost Packing material Transport Figure 5: Establishment + Operating + Marketing/value-adding (cost per ton) In Figure 2 seed, fertiliser and plant protection cost per hectare (establishment cost) for the respective typical farms are illustrated for 213. Both the Limpopo and KwaZulu-Natal (ZA9KZN) farms have a relatively high seed cost per hectare. Both farms do not want many large tubers (large tubers = lower producer price) and therefore have a high planting density (between four and five tons of seed planted, while the European farms plant less than three tons of seed per hectare. This will be discussed later. Both the Limpopo and Sandveld (ZA15WC) farms have a high fertiliser costs per hectare. Reason: Mainly sandy soils which means more fertiliser has to be applied. Because of the sandy soils these two regions always realise a good quality of potato and also realise high market prices. It is clear that the costs per hectare for South African farms are much higher, except the farm in the Eastern Free State which does rain fed production with a consequent lower yield. The next figure investigates the costs per ton. In Figure 3 seed, fertiliser and plant protection costs per ton for the respective typical farms are illustrated for 213. When comparing the cost per ton for potatoes, it is clear that three South African farms (Limpopo, Sandveld and KwaZulu-Natal) still have a relatively high cost structure. The Eastern Free State Farm has the lowest cost per ton. Despite the fact that the latter do dry land cultivation, growers in the region are low cost producers. Overall it can be said that the risk involved in rain fed cultivation is much higher than is the case with irrigated potatoes. In Figure 4 establishment cost, hired labour and diesel cost per ton are illustrated. When adding the hired labour and diesel costs to the establishment costs (see Figures 2 and 3) it is clear that the Eastern Free State still realised the lowest cost per ton in 213. Only the farm in Germany has a relatively low Page 48 CHIPS November/Desember 214
4 Ekonomiese Nuus Economic News US$ per hectare $25, $2, $15, $1, $5, $24,537 $16,646 $13,232 $12,86 $9,515 $9,48 $9,65 $8,225 $7,658 $5,976 $4,541 $5,344 $3,547 $3,359 Seed Fertilizer Plant protection Diesel Hired labor Marketing cost Packing material Transport Total Market reveneue Figure 6: Establishment, Operating & Marketing costs versus income per hectare labour cost, because it is highly mechanised (see also high diesel cost). This farm also realised the lowest market price. Machines in the harvesting process lead to mechanical damage and this may be the reason that this farm realised the lowest market price. One cannot ignore the fact that the fresh potato enterprise always will be labour intensive. In Figure 5 the establishment cost, operating cost as well as value adding cost are illustrated. Only the South African farms do value adding and thus the following costs are indicated in Figure 5: Marketing costs (market and agent commission), packaging material and transport to the fresh produce markets. It is therefore imperative that the South African farms do receive a higher producer price, as is depicted in Figure 1. In Figure 6 the income per hectare is added to the cost items used in Figure 5. The difference between the income and the total cost of the reflected cost items can be regarded as the gross margin. The Limpopo and Sandveld (WC) farm realised the highest gross margin, followed by the United Kingdom and KwaZulu-Natal farms for 213. The farm in Germany realised the lowest gross margin per hectare while the farm in the Eastern Free State realised the second lowest. It is clear that the Eastern Free State farm realised high technical efficiencies (see Figures 3 and 4), but do not do well in terms of total financial performance. In Figure 7 nutrient application rates and fertilizer use efficiency (nitrogen productivity in this case) are illustrated. Only the Sandveld farm (WC) does have a relatively high nutrient application rate, mainly because of sandy soils. The nitrogen efficiency is also the lowest of the farms which means for every one kilogram of nitrogen applied 152 kilograms of potatoes were realised. The KwaZulu-Natal farm with the highest nitrogen efficiency (46 kilograms of potatoes per one kilogram of nitrogen) applied the lowest nitrogen per hectare, namely 85 kilograms. In Figure 8 the seed productivity for the respective farms is illustrated. The three South African farms to the right in Figure 8 planted between 3.6 and 4.6 tons of seed per hectare in 213 while the three European farms planted between 2.2 ton and 2.8 tons of seed potatoes (green bars). The European farms realised more potatoes per kilogram of seed planted (higher seed productivity) than the three mentioned South African farms. The Eastern Free State farm planted less than one ton of seed per hectare and realised the highest seed productivity, namely 35 kilograms of potatoes for each kilogram of seed planted. Closing remarks The general observation that can be made is that South African typical farms performed relatively well when compared to typical farms in Germany, Poland, and the United Kingdom. Secondly, from a price perspective, South African producer prices are higher than selective Northern Hemisphere countries. Irrigation yield levels in South Africa outperformed the sample space average. A risk, especially in an environment with fluctuating oil and fertiliser prices, exists in the Sandveld production system and cost structure when considering high energy costs. The high application rates of fertiliser have a significant impact on the cost structure of these farms. In addition, this causes productivity indicators to drop substantially and the question really arises whether these patterns are sustainable. Fortunately the Sandveld producers do produce a good quality potato and receive relatively high market prices. C CHIPS November/December 214 Page 49
5 kilogram per hectare N-input P-input K-input Nitrogen productivity kg potatoes / 1kg of N Figure 7: N:P:K application rates and Nitrogen productivity (kg yield per 1 kg of N applied) Kilograms per hectare ,646 4,275 3,658 2,635 2,8 2, Kilograms potatoes / 1kg of seed Seed application (kg planted per ha) Kg potatoes harvested per 1kg of seed planted Figure 8: Seed productivity (kg yield for every 1 kg of seed planted) Page 5 CHIPS November/Desember 214
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