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Review of South African oil crops sector

05 July 2011

According to a recent Global Agriculture Information Network report published by USDA, the area under oilseed in South Africa is set to increase in 2011/12, due to a recovery of oilseed prices and reduced maize plantings. A record crop of 1.626 million tonnes is expected. This reflects a 70% increase in production of sunflower seed to 831,220 tonnes, and a 26% expansion of the soybean crop to an estimated 709,350 tonnes. Production of oilseed meal and oil is estimated at 496,000 tonnes and 334,000 tonnes respectively. The expansion of soybean production in South Africa in the past 5 years is largely driven by growing farmer recognition of ‘the value of soybeans in a crop rotation system with corn’. The upward trend in soybean plantings using GM varieties is expected to continue, with production of 1.62 million tonnes expected by 2020.

Local demand for soybean meal in recent years has expanded as a result of increased South African poultry production. Overall, current consumption of oilseed meal and oil in South Africa is around 1.1m and 800,000 tonnes respectively.

With a shortage of crushing capacity, South Africa has become an exporter of soybean (122,814 tonnes in 2010, with this expected to expand to 245,000 tonnes in 2011. The main export markets are Malaysia (66,022 tonnes), Indonesia (53,609 tonnes) and China (2,300 tonnes). Efforts are underway to address this situation by stimulating investment in soybean crushing. This includes the retention of import duty (except for the EU and SADC). These duties have been retained despite lobbying from the animal feed industry for immediate duty rebates.

The bulk of South African soybean meal imports come from Argentina (98.7%), with Argentina also providing 70% of South Africa’s imports of sunflower oil. However, Germany, Netherlands and Spain were the source of 32%, 21% and 10.8% respectively of South Africa’s soybean oil imports in 2010. This needs to be seen in the context of a doubling of South African soybean oil imports in 2010 compared to 2009. This gave rise to a situation where the share of Argentina and Brazil of soybean oil imports into South Africa fell from 67.9% and 25.7% respectively to 30.3% and 5.6% respectively.

Against the background of the current shortfall in supply of oilseed products in South Africa, it should be noted that the EU enjoys duty-free access to the South African market for oilseed products. This gives EU exporters tariff advantages over Argentinean and Brazilian suppliers.

Table: South African tariff for imports of oilseed products

Product Sunflower seed Soybeans Peanuts Soybean meal Sunflower meal Soybean oil Sunflower oil
General tariff 9.4% 8% 10% 6.6% 6.6% 10% 10%
EU/SADC tariff free free free free free free free


Editorial comment

It is not clear to what extent the duty-free access enjoyed by EU exporters of soybean oil, compared to the 10% tariff paid by their competitors in Argentina and Brazil, is a factor in the increased market share that EU suppliers have gained in South Africa’s expanding soybean-oil import market. However, it is precisely this type of competitive edge that the EU’s FTA policy is designed to deliver to EU exporters of food and agricultural products.

This raises an interesting dimension to the current discussions on the MFN clause in the SADC–EU EPA negotiations. If SADC EPA configuration member governments agree to the inclusion of an MFN clause in the SADC–EU EPA, it would make it very difficult by the nature of this very principle for the SADC EPA configuration governments to resist the inclusion of a similar provision in any SACU–Mercosur agreement (the Mercosur group includes Argentina and Brazil). The inclusion of such a provision in a SACU–Mercosur agreement however would remove the preferential margins which EU soybean oil exporters currently enjoy on the SACU market.


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