Have spud farmers had their chips?
Expiry of import tariffs could open floodgate of cheap French fries
● SA’s potato farmers may be undercut by imported chips this season after import tariffs lapsed, exposing them to the potential dumping of processed potatoes from the EU.
This comes on the back of higher costs and the closure of restaurants during the hard lockdown last year, which also hurt the spud industry.
Willie Jacobs, CEO of Potatoes SA (PSA), said this week the latest four-year import duty regime expired in February. Reinstating it would take about six months.
PSA spokesperson Immaculate Zinde, writing in the industry’s publication Chips in March, said the anti-dumping tariff had contributed to a 61% drop in imports of frozen French fries into SA from 46,904 tons a decade ago to 18,417 tons last year.
Jacobs noted that last year’s low import figure was also a result of the Covid pandemic, which severely curtailed global trade and operations at local harbours, particularly in the first months of lockdown.
Operations are now gradually returning to normal at most local ports, which could mean a surge in frozen potato-chip shipments. Without tariff protection, local producers cannot compete with the lower prices of imported product from the EU, where potato farmers are highly subsidised.
The same cannot be said for SA’s farmers, who say their costs are on the rise and they will probably have to cut jobs.
This week the spike in fuel prices has added to the financial pressure on farmers, who also have to budget for the 15% increase in Eskom charges — their packing sheds are heavy electricity users — and the increase in the minimum wage for farm workers to R21.69 an hour.
Jacobs expects labour-intensive farms to cut 10,000 jobs this year as financial pressures intensify, and he expects this trend to continue in 2022, resulting in up to 30% of the workforce being laid off. The potato industry currently provides employment for 50,000-60,000 people.
The increased costs are adding to the strain of repaying the short-term debt that farmers take out to see them through a planting season.
Loans provide farmers with the cash flow to buy seed, fertiliser and fuel, pay wages, and meet other input costs including electricity and water.
Irrigation farmers cultivating potatoes pay between R165,000/ha and R220,000/ha for water, while dryland farmers shell out between R70,000/ha and R90,000/ha. This is the cost of a season’s water supply over an average six-month period.
In SA, an estimated 58-million hectares are planted to the tubers, enough to supply the local market and for export. About 7% of production is shipped to members of the
Southern African Development Community.
Jacobs said the closure of restaurants and the tourism industry during lockdown resulted in a 30% drop in potato consumption.
Climate change also plays a role in lower potato production. Erratic weather such as unusually heavy rainfall at the wrong time can prevent planting, and other unexpected changes in conditions can affect crop quality and force the potatoes to be harvested prematurely.
All these factors impact the price the potatoes fetch and a farmer’s income.
In some areas in the Free State a bacteria that thrives in wet weather ate into the potatoes and “farmers were digging up holes”, said Jacobs.
Potato farmers themselves contribute R8bn to agriculture annually while the secondary industry, including packaging and logistics, adds R25bn, said Jacobs.
He said farmers were trying to address the challenges by improving the efficiency of their operations. By using better quality seed and improving crop protection they were achieving higher yields.
To ensure a decent harvest, land used for cultivating potatoes needs to lie fallow for about four years before being replanted, Jacobs said, making these interventions vital to a farmer’s survival.
Demand for potatoes is expected to continue increasing, after doubling in the past 10 years. The PSA estimates that farmers will increase production from 2.5-million tons in 2015 to 2.8-million tons in 2025.
But this does not necessarily mean more money in farmers’ pockets.
In November last year the price of a 10kg pocket of potatoes spiked to about R140, compared with about R30-R40 six months earlier, but this was an anomaly caused by production losses after unseasonal frost decimated crops in Limpopo, one of the largest growing regions.
On average farmers now get R40 a pocket, but to be financially viable they need about R65 a pocket, said Jacobs.
Zinde said that for the import tariffs to be reinstated, the Potato and Vegetable Processors Forum (PVPF) — which includes PSA, McCain Foods SA, Nature’s Garden and Lamberts Bay Foods — had to lobby the government. “The PVPF is working tirelessly to prevent a surge in imports of frozen potato products that are priced below fair market value,” she wrote in Chips.
The department of trade, industry & competition and the department of agriculture, land reform & rural development did not respond to requests for comment on plans to reinstate the tariff.
The PVPF is working tirelessly to prevent a surge in imports Immaculate Zinde
Spokesperson, Potatoes SA