FINANCIAL IMPACT OF
DROUGHT ON GROWERS


Richard Nicholson

Economic Research Manager at South African Canegrowers’ Association.


The South African Canegrowers’ Association 2015/16 large-scale grower cost survey results have recently been completed.


The data gathered and analysed for the 2015/16 season shows the effect the drought has had on growers. The season was a poor one in terms of yield, especially for the dryland growers where in some cases yields halved. The total dryland crop decreased by 34% due to the drought with an overall industry decrease in total crop of 26% compared to a normal season. 


This meant that for some growers the decision to harvest or not to harvest at all, was a difficult one as they may not have made a worthwhile return on their cane. The large-scale grower cost survey reflects the reduced revenue achieved by growers and the cost saving that had to be implemented to survive the drought period.



Figure 1: Sugarcane production in the 2015/16 season compared to the 2013/14 season


The grower data gathered and analysed showed the following results. 


  • Real (inflation adjusted) revenue was 11% lower than the previous year
  • Real operating expenditure decreased by 6% compared to the previous season 
  • Real net operating income decreased by 28% due to the severe drought in this season.



Figure 2 shows the significant decline in percentage difference from the previous season for Real Revenue, Real Total Fixed and Variable Costs and Real Net Operating Income. 


The decreases over the 2014/15 and 2015/16 seasons from the good season of 2013/14 can be attributed to poor yield and cost saving measures growers implemented during the drought affected season. Better rainfall in the 2016/17 season showed slight improvement in yield but reinvestment in terms of replanting and normal farming practice is needed to improve yields and margins. This is only enabled by better rainfall.






Figure 3 shows the percentage breakdown of the costs attributed to cane production. 


There were some noticeable changes in costs per hectare due to either the low yield or cost saving measures instituted by growers to see through the drought period. Some of the major costs and their changes compared to the 2014/15 season are listed below; 


  • Real Farm Staff Costs decreased by 1%
  • Real Chemical and Fertiliser Costs decreased by 14% and 3% respectively
  • Real Fuels and Lubricants decreased significantly by 23% compared to the previous season, this can be attributed to the lower machine usage on farm due to the drought
  • Real Cane Transport Costs also decreased by 9% due to lower yield harvested in the 2015/16 season. 





arrow_upward