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Real Economy News in Real Time
R/€ = 16.17 Change: 0.06
R/$ = 14.28 Change: 0.06
Au 1244.12 $/oz Change: -4.19
Pt 786.48 $/oz Change: 5.57
 
 
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Agribusiness outlook remains cautious as lack of rainfall issue looms

5th December 2018 BY: Simone Liedtke
Writer
Agbiz agribusiness research head Wandile Sihlobo
Photo by: Simone Liedtke
Agbiz agribusiness research head Wandile Sihlobo

The agriculture sector’s optimistic outlook at the start of the 2018/19 production season has changed, says Agbiz agribusiness research head Wandile Sihlobo.

Despite the season having started with farmers aiming to lift the summer grain and oilseed planting activity by 5% from the previous season to just over four-million hectares, Sihlobo on Wednesday warned that a lack of rainfall remains a big concern for the industry.

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The South African Weather Service last week offered an optimistic outlook pointing towards the possibility of above-normal rainfall between December and February 2019, but there has, so far, been little evidence of an improvement in rainfall.

Additionally, fears of an extreme dryness, typically called “El Niño”, later in the 2019 summer season put a further damper on spirits.

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While there are a number of reasons that were cited as causes for despondency in the sector in the Agbiz and Industrial Development Corporation’s agribusiness confidence index, which was released on Wednesday, Sihlobo noted that the weather impact featured prominently.

“. . . the weather remains a key factor that will determine the growth prospects of the South African agricultural economy in the coming year,” he told media attending the Agbiz conference, which focused on discussing the agribusiness outlook for 2019.

On the other hand, reflecting farmers’ plans, tractor sales reached 5 818 units in the first ten months of the year, representing an increase of 9% from the same period last year.

At the time, good, yet erratic and widespread rainfall enabled farmers to start planting.

However, planting activity has proved to be a challenge in most areas, particularly the central and western regions of South Africa. At the same time, Sihlobo warned that the optimal planting period is narrowing for most crops.

As a result, he stated that this year would end on a mixed note, considering that dry and hot weather conditions across South Africa are currently a source of despondency in the South African agriculture sector.

Sentiment, he said, remains subdued as can be seen in the consistent deterioration in the agribusiness confidence index, which fell to its lowest level in nine years in the fourth quarter.

While the agricultural gross domestic product rebounded from that of the third quarter, growing by 6.5% quarter-on-quarter, Sihlobo warned that the recent uptick is no cause for celebration.

“The recovery could well be temporary, and weak going forward as the weather outlook, which initially painted a positive outlook, proves to be a key challenge again for summer crop growing areas and could then negatively affect the performance of the agricultural sector in 2019.”

Overall annual performance will be largely dependent on weather conditions in the summer rainfall areas.

Meanwhile, during the 2017/18 season, 809 931 t of white maize was exported.

The surplus white maize was also used for animal feed, and although South Africa has been a net exporter of white maize during the past few years, almost 1.5-million tonnes of yellow maize was exported during this season.

Possible new export markets are China, Malaysia, the Philippines and Middle Eastern countries.

Additionally, the new Namibian market regulations which include food safety assessment, transportation and labelling requirements will have a huge impact on South Africa’s trade with Namibia.

Statutory reporting to the South African Grain Information Service of intent to import or export is now in place for maize and wheat, and may also apply to oilseeds in the future, as both soybean and sunflower are imported, Sihlobo said.

Additionally, Agbiz Grain has established a relationship with State-owned Transnet to collaborate on the migration from road to rail.

Agbiz Grain also continues to play a role in the Forum Steering Committees of all the grains and oilseeds, Sihlobo added, noting that the grading regulations for wheat will be improved to bring it more in line with international standards and at the same time provide an opportunity to compensate local farmers for producing good quality wheat.

Changes will be implemented in the 2019 wheat season after the Department of Agriculture, Forestry and Fisheries has published the new regulations and the JSE has made the necessary changes.

In 2019, a further relaxation of the release criteria for new wheat cultivars and wheat research priorities will be investigated in order to further stimulate the revival of the local wheat industry, which is now believed to be firmly on track.

ECONOMY

The private sector, including the agribusiness sector in particular, can play a major role in South Africa’s economic turnaround on condition that real public–private partnerships are established to ensure good planning, execution and counter-accountability, Agbiz CEO Dr John Purchase said on Wednesday.

However, constructive engagement is needed within the economic cluster of Cabinet, translating into action plans through the 2019 State of the Nation Address and the 2019/20 National Budget, he added.

He explained that the damage to South Africa’s economy over the past decade is enormous and it will take “a mammoth effort” by all South Africans to turn the country back onto the road to growth and prosperity.

“However, political uncertainty, coupled with the 2019 general election, still holds sway and clarity on critical issues, such as the African National Congress and Economic Freedom Fighter’s support for land expropriation without compensation, which, in all probability, will only become apparent after the election and may very well be determined by the election results,” Purchase said. 

EDITED BY: Chanel de Bruyn Creamer Media Senior Deputy Editor Online
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