The South African agribusiness sector has maintained positive results for the past 5 quarters, however, the sector weakened by 5 points in Agbiz’s Agribusiness Confidence Index during the 4th quarter of 2017.
Factors that contributed to the confidence decline are bad weather conditions in the Western Cape, uncertainty about land reform policy and the weak international demand for South African maize.
AGRICULTURE AND AGRIBUSINESS PROSPECTS
Agbiz’s Agribusiness Confidence Index (ACI) declined by 5 points to 49 points in the 4th quarter of 2017. Readings of 50 points or below indicate contraction in South Africa’s agribusiness activities.
“This essentially means agribusinesses are more downbeat about business conditions in the country. The Index was last seen in this contractionary territory during the drought season of 2015 and earlier part of 2016,”said Wandile Sihlobo, Agbiz Head of Agribusiness Research.
Good rains in summer rainfall regions in January resulted in an increase in maize crops from the disastrous 2015/’16 drought. The low maize price severely affected grain farmers, however, it had huge benefits for various value chains, including the poultry, dairy and red meat industries. This resulted in a slow inflation from double-digit figures in 2016 to 5,3% year-on-year in October 2017.
The outlook for the summer rainfall regions are mixed for 2018. Good rainfall in the northern and eastern regions is expected, but the severe drought in the central and western areas poses a concern. The continuing drought in the Western, Northern and Eastern Cape has a negative impact on production and employment. Agribusinesses had to retrench people due to the reduction of crop in the Western Cape in the first 3 quarters of 2017.
“The prospects for the first half of 2018 in the Western Cape are generally dim, but the 2018 winter rainfall will hopefully bring relief to distressed farmers,” Sihlobo said.
Even though summer grains did well this past year, South Africa’s long-term wheat production remains under pressure. The South African wheat industry is faced with yield and profitability challenges.
“Although yield per hectare has slightly increased, the area under wheat has dropped from almost 1.6 million hectares to 496 350 hectares from 1990 to 2017. Consumption is now at 3. 2 million tons, from 2.3 million tons in 1990,” said Mariana Purnell, General Manager at Agbiz Grain.
Agbiz Grain’s prospect for 2018 is to continue assisting with the implementation of the South African Cultivator and Technology Agency (SACTA) levy and to also deal with the highly problematic Aquatic Plants South Africa (APSA) assignee testing issue for grain and oilseed.
Focus will also be placed on the development of the Southern Africa Grain Network (SAGNET), which aims to facilitate trade and to focus on issues such as standardising and harmonising facets of the grain industry.
The primary and secondary agriculture sectors generated R124 billion from foreign markets, with a positive trade balance of R38.6 million. Fruits, grains, dairy products and sugar commodities are the biggest role players behind the successful trade.
Sfiso Ntombela, Agbiz Head of International Trade and Investment, said he foresees the export trade outpacing imports by more than R40 billion next year.
“Maintaining healthy international demand for South African agricultural commodities is vital because it sustain jobs, enhances growth and reduces poverty,” said Ntombela.