Although the agriculture sector was expected to show positive growth next year, the Agribusiness Business Chamber (Agbiz) said this would be at a much lower rate than in 2020.
Agbiz chief economist Wandile Sihlobo wrote in the organisation’s agricultural market viewpoint on Monday that the sector’s gross added value for 2020 was forecast at a 10 percent year-on-year expansion.
The lower growth rate would primarily be a function of base effects.
“The output will most likely be large, all else being equal. The same is true for food price inflation, which we continue to believe won’t exceed 5 percent year-on-year in 2021 from an expected 4.5 percent in 2020 and the actual rate of 3.1 percent in 2019.
“The potentially larger harvest in 2021 could result in softening commodities prices from the higher levels experienced in October, where maize and soybean prices are up by more than 20 percent. The reasons for such an increase are demand-driven and weaker currency effects,” said Sihlobo.
According to Statistics South Africa, the country’s second-quarter gross domestic product figures showed that agriculture was the only industry that seemed relatively unaffected. It registered an increase in maize exports, as well as rising international demand for citrus fruits and pecan nuts. These helped the industry expand by 15.1 percent.
Statistics SA said locally, the baking craze that gripped the country during the lockdown also increased the demand for home cooking products.
Sihlobo said if from February the favourable weather conditions and the view that harvests would be large held for South Africa and southern Africa, commodity prices could soften notably, which would bode well for food price inflation.
Agbiz said the most crucial time for South Africa’s summer crop and some horticulture products – and, by extension, the livestock sector – was between October and February of each year, as the summer rainfall period determined the season’s harvest and veld conditions.
He said the country had started the 2020/21 production season at the beginning of October with prospects of above-normal rainfall in most regions.
“This meant a possibility of a large harvest. While October was set to experience below-normal rainfall, with the La Niña induced higher rainfall set to begin from November, there were, in fact, good showers in most regions of South Africa. The benefit of these rains is evident in improved soil moisture,” said Sihlobo.
Agbiz said the improved soil moisture – primarily in KwaZulu-Natal, the central and northern Eastern Cape, the eastern Free State and parts of Mpumalanga – would help to accelerate planting activity, which was already under way.
Sihlobo said the optimal planting window for maize and soybeans closed in the week of November 20 in the eastern regions of South Africa, while it remained open in the central and western regions until mid-December.
He said that for the eastern regions, this meant that the areas that would manage to complete plantings within the next two weeks could have their crop benefit from improved soil moisture on the back of the early La Niña rainfall.
“Meanwhile, for the central and western regions, the rainfall will have a similar effect on crops, although there might be delays in plantings from time-to-time depending on the occurrence of expected rains.”
Farmers had also been encouraged by the favourable weather prospects following the reports of their intention to increase summer crop area plantings by 5 percent to 4.15 million hectares.
While there was no comprehensive seed sales data yet, the other indicator that Agbiz continued to monitor was tractor sales. Sales had remained robust between June and October at levels higher than 2019. This also illustrated farmers “optimism” about the 2020/21 summer crop production season.
The improved financial conditions following the second-largest summer crop harvest on record in the 2019/20 production season, coupled with higher commodity prices, have also contributed to higher tractor sales and intentions to increase plantings in the 2020/21 season.
Source: Independent Online