2 August 2020
Good rainfall after several years of drought has provided relief for many farmers in SA and, along with lower interest rates and overall good demand, has offered some respite to agricultural producers.
This week the crop estimates committee of the department of agriculture, land reform & rural development (DALRRD) published updated figures for the 2020 maize crop, forecasting a 31,000t increase in the harvest to 15,545Mt.
This is just one of SA’s crops that will be yielding a return higher than that achieved last year.
Abrie Rautenbach, the head of the agribusiness division at Absa, said the current maize crop is marked as the second biggest in terms of volume in SA’s history and the biggest in value terms.
Marda Scheepers, the senior statistician for food security and crop estimates at DALRRD, said this is because the estimated maize crop for 2020 is expected to exceed the 2019 crop by 38%.
Scheepers said export industries are also performing well as harbours are operational, although not at full capacity, while low interest rates have reduced repayments on debt.
While farmers are generally meeting their debt obligations, said Rautenbach, some industries, such as wine, are experiencing a tough time due to the pandemic.
Paul Makube, senior agricultural economist at FNB Agri-Business, said that with an enormous contribution from field crops, horticultural products and animal products, first quarter GDP for agriculture, forestry and fishing increased by 27.8% quarter on quarter with a 0.5 percentage point positive contribution to national GDP.
The meat industry is also on a positive trajectory.
“The good rains are very good news. Namaqualand had its first good rain in seven years,” said Gerhard Schutte, CEO of the Red Meat Producers Organisation.
The sustained demand for meat is surprising, he added, given the economic hardships faced by many due to the lockdown. But the favourable price for beef, which is 5% lower than last year due to an increase in supply, is likely supporting demand.
The price of lamb, however, has increased by 14% because farmers are re-herding their flocks and not supplying as many animals to market.
Schutte saidthat because of the financial distress caused by the drought many farmers have had to sell their ewes, leaving them with only about 30% of their flock. It will take two to three years before sheep numbers reach the same level as before the drought.
The dairy industry has seen a decrease in the supply of milk and in the demand for some varieties of cheese.
Bertus van Heerden, chief economist at the Milk Producers Association, said that in the first six months of 2020 there had been a 1% decrease in the supply of milk compared with the same period in 2019.
“One percent may not sound like a lot, but SA produces about 3.3-billion litres of milk a year, so that is about 16.5-million litres,” he said.
One reason for the decrease in supply is that farmers are feeding their cows sub-optimal feed to keep costs in check, which means that less milk is being produced.
But even with a drop in milk supply there is still an excess in the market, which Omri van Zyl, CEO of Agri SA, said is due to a decrease in demand for some cheeses.
Demand for cheeses such as mozzarella, usually purchased by the hospitality industry, has decreased due to the closure and then partial reopening of the industry, while the demand for pre-packaged cheese is stable, Van Heerden said.
Deon Joubert, special envoy to the EU for the Citrus Growers Association of Southern Africa, said the industry is “one of the stars in South African agriculture”.
The production of the fruit is expected to increase to 143-million cartons in 2020, up from 128-million in 2019, creating an additional 25,000 permanent jobs.
SA is the 11th-biggest producer of citrus in the world and the second-largest exporter, generating about R20bn in 2019.
One of the reasons SA’s citrus fruits are well received by other markets is that they are counter-seasonal to large northern hemisphere producers such as Spain, the US and China.
The Covid-19 pandemic has also increased demand for citrus because of its high vitamin C content.
Congestion at export terminals at South African ports is a concern for agriculture destined for export. Joubert said that Transnet Port Terminals (TPT) are making improvements to increase the rate at which containers leave SA’s shores, but “we are still not as efficient as other terminals in China and Europe”.
Siyabulela Mhlaluka, general manager for sales and new business development at TPT, said in a recent statement: “We are halfway through the citrus season and despite the well-documented challenge of Covid-19
TPT is exceeding the reefer targets, having prepared well ahead.”
Reefers are refrigerated containers used for transporting perishable items such as fruit.
Mhlaluka added that the most critical element of terminal preparations is the availability of equipment, having sufficient plug points and human resources.
“We are in continuing discussions with customers to maximise the 24-hour operations that we run across our terminals to limit congestion at peak hours for better cargo flow,” he said.
Better yields are helping farmers improve their finances, with many still heavily indebted.
Rautenbach said the drought conditions that existed prior to the pandemic had impacted some clients’ ability to endure setbacks.
However, weather conditions during the current season have been supportive and many clients find themselves in a better financial space.
Nico Groenewald, head of agriculture at Standard Bank, said that based on the DALRRD annual economic review, agriculture’s debt-asset ratio has deteriorated somewhat to over 35%, with total agricultural debt currently at R181bn.
Source: Business Day