The sentiment could be downbeat because of the coronavirus (COVID-19) spike but South Africa’s agricultural economy is projected to perform superbly after considerable output in all major sub-sectors. Statistics for the first quarter of 2020 indicate agriculture has rebounded after four consecutive quarters of contraction. Droughts and foot-and-mouth disease, among other factors, are blamed for the decline.
The Agricultural Business Chamber (Agbiz) has forecast the remaining quarters of this year to show solid growth. Agbiz expects the year to average at about 10 percent year-on-year (y/y), compared to a decline of 6,9 percent in 2019.
“This will be underpinned by a recovery in all major sub-sectors of agriculture,” explained Wandile Sihlobo, the Agbiz Chief Economist.
He mentioned livestock, field crops and horticulture production as leading the recovery. This, he said, was on the back of favourable weather conditions during the 2019/20 production season. South Africa expects its second-largest grains harvest on record.
Maize (38 percent up to 15,5 million tonnes from the previous year), sunflower seed (13 percent, 765 960 tonnes) and soybeans (8 percent, 1,3 million tonnes) are among the most productive sub-sectors. Agbiz noted South Africa’s sugar cane production is set to increase by 1 percent y/y to 19.4 million tonnes. Elsewhere, horticulture also had a positive year, especially the citrus industry recently noting a 13 percent y/y increase in available supplies for export markets in 2020.
Paul Makube, the Senior Agricultural Economist at First National Bank (FNB) South Africa, noted maize output was still higher even though the National Crop Estimates Committee (CEC) made a downward revision from 15,89 million tonnes.
According to Makube, the main contraction in output was for the yellow maize areas of Mpumalanga and Gauteng provinces, which were reduced by 3,1 percent and 1,6 percent respectively from the May estimate.
Reports from Mpumalanga indicate that some areas experienced a severe midsummer drought with less rainfall in February.
“Although the situation improved towards the end of the season, damage had already been done as reflected in yield reduction during the current harvest,” Makube said.
In the oil-seed complex, yields were also revised lower for soybeans which came in down by 2,3 percent from last month to 1,26 million tonnes but still 7,8 percent higher than last year.
The sunflower estimate remained unchanged while groundnuts were cut sharply by 16,5 percent from the previous estimate to 37,500 tonnes.
Similarly, yield losses for sorghum and dry beans are down by 1,5 percent and 3,1 percent respectively from last month.
“While grain prices may initially edge higher in reaction to the revised estimates, the relatively hefty supply outlook will limit further upside in the medium term which is positive from an inflation perspective,” Makube projected.
This is a boost for consumers as food inflation is expected to remain under control.
It further decelerated by 3,7 percent y/y and was unchanged month-on-month in April.
Source: Caj News Africa