Despite some of the policy uncertainties such as land reform, the agricultural sector has generally been buoyed by a wave of renewed optimism and agribusiness confidence.
In 2017 agricultural exports grew past $10bn for the first time, boosted by growth in exports of edible fruits, beverages, spirits, vegetables and grains, according to the Agriculture Business Chamber (Agbiz), an organisation that represents commercial farmers and agribusiness.
SA’s agricultural sector recorded a positive trade balance of $3.3bn in 2017, which is also a record level in a dataset starting from 2001, Agbiz said.
Food security
SA is generally a net exporter of agricultural commodities and products. However, there are concerns that uncertainty concerning land reform could harm the agriculture sector and threaten food security.
Parliament recently voted in favour of exploring the possibility of amending the Constitution to pave the way for the government to expropriate land without compensation — a move that observers say will most likely spook investors.
Wandile Sihlobo, head of agribusiness research at Agbiz, said in a report dealing with the immediate, short-and medium-term prospects of the sector that the overall picture of agriculture in SA could be described as mixed, at best.
"Adverse impacts on the wheat crop, and possibly on this season’s summer crop, are expected to lead to subdued production. However, the lower output is not expected to lead to any fundamental shifts in the market. First, because the sector is coming out of a season of historic output levels that will still provide some buffer stocks against severe price swings," said Sihlobo.
A stronger exchange rate now and in the short term "will ensure that food inflation levels remain low and steady", he said.
"Despite some of the policy uncertainties that have remained endemic to the agricultural sector vis-à-vis land reform, the sector is generally being buoyed by a wave of renewed optimism and agribusiness confidence, all of which are expected to shake off the adverse effects of policy and weather," he said.
Sihlobo said that the weak US dollar — which translates into rand strength — offset the effects of farm input costs, most of which were imported, such as fuel, fertiliser and chemicals. At the same time, it made commodity exports less competitive on international markets.
In net terms, said Sihlobo, unfavourable weather in SA implied a decline in yields and, in turn, production.
Exchange rate volatility causes shifts in profitability for farmers and the sector.
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