Access to markets and the government’s policy stance towards SA’s main agricultural trading partners, remain the biggest risk for its exports, the Agrikonsult survey barometer shows.
Botswana recently imposed another ban on agricultural imports from SA, specifically oranges, and the Namibian Agronomic Board last month announced a one-month ban for July on the importation of eight of the 20 crops that are on the special controlled products list.
The barometer, which surveyed agricultural economists working in SA commercial agriculture, showed a decrease in government policy risks from 62% in January 2024 to 46%, reflecting optimism in the government of national unity (GNU) and the appointment of a new agriculture minister. Agrikonsult is a farm and agriculture value chain organisation.
DA leader John Steenhuisen was appointed minister of agriculture in the recently constituted government of national unity.
Serious threat
Infrastructure risks remained elevated at 54%, though this was an improvement from 62% earlier in the year, the barometer showed.
Agricultural exports were also facing a serious threat due to government policies and the absence of new trade agreements. Market conditions were alarmingly challenging, with livestock and fruit exports particularly vulnerable and now facing a 65% risk level.
Financial pressures were expected to continue throughout the year, the barometer showed. A slight improvement was expected in early 2025, provided there was good summer rainfall and interest rates decrease.
The expected privatisation of rail and harbour infrastructure this year could boost perceptions.
Meanwhile, those of climate risk remained steady, showing an improvement from 50% in January 2024. The expected La Niña phase (periodic cooling of ocean surface temperatures in the central and east-central equatorial Pacific) is contributing to this more positive outlook for the upcoming summer rainfall season.
The report highlighted that the previous El Niño event, which reduced summer crop yields, combined with weak domestic demand affecting red meat prices and high interest rates, continued to have a lingering effect.
“Reports indicate that farmers are still under financial pressure in the summer grain and livestock industries. Access to financing is tight and expensive with interest rates quoted at 17%-20%, especially on outstanding debt. Farmers are relying more on input suppliers to finance inputs of the new crop,” the survey said.
Debt
The outlook for agricultural debt was worsening, with 73% of respondents now expressing concern, up from 68% in January 2024. Contributing factors included smaller crop yields, low livestock prices, and high interest rates.
“The profitability outlook remains under pressure, with a slight improvement since January 2024. However, the majority of respondents indicate lower profitability. Land values are expected to remain mostly stable (59% of the respondents) while the outlook of a decline increased slightly (22%).”
The outlook for investing in new technology dropped to 38%, down from 49% in January 2024. Expanding farming operations by renting additional land decreased to 18% but remained relatively stable at 56%.
Economists do not view purchasing land as a viable growth strategy this year due to lower profitability, high interest rates, and other risks. They expected a decline in land purchases, with 44% predicting this trend compared with 34% in January 2024.
“Profit margins are expected to decline further according to 68% of economists (compared with 61% in January 24). Only 10% expected some improvement,” the survey said.
This would put pressure on cash flow liquidity and result in deteriorating profit margins.
The debt/asset ratio outlook worsened to 43% of correspondents (compared with 29% in January 2024). This would further hinder access to finance, the survey said.
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