Confidence across SA’s agricultural economy eased slightly in the second quarter with the Agbiz/IDC Agribusiness Confidence Index (ACI), slipping five points to 65 after touching a 14-quarter peak of 70 earlier in the year.
Those surveyed pointed to fraught geopolitics, an uncertain trade environment and lingering animal-disease outbreaks as the main down drafts. Better summer rains and improvements at the ports helped keep spirits high enough to prevent a steeper fall.
For producers a reading comfortably above 50 suggests cash flow, hiring and capital plans remain in play, supporting rural jobs and input suppliers.
“The dominance of geopolitical concerns among respondents’ views illustrates SA’s agricultural sector's strong dependence on export markets and the need to work to diversify markets,” Agbiz chief economist Wandile Sihlobo said, adding that China, India, Saudi Arabia and Egypt were among the key markets to expand to.
“Still, as we drive the diversification, we must work vigorously to retain the access we have in various markets in the EU, UK, Africa, Asia, Middle-East and Americas, among others,” he said.
He emphasised the importance of “collaborative efforts” between business and government on biosecurity, in pushing for municipal efficiency and the long-promised Agriculture and Agro-processing Master Plan to sustain long-term growth.
As for the index’s various subsectors, confidence in turnover and net operating income each shed five points to 55 and 65 respectively, reflecting weaker sentiment among red-meat operators in particular.
Export-volume sentiment posted the biggest slide, tumbling 40 points to 60 in the second quarter; however, Agbiz stressed this is still a “relatively favourable” level after a bumper first quarter.
In the first quarter, agricultural exports reached $3.36bn, up 10% year on year due to excellent export activity and better operating conditions at the ports.
Agbiz therefore called the decline in sentiment in the second quarter “a normalisation”.
The general economic-conditions gauge lost 15 points to land on the neutral line of 50, underscoring anxiety over global and domestic constraints. Market-share expectations dipped five points to 65. Most respondents maintained an essentially unchanged view, which enabled the high base to lead to a mild decline in sentiment, Agbiz said in its report.
Three pillars of the index held firm. Employment stayed at 55 thanks to buoyant field-crop and horticulture prospects, while the capital-investment barometer was unmoved at a robust 75 amid brisk tractor and harvester sales.
General agricultural conditions remained a stellar 80, mirroring the yield boost from consecutive La Niña rains.
On the other hand, the financing-costs subindex — one of two components interpreted inversely, where an increase is seen as unfavourable — jumped 10 points to 85.
“This came as a surprise, as the easing interest rates in the country would have made the financing environment better,” the report noted.
Debtor provisions for bad debt were steady at 50, hinting that some farmers, especially in the livestock segment battling foot-and-mouth disease, remain under pressure.
The index reflects the perceptions of at least 25 agribusiness decisionmakers on the 10 most important aspects influencing a business in the agricultural sector. The survey was conducted in the second week of June.
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