SA’s big agricultural story for 2017 is the impressive rebound from the 2016 El Nino-induced drought. Maize and soybean harvests were the highest in history in 2017, recorded at 17.4-million tonnes and 1.32-million tonnes, respectively.
The recovery, however, has not been limited to these crops; all summer grains, oilseeds, vegetables and livestock performed relatively well compared to 2016.
This was mainly due to good summer rainfall, an increased planting area and improved farming practices.
The agricultural sector’s contribution to the economy grew by double digits in the first three quarters of the year. The most notable of the growth, the 44.2% quarter-on-quarter growth in the third quarter, led to a 0.9 percentage point contribution to the overall economic growth of 2.0% quarter on quarter in the period.
Consumers were the chief beneficiaries of the improvements after staple grains and vegetable prices fell by more than a third from 2016’s levels.
Disappointingly, the labour market in the agricultural sector was dominated by the Western Cape drought, despite improved agricultural activity in other parts of the country
In November, overall food and nonalcoholic beverages inflation decelerated to 5.2% year on year, after reaching an average 10.4% in 2016.
Indications are that the agricultural sector could perform relatively well in trade in 2017. Data obtained from the South African Revenue Service shows that the value of vegetable exports in the first 10 months of the year grew by 7% year on year.
The Agricultural Business Chamber estimates that fruit exports, which account for a third of total agricultural exports, could increase by 9.8% year on year and 5.5% year on year in 2017, measured in value and quantity, respectively.
The sector registered a positive trade balance of $2.3bn in 2016. This indicates that there could be tangible improvements in the trade balance, as agricultural imports softened in 2017 due to the large quantities of supplies.
However, the picture is not all rosy. The Western Cape is experiencing drought, which could negatively affect the growth of vines and reduce grape yields in 2018. The winter wheat crop, predominantly produced in the Western Cape, is set to decline by 23% year on year to 1.47-million tonnes in 2017 due to the drought.
Disappointingly, the labour market in the agricultural sector was dominated by the Western Cape drought, despite improved agricultural activity in other parts of the country.
The sector’s combined job cuts for the past three quarters were 109,000. About 80% of these job losses were in the Western Cape and include seasonal and permanent labour. Other provinces experienced a modest reduction in employment, partly linked to changes in weather patterns.
The sector is ending the year on a bit of a low note as confidence among agricultural companies has deteriorated. The Agbiz/IDC Agribusiness Confidence Index declined to 49 points in the fourth quarter.
A reading of less than 50 points indicates contraction in agribusiness activity, which means agribusinesses are cautious about business conditions in the country.
The main factors underpinning the despondency of agribusinesses include unfavourable weather in the Western Cape and uncertainty about land reform policy, among others.
But 2018 promises to be a good one for producers and consumers. The weather forecasts indicate a possibility of a weak La Nina during the 2017-18 summer season.
This essentially means the country could receive above-normal rainfall, which is good for summer crops and the dairy and livestock industries.
Agricultural commodity prices could remain at relatively lower levels, which should contain food price inflation for some time.
• Sihlobo heads agribusiness research at the Agricultural Business Chamber.
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