The underperformance of SA’s agricultural sector in 2019 was largely caused by two factors: drought and biosecurity (specifically foot-and-mouth disease and African swine fever). This was through two channels, namely lower agricultural output because of drought, and subdued trade activity because of a ban on exports of animal products after the outbreak of foot-and-mouth disease.
Will 2020 be any different? It is hard to tell at this point as the drought and foot-and-mouth disease remain a challenge, specifically in the Eastern Cape but also parts of the Free State and Limpopo.
Another important factor is soil moisture, even for those areas that have sufficient soil moisture, because the summer rains arrived later than normal. This meant summer crop plantings were delayed across the country. Fortunately, plantings have now been completed in Limpopo, Mpumalanga and KwaZulu-Natal. The feedback from farmers in these regions suggests that the intended area for summer crops was successfully planted.
The foot-and-mouth disease outbreak that was reported at the end of 2019 remains a major challenge in the country because it has resulted in a ban on exports of animal products.
In the Free State, the North West and Eastern Cape, maize and sunflower seed plantings were still under way in the week of January 10. About 80% of the intended area for maize had been planted, with sunflower seed at just more than 50% of the intended area. In a normal season maize plantings would have been completed across SA by mid-December and sunflower seed by the end of December to early January. Plantings that occur beyond this period, as in the current season, risk being affected by frost later in the season. This, in turn, would negatively affect crop yields.
To recap, SA farmers were optimistic at the start of the 2019/2020 summer crop production season, intending to increase the area plantings by 7% year on year to 3.9-million hectares. The official preliminary area plantings will be released on January 29.
My sense is that the actual planting could be somewhat less than the intended area because of late rains in some regions. Another risk to keep in mind is the SA Weather Service’s warning of the possibility of below-normal rainfall in most parts of SA between January and March. Late plantings mean crop pollination might not occur around February as is typically the case, but only around March in some areas. This process usually requires increased moisture, which at this point is in doubt in light of the SA Weather Service’s prediction.
The foot-and-mouth disease outbreak that was reported at the end of 2019 remains a major challenge in the country because it has resulted in a ban on exports of animal products. At risk are beef exports of about $140m (R2bn), the average value SA exports in a normal year.
Moreover, SA’s trading partners’ response to the foot-and-mouth disease outbreak earlier in the year extended to sectors such as the wool industry. China, which imports on average 71% of SA’s wool, imposed a ban for months, which weighed heavily on the industry. The wool sector’s exports are worth twice that of beef in monetary terms, averaging $308m more than the past five years, and all this was at risk during the ban.
The government and private sector participants will be engaging in the coming weeks to find workable solutions to this challenge. At this point, the government has placed a ban on auctions in the country as a way to limit livestock movement.
SA’s food price inflation in the first 11 months of 2019 averaged 3% year on year, which was well below market expectations. What many analysts seem to have underestimated was the length of time meat prices would remain subdued, and the influence on the overall food price inflation headline number.
The subdued meat price trend was largely caused by the ban on exports due to the foot-and-mouth disease outbreak at the start of 2019. Seeing that foot-and-mouth disease is already a challenge this year, SA’s meat prices could again remain subdued for the greater part of this year.
However, the lower base of 2019 will mean meat will not suppress overall food price inflation in 2020 as was the case last year. Therefore, the lower base of meat prices, and possibility of a lower grains harvest, are major factors that could add upward pressure on food price inflation this year. While we have flagged a possibility of below-normal rainfall, we don’t think this time it will induce increased slaughtering as grazing veld has generally improved in provinces that have better soil moisture.
Overall, there is still some level of uncertainty about all the aforementioned factors, so I haven’t provided forecasts on agricultural production and food price inflation for 2020. There should be clarity on these issues at the end of January, when official crop estimates are released and when the SA Weather Service releases an update of its rainfall predictions.
• Sihlobo (@WandileSihlobo) is head of economic and agribusiness research at the Agricultural Business Chamber.
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