Drop of optimism for agriculture
SA’s drought recession could ease
THIS year, characterised by drought, has been one of the most challenging for the agricultural sector. Activity has been reduced throughout the sector, with revenue shrinking at primary agriculture operations and other agribusinesses.
The impact on crop and livestock production has been devastating, and these industries are expected to continue to bear the brunt of this weather phenomenon for years to come.
The sector has remained in recession as a result, contracting by 0.3% in the third quarter compared with the second.
But we need to remember that droughts alternate with good production seasons, and already, weather indications suggest next year could bring muchneeded relief to the sector.
Weather forecasters are suggesting conditions could normalise throughout the country, which would improve soil moisture levels.
There is also rising optimism among farmers: the 2016 data on intentions to plant suggest summer crops could increase 15% year on year to 3.7 million hectares. The summer crops are maize, sunflower seed, soybeans, peanuts, sorghum and dry beans.
With maize production having fallen to 7.5 million tons in the 2015-16 production year, several organisations are already predicting a significant recovery in 2016-17 maize production.
The Bureau for Food and Agricultural Policy puts it at 12.8 million tons; the International Grains Council estimates 12.9 million tons; and the US Department of Agriculture’s forecast is 13 million tons.
The Agbiz/IDC agribusiness confidence index also shows rising optimism in the sector.
In both the third and fourth quarters of this year, the index was above the 50-point threshold, suggesting agricultural roleplayers hold a relatively optimistic view of business conditions in the country.
This index is of particular importance because, among many things, it projects how SA’s agricultural gross domestic product could perform in the succeeding quarters.
The recent readings suggest the sector could soon move out of the recession in which it has been mired since 2015.
● Sihlobo is head of economic and agribusiness research at the Agricultural Business Chamber.