Finweek English Edition - - Economic Trends & Analysis - JO­HANN VAN ZYL jo­hannv@fin­

THE EX­TENT to which South Africa’s agri­cul­tural in­dus­try is sub­ject to cy­cles is shown in the lat­est Trends in the Agri­cul­tural Sec­tor, which has just been is­sued by the Direc­torate of Agri­cul­tural In­for­ma­tion Ser­vices. Just like the share mar­ket, this in­dus­try con­stantly fluc­tu­ates from prof­itabil­ity to be­low av­er­age and even loss con­di­tions. And – judg­ing from the direc­torate’s in­dex of net farm­ing in­come – it looks as if the in­dus­try is once again en­ter­ing a pe­riod of poorer prof­its.

The lat­est cy­cle of prof­itable farm­ing be­gan in 2004/2005 (see graph) and then rose sharply. Over the past 2007/2008 sea­son farm­ers were 25% bet­ter off than in the pre­vi­ous sea­son. Ac­cord­ing to that, net farm­ing in­come (af­ter de­duct­ing pro­duc­tion ex­penses but ex­clud­ing spending on fixed as­sets and cap­i­tal goods) was R36,7bn for the year to end-June 2008 – around R7,5bn bet­ter than the pre­vi­ous year.

In­di­ca­tions that the cy­cle is turn­ing are shown by the weaker agri­cul­tural prices of the past few months and the lat­eral move­ment of net farm­ing in­come as a per­cent­age of gross farm­ing in­come.

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