Agriculture underperforming
SA’s agricultural sector faced several challenges in 2023, but we didn’t think the overall annual performance would drop sharply.
Along with the Bureau for Food and Agricultural Policy (BFAP), we expected a mild contraction in 2023 because of the animal disease challenges in the livestock and poultry subsector.
However, the figures released by Stats SA on March 5 show that the gross value added fell notably by 12.2% year-on-year (from a mild performance of 0.9% in 2022 and a robust activity of 7.4% in 2021).
The headwinds in the livestock and poultry industry weighed on the overall sector performance more intensely than we anticipated.
The livestock and poultry industry, which accounts for nearly half the sector’s value, was hit by animal diseases such as foot-and-mouth, avian influenza and African swine fever in 2023.
In the case of the livestock and pig industry, foot-andmouth disease and African swine fever were a challenge even in 2022 but intensified in 2023.
Regarding the field crops, the summer crop harvest was robust in 2023 but insufficient to boost the overall sector performance.
For example, the 2022/2023 maize harvest reached a solid 16.4 million tonnes, 6% higher than the 2021/2022 season ’ s harvest and the second-largest harvest on record.
Soybean harvest was at a record 2.8 million tonnes.
Another major field crop, 2023/2024’s sugar cane, was at 18.5 million tonnes, up 3% y/y.
Other field crops and fruit harvests were also decent in 2023.
Also worth noting is that some agricultural commodity prices were generally down in 2023, which would have also slightly added to the downward performance of the sector.
Notably, the signs of possible underperformance in the sector in 2023 were visible in various vital indicators.
For example, the Agbiz/IDC Agribusiness Confidence Index
(ACI), which we view as a lead indicator of the sector’s performance, deteriorated by 10 points to 40 in the last quarter of 2023.
This is its lowest level since the second quarter of 2020, at the height of the Covid-19 pandemic hard lockdown restrictions.
Critically, the last quarter of 2023 reading of the ACI is below the neutral 50-point mark, implying that South African agribusinesses were downbeat about business conditions in the country.
This pessimism emanates from the sector’s numerous challenges, such as intensified delays and inefficiencies at the ports, deteriorating rail and road infrastructure, worsening municipal service delivery, increased geopolitical uncertainty and persistent episodes of load-shedding.
These challenges remain broadly unresolved, which means that the long-term growth prospects of the sector could still be undermined by the persistent load-shedding, inept local government, rising crime and theft, inefficient ports and rail, lingering animal diseases, and relatively higher interest costs.
Compounding these challenges is also the fact that the agricultural production conditions remain tough because of the drought in Southern Africa.
The intensified El-Nino-induced
dryness continues to strain the 2023/2024 summer crop production prospects.
A recent survey by Grain SA, a lobby group for the sector, found that extreme heat and dry conditions had caused the grain and oilseeds harvest to deteriorate much faster than initially expected.
These challenges have probably worsened since the survey was completed towards the end of February.
SA’s Crop Estimates Committee also fears the possible decline in the summer grains and oilseed harvest.
In its first production estimate for the 2023/2024 season, the committee placed the summer grains and oilseed harvest at 17.4 million tonnes, down 13% on 2023.
This is primarily a function of lower expected yields rather than a reduction in the acreage planted, thus reflecting a negative impact of the drier weather conditions and heatwaves.
This is an overall production figure, and the decline varies crop by crop.
Still, a positive aspect of SA is that the expected harvest will still be enough to meet the country’s domestic consumption, leaving some volume for exports, albeit significantly down from the previous seasons.
Still, the more reliable production figures for the 2023/2024 summer grain and oilseed will be released by the Crop Estimates Committee at the end of March, and that will provide us with a better guide into the 2024 outlook for the sector.
The weather conditions have remained bleak since the release of the current estimates at the end of February.
Moreover, the agricultural sector still feels the tail-end effects of animal diseases, which may further weigh on growth this year, though possibly milder than in 2023.
In essence, the path ahead for SA’s agriculture remains challenging.