Agribusiness co nfidence hits negative territory

With the latest Agbiz/IDC Agribusiness Confidence Index at its lowest level since the second quarter of 2016, the value of commercial grain production land was likely to level out, or possibly even decline, in the foreseeable future.

The overall index declined from 54 points in the second quarter to 48 points in the third quarter.

“With the results now below the neutral 50-point mark, it means agribusinesses are somewhat downbeat about business conditions in South Africa,” said Wandile Sihlobo, head of economic and agribusiness intelligence at Agbiz.

Commenting on the figures, Dawie Maree, FNB’s head of agriculture information and marketing, said he expected many farmers, particularly in the commercial grain production sector, to defer replacing old, or investing in new, equipment and infrastructure until they had more certainty about what the future held for their farms and agribusinesses.

“There are large carry-over and current grain stocks that are putting grain prices under pressure. This, in addition to the effects of political uncertainty, also impacts land values in the grain industry,” Maree explained.

On the other hand, the tree fruit and horticulture sectors, and a number of other intensive agricultural sectors, were showing investment growth and increased land values wherever water availability allowed, he said.

According to Sihlobo, the decline into negative sentiment territory from the second to third quarters was driven by declines in the sub-indices of turnover (down 2,13 to 61,76), employment (down 2,62 to 52,94), capital investment (down 13,89 to 50), volume of exports (down 3,89 to 35), and economic growth (down 35,29 to 14,71).

However, the drop had been somewhat tempered by improvements in net operating income (up 0,49 to 58,82), market share (up 6,04 to 58,82), general agricultural conditions (up 8,33 to 50), provision for bad debt (down 5,88 to 44,12), and financing costs (down 23,26 to 40,63), he said.

In the past, the deterioration in agribusiness confidence had been underpinned by unfavourable weather conditions. Now, the lack of clarity about expropriation without compensation was a key risk that could potentially undermine investment and long-term growth, he said.

Despite these concerns “we have not seen evidence pointing to disinvestment yet” and farmers and agribusinesses were in a “wait-and-see mode”, he added. – Lloyd Phillips