Farmer's Weekly (South Africa)
AGRIBUSINESS PERSPECTIVE: Weather conditions will remain the key factor in agri growth
From an agricultural economic perspective, 2018 ended on a mixed note. The sentiment in the sector remains subdued as reflected in the consistent deterioration of the Agbiz/IDC Agribusiness Confidence Index, which fell to its lowest level in nine years in the fourth quarter of 2018.
Conversely, the agricultural GDP rebounded in the third quarter of 2018, growing 6,5% on a quarter-on-quarter and seasonally-adjusted annualised basis, due to increased output of horticulture and animal products.
TEMPORARY RECOVERY
However, this uptick in agricultural GDP is no call for celebration as the recovery could be temporary.
The weather outlook, which initially painted a positive picture, could again prove to be a key challenge for summer crop production regions and thus the performance of the agriculture sector in 2019.
The 2018/2019 production season started off on a sound footing, with farmers aiming to increase their summer grain and oilseed planting activity by 5% from the previous season to about four million hectares. However, the rainfall turned out to be erratic and not widespread. Therefore, yellow maize and soya bean plantings, which are predominantly undertaken in the eastern parts of South Africa, had not yet been completed in the second week of December, particularly in the eastern Free State. Farmers have only made good progress in Mpumalanga and KwaZulu-Natal.
Meanwhile, the central and western parts of South Africa have not received much effective rainfall since the start of the 2018/2019 summer season. As a result, there is still limited activity on the lands in the western Free State and across North West. These regions are mainly white maize and sunflower seed production areas.
At the time of writing, the key issue was that the optimal planting window for yellow maize in the eastern parts of the country, running from midOctober to mid-November, had closed. Any plantings beyond this period could result in lower yields.
This is likely to be the reality in the maize lands of the eastern Free State and parts of the Eastern Cape. In the case of white maize, sunflower seed and soya bean, there is still time to plant until early January.
UNCERTAIN RAINFALL PROSPECTS
LIVESTOCK SECTOR GROWTH DEPENDS ON FIELD CROP PRODUCTION
The big question is whether there will be sufficient moisture in the ground to support the planting activity. At the end of November, the South African Weather Service presented an optimistic outlook, pointing to the possibility of abovenormal rainfall between December 2018 and February 2019. But this remains to be seen, as there has been little evidence of an improvement in rainfall. Moreover, there are fears of an El Niño weather event later in the 2019 summer season. This implies that the summer crop production regions could experience more acute dry conditions from the end of February onwards.
My back-of-the-envelope calculations, taking into account the aforementioned weather outlook and expected area planted, suggest that the output of major crops such as maize could fall 5% year-on-year to 12,2 million tons in the 2018/2019 production season.
This could have significant implications for the growth of the farming sector. Field crops are not the biggest contributor to the South African agricultural economy in terms of value added, as nearly half is consumed by the livestock sector. But the growth of the livestock sector depends on field crops, which play a key role as feed. Therefore, it would be right to say that the weather remains a key factor that will determine the growth prospects of the South African agricultural economy in the coming year.