GLOBAL FARMING

While the total economy shrank by 7% in 2020, South Africa’s agriculture sector grew by 13,1%. The outlook for 2021 is favourable, with high grain prices and good prices for livestock products, says Dr Koos Coetzee.

The agriculture sector was the star performer in South Africa’s economy in 2020. According to recently released figures from Statistics South Africa (Stats SA), the local economy shrank in real (adjusted for inflation) terms by 7% in 2020, following the barely positive growth of 0,2% in 2019.

All sectors with the exception of the agriculture (13,1%) and government (0,7%) had negative growth. Mining was at -10,9%, down from 4,2% in 2017; and manufacturing was at -11,6%, down from -0,8% in 2019. The construction sector had the worst performance, with a fourth year of negative growth. The value added by the sector decreased by 24% from 2016 to 2020 to -20,3%.

Over the same period, the value added by the agriculture sector grew in real terms by 20%.

As noted in previous columns, South Africa’s agriculture sector performed well on the social level during the COVID-19 pandemic.

Farmers and farmer organisations in various industries provided food and other necessities to distressed communities. This resulted in an improved awareness of the importance of commercial agriculture among consumers.

Unfortunately, it does not seem as if government officials and politicians realise this.

WEAK PERFORMANCE

There are many reasons for the weak performance of South Africa’s economy. Some sectors, such as trade and accommodation, were hit hard by the pandemic. The mining sector also suffered during the initial phases of COVID-19.

For many industries, the dismal performance of Eskom as the main electricity supplier was a huge problem. The production of electricity, gas and water was 5% less in 2020 than in 2019.

After two very difficult years, agriculture performed well during all quarters of 2020, with yearon-year growth of 28,1%, 9,9%, 5,4%, and 12,7% respectively.

While the ban on alcohol and tobacco sales, as well as problems with damaged exports, affected the wine and tobacco industries, other sectors were more fortunate.

Consumer spending on fuel, accommodation, alcohol and tobacco, and meals away from home was severely limited. This resulted in increased spending on basic food products.

Crop farmers had a good year, with a 15,3-million-ton maize crop and a 2,1-million-ton wheat crop, compared with 11 million tons of maize and 1,5 million tons of wheat in the previous seasons.

Despite the slowdown in global economic activity, global food prices increased during 2020. According to the Food and Agriculture Organization of the United Nations’ Food Price Index (FPI), prices were, on average, 3% higher in 2020 than in 2019. Prices decreased during the first half of 2020, but recovered afterwards, so that the FPI reached 116 in February 2021, up 16,7% on February 2020, with the highest increase seen in cereal prices.

South Africa’s grain prices followed the global trend. Good rain after years of drought saw a lower supply of meat, while consumer demand increased. Producer prices are therefore higher than a year ago.

Retail food prices increased due to higher demand. According to Stats SA, food prices increased by 5,4% from January 2020 to January 2021.

At factory level, food prices increased by 7,2% and at producer level by 13%, with cereal and crop prices increasing 26,9% and livestock and animal products 14,6%.

OUTLOOK FOR 2021

The Crop Estimates Committee expects a 15,9-million-ton maize crop in 2021. This is 3,5% more than in 2019.

Good summer rain in most areas has meant more favourable grazing conditions. Cattle numbers are down after the drought, and farmers are trying to rebuild herds. Sheep numbers are still decreasing as farmers suffer from predator problems and stock theft. Farmers can expect good grain and livestock prices during the year.

Negative aspects that will hamper agricultural production in 2021 are the deterioration of infrastructure and the failure of government institutions and parastatals such as the Department of Agriculture, Land Reform and Rural Development, Eskom and the Land Bank. Farmers will have to manage on their own. The actions taken to supply feed to farmers in drought-stricken areas illustrate that they will be able cope despite government’s best intentions.

GOOD RAIN AFTER YEARS OF DROUGHT SAW A LOWER SUPPLY OF MEAT, WHILE CONSUMER DEMAND INCREASED