Ex­pect West­ern Cape drought to knock farm ex­ports

Sunday Times - - Business Opinion - Wandile Sihlobo Sihlobo is head of agribusi­ness re­search at the Agri­cul­tural Busi­ness Cham­ber. Twit­ter: @WandileSihlobo

Agri­cul­ture has its fair share of chal­lenges, but I try to find up­lift­ing do­mes­tic and re­gional devel­op­ments to dis­cuss. This week, agri­cul­tural trade was in my cross hairs.

For con­text, I re­cently re­flected on the pos­i­tive trade per­for­mance in cal­en­dar 2017, when South Africa’s agri­cul­tural ex­ports sur­passed $10bil­lion (about R134-bil­lion) for the first time, boosted by growth in ex­ports of ed­i­ble fruits, bev­er­ages, spir­its, veg­eta­bles, grains and other farm prod­ucts.

The $10.01-bil­lion fig­ure rep­re­sented a 15% year-on-year in­crease from $8.7-bil­lion. In the same pe­riod, im­ports in­creased by 5% year on year, reach­ing $6.7-bil­lion, par­tic­u­larly driven by wheat and rice.

Africa and Europe were the largest des­ti­na­tions for agri­cul­tural ex­ports, col­lec­tively ab­sorb­ing 67% of to­tal ex­ports last year in value terms. Asia was also an im­por­tant mar­ket, tak­ing 24%.

The Amer­i­cas ac­counted for just 5%.

Good start to the year

The first quar­ter of this year started on a pos­i­tive foot­ing, with agri­cul­tural ex­ports amount­ing to $2.3-bil­lion, up 8% from the cor­re­spond­ing pe­riod last year, ac­cord­ing to data from Trade Map. This was boosted by in­creased sales of ed­i­ble fruits, bev­er­ages and spir­its, veg­eta­bles, wool, sugar and ce­re­als.

The trade im­pact of the se­vere drought in the West­ern Cape was muted in the first quar­ter. It will, how­ever, be felt in the com­ing quar­ters, as 2017-2018 ta­ble grape and ma­jor fruit pro­duc­tion de­clined by dou­ble dig­its year on year. Re­search from the Univer­sity of Cape Town shows West­ern Cape rain­fall last year was the low­est in more than 80 years.

Agri­cul­tural im­ports in the first quar­ter of this year were worth $1.8-bil­lion, up 2% from the cor­re­spond­ing pe­riod last year. This was driven by a no­table uptick in grain im­ports, par­tic­u­larly wheat and rice.

South Africa is tra­di­tion­ally a net im­porter of wheat, but the West­ern Cape drought, which led to a de­cline in do­mes­tic pro­duc­tion, re­sulted in an in­crease in wheat im­ports to 1.9 mil­lion tonnes — the sec­ond­high­est level on record. A no­table share of this was fa­cil­i­tated in the first quar­ter.

At the time of writ­ing, about 84% of our es­ti­mated wheat im­ports had al­ready landed. The rest will be de­liv­ered by the end of Septem­ber, which is the end of the 20172018 mar­ket­ing year.

In the case of rice, South Africa is tra­di­tion­ally a net im­porter, and we saw im­ports grow­ing by 10% year on year to 1.1 mil­lion tonnes last year due to higher de­mand. This year’s im­ports could soften to one mil­lion tonnes, ac­cord­ing to data from the In­ter­na­tional Grains Coun­cil.

Grape im­pact

From a desti­na­tion point of view, the rest of Africa was, as in pre­vi­ous pe­ri­ods, the big­gest mar­ket for our farm ex­ports in the first quar­ter, ac­count­ing for 43% in value terms. Prod­ucts at the top of the list for ex­port to the rest of Africa in­cluded bev­er­ages, veg­eta­bles, fruit, grains, sugar and dairy.

Ex­ports to Europe — the sec­ond big­gest mar­ket, tak­ing 32% in value terms in the first quar­ter — were led by fruit, bev­er­ages, veg­eta­bles, wool and an­i­mal fats.

Asia re­mained a key mar­ket, ac­count­ing for 20% of farm ex­ports in the first quar­ter,

The drought re­sulted in an in­crease in wheat im­ports to 1.9 mil­lion tonnes

with grains and wool lead­ing the prod­uct pack.

The dom­i­na­tion of bev­er­ages and fruits is no­table, be­cause it means the de­cline in pro­duc­tion of fruit and wine grapes in 20172018 ow­ing to the West­ern Cape’s drought could have a sub­stan­tial im­pact on ex­port fig­ures in the com­ing quar­ters.

How­ever, at this stage it is too early to say pre­cisely how big this im­pact is likely to be.

Per­haps good pro­duc­tion in other fruit­pro­duc­ing prov­inces such as Lim­popo could slightly off­set the losses and keep the South African agri­cul­tural trade bal­ance in pos­i­tive ter­ri­tory in the com­ing quar­ters.

Pic­ture: Sup­plied

Cit­rus is among South Africa’s lead­ing farm-ex­port prod­ucts.

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