Agricultural Market Viewpoint with Wandile Sihlobo

While the 2023-24 mid-summer drought has been the central theme of the downbeat performance of South Africa's agriculture this year, we see a welcome positive change in the jobs data. Statistics South Africa data show that primary agriculture employment improved by 4% from the previous quarter to 935k jobs in the third quarter. However, from an annual perspective, the performance is weak, down 2% year-on-year. Still, the primary agricultural employment of 935k people is well above the long-term jobs of 799k. The poor annual performance mirrors the harsh summer season we are leaving behind. Some subsectors showing a quarterly increase in employment include livestock, horticulture, game hunting, and the production of organic fertilizers. Meanwhile, forestry and aquaculture recorded job losses from the year's second quarter. The Western Cape, Northern Cape, Eastern Cape, North West, Gauteng, and Limpopo showed significant quarterly job gains. The livestock and horticulture industry may have boosted the employment prospects in these provinces. Meanwhile, the Free State, KwaZulu-Natal and Mpumalanga showed job losses in the year's second quarter. The dominant types of agricultural activity in these provinces partly explain the job losses, especially in the Free State, primarily the grains and oilseed growing region. My writing on agricultural economic matters is available on my blog: https://wandilesihlobo.com/ Richard Humphries and Sam Mkokeli produced this podcast. Wandile Sihlobo website

After a challenging 2023-24 summer crop season, which saw South Africa's grains and oilseeds production falling by 24% year-on-year to 15,39 million tonnes, the recovery period may be in sight. The data released by the Crop Estimates Committee on October 29 shows that South African farmers intend to plant 4,47 million hectares of summer grains and oilseeds in the 2024-25 season. This is up mildly by 1% from the previous season. The planting intentions for white maize are at 1,58 million hectares (up 1% y/y), and yellow maize is at 1,06 million hectares (down 2% y/y). The overall maize planting intentions are at 2,64 million hectares (up 0,2% y/y), which aligns with the five-year average area. The planting intentions for soybeans are at 1,2 million hectares (up by 0,2% y/y), the largest area on record. The sunflower seed planting intention is 540k hectares (up 2,1% y/y), slightly below the average planting of 554k hectares. The planting intentions for groundnuts are 40k hectares (down 2,9% y/y), sorghum at 54k hectares (up 28% y/y), and dry beans at 45k hectares (up 14% y/y). We think there are three primary drivers of this optimism. Listen to the podcast for more insights. My writing on agricultural economic matters is available on my blog: https://wandilesihlobo.com/ Richard Humphries, Sam Mkokeli, and Amanda Murimba produce this podcast. Wandile Sihlobo website

The past three years have been challenging for South Africa's livestock and poultry industry because of the spread of animal diseases. Throughout this period, we have had various cases of foot-and-mouth disease in cattle, African swine fever in pigs, and avian influenza in poultry. While animal disease outbreaks are not unique to South Africa and indeed common across the world, South Africa's challenges have intensified in the recent past. The cost of diseases in the livestock industry is felt through the loss of livestock and reduced exports to the world market in times of outbreaks. However, the county is now taking significant steps to control the spread of the disease. On October 25, 2024, the Department of Agriculture released even more positive news, which we believe will further support the recovery path of the industry. The Department announced that the "foot and mouth disease outbreak, which occurred during 2021-2022, has been successfully resolved in the North West, Free State, Gauteng, and Mpumalanga Provinces. These provinces, initially impacted by the outbreak, have now completed comprehensive testing of animals on quarantined farms. The results indicate that the foot and mouth disease virus is no longer present." My writing on agricultural economic matters is available on my blog: https://wandilesihlobo.com/ This podcast is produced by Richard Humphries, Sam Mkokeli and Amanda Murimba. Wandile Sihlobo website

I've been one of the people who have been vocal about the positive prospects for the 2024-25 agricultural season in South Africa, leaning of expected La Nina rains. I continue to remain optimistic about the upcoming season. But the reality is that we may have a late season. The good rains of the past few weeks have been scattered, and planting hasn't gained momentum in any meaningful way across the country. This has raised fears in the grains markets about another tough season, partly contributing to the surge in maize prices we continue to see on SAFEX. Of course, the fundamental driver of maize prices is that we have tight supplies because of the bad crop in the 2023-24 season. Still, I think it's too early to make a call as to whether the upcoming season will be tough. The prospect of La Nina is still active. In all likelihood, it may be a late season. Until we see a material change in the weather prospects, we will maintain our view of a possible better season. Another essential point to underscore is that even if we move from "La Nina" to "normal" weather conditions. Normal weather in the summer season does not translate to drought; it's normal rains. We have gotten so used to the cycle of moving between "La Nina" and "El Nino" that we no longer talk of a regular season. Still, I want to underscore that we are probably in for a late season. There are still convincing signs of La Nina. The planting has also not occurred in any meaningful way across South Africa. My writing on agricultural economic matters is available on my blog: https://wandilesihlobo.com/ This podcast is produced by Richard Humphries, Sam Mkokeli, and Amanda Murimba Wandile Sihlobo website

South Africa’s agriculture and agribusiness sectors have a broader responsibility for food security beyond our borders. The Southern Africa region leans heavily on South Africa for food supplies. This is clear from the observation of South Africa’s agricultural exports. The country exported about US$13,2 billion of agricultural and processed food products in 2023. Nearly 40% of these exports were for the African continent. Notably, roughly 90 cents in every dollar of South Africa’s agricultural exports to the African continent is from the Southern Africa region. Grains, fruits, vegetables, and selected beverages are typically high on South Africa’s list of agriculture and food exports to the Southern Africa region. Not all countries rely equally on South Africa’s agriculture and food industry. There are just seven dominant countries, namely, Botswana, Namibia, Mozambique, Zimbabwe, Lesotho, Eswatini, and Zambia, which accounted for 81% of South Africa’s agricultural exports to the African continent in 2023. In fact, over the past five years, these countries have accounted, on average, for 80% of South Africa’s agricultural exports to the African continent a year. My writing on agricultural economic matters is available on my blog: https://wandilesihlobo.com/ This podcast is produced by Richard Humphries, Sam Mkokeli and Amanda Murimba Wandile Sihlobo website

South Africa has an export-led agricultural sector, with exports having been a major catalyst in the sector’s growth over the past three decades. But rising geopolitical tensions have introduced new risks, leading to an increased need for the country to diversify its export agricultural markets. In this podcast, we argue that South Africa should expand market access to some key BRICS countries, such as China, India, Egypt, and Saudia Arabia. Other strategic export markets for South Africa's agricultural sector include South Korea, Japan, Vietnam, Taiwan, Mexico, the Philippines, and Bangladesh. Currently, the significant challenges in these markets are high import tariffs and phytosanitary barriers. Listen to the podcast for more. My writing on agricultural economic matters is available on my blog: https://wandilesihlobo.com/ This podcast is produced by Richard Humphries, Sam Mkokeli, Nelisiwe Tshabalala, and Amanda Murimba Wandile Sihlobo website

South Africa's agriculture is showing signs of improving optimism since the start of the Government of the National Unity (GNU), which has fueled confidence levels about the path forward. The Agbiz/IDC Agribusiness Confidence Index (ACI), a sentiment indicator about business conditions in the sector, has risen from its low levels in the second quarter of 2024. The ACI increased by 10 points to 48 in the third quarter. While the index remains below the neutral 50-point mark, the jump by 10 points is encouraging. It signals that things are moving in the right direction. A sustained lift in sentiment matters, especially over the long run, for fixed investment in the agriculture and agribusiness sectors. The ACI also serves as a leading indicator of agricultural growth prospects over time. We can thus expect slightly better farming output data for the third quarter of the year. Several factors underpin the improvement in sentiment. One of them is the better electricity supply in the country. South Africa's horticultural production – fruit, vegetables and floriculture – is under irrigation, requiring a sustainable energy supply. Furthermore, roughly a third of field crops are produced under irrigation, benefiting from improved energy supply. The livestock, poultry, and dairy industry are also among the major energy users in the sector. Aquaculture industries like abalone farms also require a sustainable energy supply to pump fresh water. Indeed, there has been a significant increase in renewables and other alternative energy sources, but the broad stability in the national energy supply has helped. Moreover, the fact that the 2024-25 summer season starts, at least for field crops and horticulture, with relatively better-priced input costs compared with the past season, is another reason to be optimistic. For example, in rands terms, most fertilizer product prices were down by roughly 10% year-on-year in September 2024 compared with the previous year. Since fertilizer accounts for approximately a third of the grain farmers' input costs in South Africa, such a price decline significantly improves farmers' finances. The prospects of a La Niña-induced rainfall in the 2024-25 summer season is another additional factor to be optimistic about the agricultural outlook in South Africa. The weather arguably matters more than other factors regarding the sector's performance. Listen to the podcast for more details. Podcast production by Richard Humphries, and Sam Mkokeli My writing on agricultural economic matters is available on my blog: https://wandilesihlobo.com/ Wandile Sihlobo website

It is perhaps a reasonable choice to remain optimistic about the upcoming 2024-25 summer season in South Africa's agriculture. The global weather forecasters paint encouraging prospects of weather conditions. For example, the Australian Bureau of Meteorology and the International Research Institute for Climate and Society (IRI) at Columbia University continue to forecast La Niña occurrence. The Australian Bureau of Meteorology states, "The ENSO Outlook is at La Niña Watch, meaning there are some signs that a La Niña may form in the Pacific Ocean in 2024". Meanwhile, the IRI sees a strong likelihood of La Niña now through January 2025, and after that, it weakens as the weather normalizes. Overnight, the South African Weather Service (SAWS) also published a cautiously optimistic note. The SAWS stated that the "current predictions indicate the development of a La Niña state during the start of the summer season; however, there is still significant uncertainty in the predictions." The SAWS added that "it is advised to monitor the ENSO system during the start of the summer season, as it may change the rainfall outlook for the summer rainfall regions if and when the La Niña materializes. Current predictions focus on the early- and mid-summer seasons and indicate wetter conditions over the interior of the country. The northeastern parts, however, at this stage, indicate drier conditions extending through to the mid-summer period." What we draw from these statements is that (1) South Africa and indeed the Southern Africa region is out of an El Niño cycle, which typically brings drought and has had a devastating impact on agriculture in the 2023-24 summer season; (2) there is reason to be optimistic about the La Niña possibilities and favourable rains in the 2024-25 season (but must be mindful of the regions the SAWS suggests may be slightly dry for some time), and that (3) even if we are out of a La Niña cycle soon and in the "neutral" state, the agricultural conditions could still be favourable as the "neutral" state implies normal conditions. Listen to the podcast for more details. Podcast production by Richard Humphries, and Sam Mkokeli My writing on agricultural economic matters is available on my blog: https://wandilesihlobo.com/ Wandile Sihlobo website

South Africa is on its eighth summer grain and oilseeds production forecast for the 2023-24 season. There are two more monthly reports to follow. Given that we are at the tail end of the season and will soon be in the optimal planting window for the 2024-25 production season from mid-October, we thought there would be no major revisions of the production figures at this late stage. But this has not been a typical season, and the lower producer deliveries we have been observing over the past few weeks are not only a function of on-farm storage but a poor harvest. Indeed, we struggled with a mid-summer drought in February and March, undermining crop yield potential in various regions. On October 26, South Africa's Crop Estimates Committee lowered again the 2023-24 summer grain and oilseeds production estimate by 2% from August to 15,45 million tonnes. The major downward revision was in maize, sunflower seed, and groundnut harvest. The 2023-24 summer grain and oilseeds harvest is now down 23% from the previous season. Listen to the podcast for more details. Podcast production by Richard Humphries and Sam Mkokeli My writing on agricultural economic matters is available on my blog: https://wandilesihlobo.com/ Wandile Sihlobo website

South Africa's agricultural growth in the first thirty years of the democratic era has been supported, among other things, by two pivotal interventions. The first was a deliberate and concerted strategy to invest in genetics for crops, horticulture, and livestock. The second intervention was a strong push to expand export markets. As production continues to increase, and there remains capacity for expanding production, these two levers must be accelerated. The trade issues are not purely economic but political, which means that the South African political leadership must take a clear stand and focus on retaining the existing markets through dialogue with the political leadership of the countries where we continue to experience challenges. The Department of Trade Industry and Competition and the Department of International Relations and Cooperation must be at the forefront of these efforts, supported by scientific insights from the Department of Agriculture. Also very important in the near term is the upcoming BRICS+ summit in October, which will take place in the city of Kazan in Russia. While this grouping is not a trade bloc, utilizing the structure to push more ambitious trade matters is vital. The agricultural sector is one of the South African economic sectors that would benefit from deeper trade relations with the BRICS+ countries. As things stand, South African agriculture has not benefited much from trade with this grouping. Before adding other members to the 15th Summit in Johannesburg in 2023, the original BRICS countries accounted, on average, for just 8% of South Africa's agricultural exports. For comparison, the UK accounts for roughly 7% of South Africa's agricultural exports. Yet, between 2019 and 2022, the original BRICS countries' agricultural imports averaged US$255 billion annually, according to Trade Map data. China accounted for 71% of all the agricultural imports into the group, followed by India at 11%, Russia at 11%, Brazil at 4% and South Africa at 3%. Despite these sizeable agricultural import figures, the intra-BRICS agricultural trade remained relatively low. Remarkably, the products these countries imported include soybeans, beef, maize, berries, wheat, palm oil, poultry meat, cotton, barley, dairy products, pork, apricots and peaches, sugar, wool, sunflower seed, nuts, sorghum, goat meat, wine, grapes, bananas, avocados, mangos, guavas, and fruit juices, among other products. South Africa produces some of these products in abundance and has surplus export volumes. Thus, South Africa championed a need to deepen trade in the 2023 BRICS Summit. This year, the message going to Kazan should focus on building on the spirit of the 2023 Johannesburg Summit, which promoted the dialogue about deeper agricultural trade. This year, the message is even more urgent as the newly added BRICS+ members also present an opportunity for widening agricultural exports. The South African authorities should lobby for a more pragmatic approach beyond the high-level talk so that businesses can see the full benefit of BRICS+ engagements. Listen to the podcast for more details. Podcast production by Richard Humphries, and Sam Mkokeli My writing on agricultural economic matters is available on my blog: https://wandilesihlobo.com/ Wandile Sihlobo website