SA’s agricultural sector is having an upbeat start to the year.
This optimism is a welcome change from the usual heightened uncertainty that has characterised the beginning of each of the past few years. Since the severe drought of 2014 we have been experiencing more frequent dry periods each season that have generally dampened farmers’ sentiment.
Over the past few years this time of the year had many of us in agriculture worried about whether farmers would complete their intended planting as various regions would typically be too dry. Such dryness was the case at the start of 2020, when many of us doubted the agricultural sector would recover fully from 2019’s contraction. It was only towards the end of January 2020, when SA had widespread, consistent rain, that the outlook for agriculture turned positive.
Since the start of the 2020/2021 summer season the favourable rains have supported the sector’s strong positive sentiment. Conversations with farmers and farmer organisations in regions have also been positive. However, the heavy rains of the week of January 8 carry a risk of crop damage in some areas of the North West, Free State, KwaZulu-Natal and northern regions of the Eastern Cape. Still, this risk appears limited at this stage.
The early insights from folks on the ground, such as Free State Agriculture, have been comforting. On January 6 the organisation’s media statement opened with this optimistic line that “most farmers in the Free State are rejoicing over the good rains that have occurred in the province recently”. A few farmers in the Hoopstad and Bultfontein districts experienced crop damage, but this does not change the overall positive agricultural outlook for the year. In the northern regions of the Eastern Cape, the recent rains did not cause crop damage.
We are in a La Niña year, which means higher rainfall for the Southern Africa region throughout the summer season. On January 8 the SA Weather Service indicated that it expects wetter conditions over most SA through to March, most notably the summer rainfall areas. The rains will aid soil moisture in areas that have not yet received heavy rains. The northeastern regions of Mpumalanga and the southwestern parts of the Eastern Cape would welcome good, soaking rains.
The pollination stage of crop development, which generally requires higher moisture, will be during a rainy period for most summer crops — maize, sunflower seed, soybeans, groundnuts, sorghum and dry beans. Such wetter conditions add to the prospects of yet another large summer crop harvest for SA within the 2020/2021 season.
We will have a good indication of the potential size of the crop when the Crop Estimates Committee releases the first production forecast on February 25. It is also around this period when I believe commodity prices, mainly maize, will soften from their current higher levels. On January 7 white and yellow maize spot prices were each up by 40% year-on-year, trading at R3,703 and R3,633 a tonne respectively. These higher prices are a function of various factors, including higher global prices underpinned by strong global demand, and a relatively weak domestic currency and strong demand for SA’s products in the region.
The 2020/2021 summer rainfall was not restricted to SA but spread across the region. Hence the agricultural outlook is upbeat across Southern Africa. Improved summer crop production across the region will ease demand for SA’s grains, leading to softening domestic prices.
Due to the excellent start to the agricultural season SA’s food price inflation will remain subdued, possibly not exceeding an average of 5% in 2021, which is positive for consumers. Such gains will appear only from the second quarter of the year. The first quarter could be marked by elevated food-price inflation due to higher grain prices at the end of 2020 and early 2021.
• Sihlobo (@WandileSihlobo) is head of economic and agribusiness research at the Agricultural Business Chamber.
