When the Covid-19 pandemic hit, sub-Saharan Africa faced a potential rise in food insecurity, which was underpinned by the anticipated slowdown in economic activity, loss of income, and a ban on grain exports by major exporting countries such as India, Russia, Cambodia, and Vietnam had introduced.
Sub-Saharan Africa is a net importer of food, with the World Bank having estimated that an additional 26 million people would fall into extreme poverty (defined as those living under US$1.90 per day in 2011 PPP) in 2020.
By mid-2020, the concern about trade restrictions had waned as the G20 discouraged global grain-exporting countries from banning exports. Domestic evaluation of supplies by exporting countries provided comfort for sufficient food supplies in the world market. The slowdown in economic activity played out as expected, with sub-Saharan Africa's economy contracting by 1,9% in 2020, according to estimates by the IMF. Also, there were widespread job losses in the sub-Saharan Africa region, which resulted in a rise in food insecurity as initially feared at the start of the pandemic, especially in Nigeria, Kenya, South Africa, Ethiopia, Uganda, and Malawi.
Various governments' response to the rising food insecurity during the pandemic has primarily been through increasing grain imports, mainly in Zimbabwe, Zambia, Rwanda, Tanzania, Kenya, Nigeria and Malawi. Some of these countries also rolled out farmer input support schemes to assist farmers ahead of the 2020/21 production season, which began from October 2020 for most countries. The income support to households was limited to South Africa within the sub-Saharan region, but household food insecurity rose even there.
Nevertheless, the interventions to support farmers with inputs could pay off in 2021, although concerns remain that corruption, poor farmer targeting and bureaucratic inefficiencies might have led to late input deliveries in some countries, as we have observed in previous farm input subsidies programmes. With that said, most of the African continent, specifically southern and eastern regions, received higher rainfall during the 2020-21 summer. This allowed for increased plantings and improved crop production conditions. The United States Department of Agriculture (USDA) estimates already point to prospects of increased maize production in several southern and east Africa countries. For example, Zambia's 2020/21 maize production could reach 3,4 million tonnes (up 69% y/y), Malawi's maize harvest is estimated at 3,8 million tonnes (up 25% y/y), Mozambique's maize crop is estimated at 2,1 million tonnes (up 8% y/y), Kenya's maize harvest is forecast at 4,0 million tonnes (up 5% y/y). Tanzania's maize harvest is estimated at 6,3 million tonnes (up 8% y/y). There are also prospects of large maize and wheat harvests in Zimbabwe.
These numbers suggest a good harvest, not only for grains but also for other crops and improved livestock conditions in the southern and east Africa region. While such improved agricultural conditions cannot fully compensate for job losses due to the pandemic, they might cushion households from severe food insecurity that the World Bank's economists had feared the sub-Saharan Africa region would face from 2020. It is plausible that as the year continues and the harvest begins from May 2021 in some African countries, rural households could be in a slightly better position in terms of staple grains availability and acute poverty levels than in 2020.
These observations bring one to the old arguments of strengthening rural economies through supporting agriculture and improving infrastructure to help link farmers to markets. Had efficient roads and storage infrastructure existed in many African countries, the windfall of expected large grain harvests could find a marketplace, and revenue from sales would improve household incomes. But the opposite is likely to happen; in villages with large grain surplus and poor infrastructure, high post-harvest losses effectively reduce potential revenues from the sale of the produce. Suppose the pandemic is prolonged for another couple of years, against the slow pace of vaccination in the continent. In this case, it is plausible that the fears of rising food insecurity could eventually be a reality, especially if the preceding summers are not as rainy as 2020-21, and also if the government-led input support to farmers is not carried forward during the summer planting season of 2021-22.
Essentially, the rural areas of the sub-Saharan Africa region might experience an improvement in food availability in 2021 compared to 2020, but this is temporary and at the mercy of the weather and government support going into 2022.
Weekly highlights
SA consumer food price inflation lifted marginally in March 2021
Consumer food price inflation accelerated to 5,9% y/y in March 2021 from 5,4% y/y in the previous month. The product prices underpinning the uptick were mainly bread and cereals; fish; milk, eggs and cheese; and oils and fats. The increase in prices of these products is unsurprising and reflects the elevated farm-level prices we observed at the end of 2020 and into 2021. Typically, the passthrough from the farm level to the retail level for products such as grains is three months.
While South Africa's consumer food price inflation was generally elevated in the first quarter of the year, we expect softening from the second quarter. This will primarily be underpinned by grain-related products, whose prices could soften and filter through, with a lag, on the "bread and cereals" products prices. The anticipated decline in prices is on the back of the large forecast harvest of 16,7 million tonnes. This product category also has a higher weighting of 21% in the food basket, and changes in its price inflation will be noticeable. In terms of meat, we expect a sideways price movement for the coming months. The cattle slaughtering could slightly improve in 2021, and the base effects on poultry meat, which increased in 2020 partly as a result of an import tariff hike, could also bode well for food price inflation. South Africa is a net importer of vegetable oils, and the prices tend to be influenced by the exchange rate. The relatively firmer ZAR/USD currently bodes well for oils and fats price inflation for the coming months.
In sum, we maintain our baseline view for South Africa's consumer food price inflation to average around 5,0% y/y in 2021. The only upside risk that we continue to monitor and assess inflation's impact is the rising fuel prices. South Africa's agricultural commodities and processed food are primarily transported by road, and the increased transport costs could impact the final product prices. For example, South Africa is transporting roughly 81% of maize, 76% of wheat, and 69% of soybeans. On average, 75% of national grains and oilseeds are transported by road. This is an area worth monitoring over the coming months.
Data releases this week
This week, we start with the US Crop Progress report on the agricultural data calendar, which will be released by the USDA today. The previous report of 18 April showed that US maize and soybeans planting has started and is well ahead of the last season's pace on the same day in 2020. Another essential data on the global market is the US weekly export sales data due for release on Thursday. Here we continue to monitor the US export sales to key markets such as China.
On the domestic front, we have the Weekly Producer Deliveries data for 23 April, released by SAGIS on Thursday (typically on Wednesdays). This data cover summer and winter crops, although we only focus on summer crops for now as the harvesting process gains momentum, particularly on oilseeds. To recap, on 16 April, about 395 663 tonnes of soybeans were delivered to commercial silos. This placed the soybean producer deliveries for the first seven weeks of the 2021/22 marketing year at 757 706 tonnes out of the expected harvest of 1,73 million tonnes. Similarly, 126 746 tonnes of sunflower seed for the 2021/22 season had already been delivered to commercial silos in the same week, out of the anticipated crop of 696 290 tonnes.
Also, on Thursday, the Crop Estimates Committee will release its third production forecast of the summer crop. We expect the Committee to lift its maize production forecast while other crops might remain roughly unchanged. The maize production estimate is currently at 15,9 million tonnes. We believe the number could be lifted to 16,7 million tonnes (as we have indicated in the aforementioned consumer food price inflation text).
On Friday, SAGIS will release the Weekly Grain Trade data for the week of 23 April. In the previous week of 16 April, South Africa's 2020/21 total maize exports were 2,44 million tonnes, which equates to 91% of the seasonal export forecast of 2,69 million tonnes. In terms of wheat, South Africa is a net importer. On 16 April, imports amounted to 893 560 tonnes, which equates to 57% of the seasonal import forecast of 1,58 million tonnes.
