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06
FEB

SA maize and wine outlook

The latest harvest news in wine grapes and maize paints a mixed outlook for these two subsectors. In this week’s podcast, we explore the production conditions in these separate subsectors, and the outlook for the harvest.

First, South Africa’s wine grapes for this year are projected to be lower than the 2022 harvest because of unfavourable weather conditions earlier in the season. The South African Wine Industry Statistics will release its production estimates later in February but has already indicated the prospects of lower yields. This means the wine production could also be lower than 2022 levels, with preliminary estimates pointing at an output of around 800 million litres.

This will add pressure to an industry still recovering from the slump through the worst of the Covid-19 pandemic, where the ban on sales at various intervals had a severe negative financial impact. Importantly, this industry is labour-intensive. Therefore, any additional financial strain in an already low-profit environment could negatively influence employment conditions, particularly seasonal labour. One effective response measure to assist the wine industry, especially through this tough year, would be for the National Treasury to review the excise tax burdens for wine. These are currently at 11% and this is well above the other emerging markets’ duties on wine producers.

Second, in the maize subsector, the near-term outlook is somewhat better. The season started with excessive rains, which slowed some regions' planting by roughly a month. But this proved beneficial when we confronted the heatwave in the past two weeks as the soil moisture was reasonably high and cushioned the crop. This is the case for roughly 80% of rainfed regions of maize.

As such, the preliminary production estimates from organizations such as the United States Department of Agriculture (USDA) paint a positive picture, forecasting South Africa's 2022/23 maize crop at 15,6 million tonnes, down only 3% from the previous season. Importantly, this includes commercial and non-commercial maize. In the 2022/23 maize production estimate of 15,6 million tonnes, the non-commercial estimate is 600 000 tonnes (down from 667 000 tonnes in the previous season). The minor decline in harvest reflects reduced area plantings and slightly lower yields.

With that said, it is worth noting that we are still early in the season, and these estimates could change. The Crop Estimates Committee (CEC) holds a somewhat cautious view of estimating the area plantings for commercial maize to be 2,5 million hectares, which is down by 4% from the area estimate of the USDA for commercial maize. Still, these are tentative figures.

The CEC will release its revised area planting and the first production estimates on 28 February 2023. If the area planted remained unchanged at 2,5 million hectares, with an average yield of 5,6 tonnes per hectare (lower than the USDA's yield estimate of 5,7), then the 2022/23 commercial maize crop could be around 14,0 million tonnes. This would be well below the CEC's estimate of the 2021/22 commercial maize harvest of 15,4 million tonnes (when the yield was 5,9 tonnes per hectare). Still, this harvest would be well above the annual consumption of around 11,8 million tonnes and keep South Africa's status as a net exporter of maize.

My writings on agricultural economic matters are available on my blog: https://wandilesihlobo.com/

Podcast production by: Lwandiso Gwarubana, Richard Humphries, and Sam Mkokeli
30
JAN

El Nino on the horizon

As the deepening energy crisis continues to present problems for different parts of the agricultural sector, another major challenge that could confront South Africa's agricultural sector in a few months is a change in weather conditions from favourable rains to drier and hot conditions. This would be a switch from a prolonged period of La Niña to El Niño.

South Africa has had a good four seasons of La Niña induced heavy rains from 2019/20 to 2022/23. These above-normal rains supported agriculture leading to higher yields across various field crops, fruits and vegetables. The livestock industry also benefitted from improved grazing pasture.

Importantly, having four consecutive La Niña seasons was an unusual occurrence. The typical cycles are two seasons of higher rainfall followed by normal-drier seasons. Excluding the current trend, the only other period in the recent past with three successive years of conducive weather conditions and a large crop harvest ran through 2007/08, 2008/09, and 2009/10 production seasons. This period brought a sizeable agricultural yield to the country.

But the scientists at the International Research Institute for Climate and Society at Columbia University see a protentional occurrence of an El Niño later in the year. In its recent update of January 19, the International Research Institute for Climate and Society stated, "The likelihood of El Niño remains low through May-Jul 2023 (44% chance), but becomes the dominant category after that with probabilities in the 53-57% range."

Such a weather phenomenon would bring below-normal rainfall and hotter temperatures in South Africa. If it is intense, this could resemble the bleak agricultural conditions we witnessed during the last El Niño drought in the 2015/16 season, where staple crops such as maize dropped to 8,2 million tonnes, well below South Africa's consumption levels of 11,8 million tonnes. This shortfall necessitated imports of maize to supplement domestic needs.
Other field crops, fruits, vegetables and livestock also experienced severe losses. But if the El Niño is mild, crop declines could resemble the 2018-19 episodes, where the reduction in staple crops such as maize was not aggressive.

The total maize harvest that year was 11,8 million tonnes, in line with the annual consumption level. For comparison, in the past three seasons (excluding the current 2022/23), South Africa's maize harvest averaged 16,8 million tonnes and ensured that South Africa remains a net exporter of maize.

These are some of the issues I cover in this week’s podcast.

My writings on agricultural economic matters are available on my blog: https://wandilesihlobo.com/

Podcast production by: Lwandiso Gwarubana, Richard Humphries, and Sam Mkokeli
23
JAN

Energy crisis now a food security risk

There is probably no issue more urgent than the worsening energy crisis for South Africa's agriculture and agribusinesses. Farmers who rely on irrigation have all expressed concerns that persistent loadshedding negatively affects production.

In crucial field crops, roughly 20% of maize, 15% of soybean, 34% of sugarcane and nearly half of the wheat production are produced under irrigation. Fruits and vegetables also heavily rely on irrigation and thus face similar challenges. In red meat, poultry, piggery, wool, and dairy production, there are also concerns that loadshedding beyond stage two makes operations and planning challenging, as these industries all require continuous power for their usual activities.

Similarly, agribusinesses face similar challenges in various downstream processing activities, such as milling, bakeries, abattoirs, wine processing, packaging, and animal vaccine production. Exporting agribusinesses, especially those with products susceptible to delays, such as fruits, red meat, and wine, are also worried about the port activities, which fortunately haven't been primarily affected.

The financial impact on farmers and agribusinesses or food security is not yet clear and will be difficult to quantify. There are also food security concerns as the effect of loadshedding will probably show in the volumes of products to be harvested/produced later in the coming months due to the time lag in agricultural production stages. The other emerging concern is the impact on jobs if businesses are severely affected. There is a real danger that some farmers could lose their crops, which would impact the farms' financial future and likely negatively impact agricultural financiers.

Total exemption of the sector from loadshedding will be near impossible. Many food processing companies and farms are technically linked to other localities and cannot be easily insulated from loadshedding. With Eskom's challenges likely to be with us for some time, reducing reliance on Eskom will probably be a strategic business survival consideration for many businesses, although costly. Investing in alternative power sources will need to be prioritized where financial resources permit. This alternative generation may not necessarily take a business "off the grid" but ensure the continuity of crucial business activities during the cycle of loadshedding.

The financial commitments associated with this may be quite large, and businesses may also encounter regulatory hurdles. These financial or regulatory limitations should be shared with the Department of Agriculture, Land Reform and Rural Development (DALRRD) so that they can help address them within their available resources and means.

One possible step DALLRD can consider is to streamline the application processes under the Subdivision of Agricultural Land Act (SALA) and Spatial Planning and Land Use Management Act (SPLUMA) to authorize land use for energy generation. Additionally, if the government could also consider subsidies for solar panels and battery storage on top of relaxing these requirements, many farmers could possibly go off grid and generate enough power for their systems.
These are some of the issues I cover in this week’s podcast.

My writings on agricultural economic matters are available on my blog: https://wandilesihlobo.com/

Podcast production by: Lwandiso Gwarubana, Richard Humphries, and Sam Mkokeli
16
JAN

Crumbling basic infrastructure limits agriculture and tourism

The interlinked problems of poverty, unemployment and weak economic activity continue to plague rural towns and communities in SA. However, the two industries that could help ease some of these challenges — agriculture and tourism — face various constraints that limit their growth potential.

Beyond the big topics of ambiguous land reform and international trade in the case of agriculture, the everyday challenge for farmers, agribusinesses and tourism entities is the dire state of local road networks, deteriorating water infrastructure and high crime levels.

Many people, myself included, have tried to keep this issue at forefront of public policy discourse over the past two years. Food and beverage group Clover’s decision in 2021 to move its cheese production from Lichtenburg in the North West to an existing plant outside Durban in KwaZulu-Natal as a result ongoing poor service delivery, brought to light the real economic consequences of these challenges. The company had provided more than 400 jobs in Lichtenburg and there were other positive economic spin-offs for the community.

There are other well-publicised cases, including Astral in the Lekwa Municipality, where the poultry-producing company lost millions of rand because of the municipality’s failure to provide reliable supplies of water and electricity. In my home province, the Eastern Cape, dairy-producing organisations such as Amadlelo Agri and others are struggling to move their fresh milk to market because of the dire state of the roads, especially after recent heavy rains. They also face challenges of poor maintenance of water infrastructure.

These are some of the issues I cover in this week’s podcast.

My writings on agricultural economic matters are available on my blog: https://wandilesihlobo.com/

Podcast production by: Lwandiso Gwarubana, Richard Humphries, and Sam Mkokeli
09
JAN

The State of SA Countryside

My annual December drive from Pretoria to the Wild Coast in the Eastern Cape always allows me to assess South Africa's agricultural conditions after the first few months of the summer season.

Whether one enjoys this trip largely depends on weather conditions. In drought seasons like in 2015, this could be a depressing drive, traversing the dry grains and oilseed fields. Conversely, this could be an uplifting drive in rainy seasons, with green and lush fields visible from the highway. Thank goodness, my drive this year was to the latter, refreshing as in December 2021, another La Niña induced rainy summer season.

We are again in another La Niña rainy season. The heavy showers since the start of October have helped improve soil moisture across the country and assisted farmers in boosting plantings. But not all areas have fully completed the areas they intended to plant. Some fields in Free State, Eastern Cape and North West are yet to complete grains and oilseed plantings. There will roughly be a month delay in plantings.

Ordinarily, the regions to the east of the N1 highway plant maize and soybeans between mid-October and mid-November.

Meanwhile, the regions to the west plant between mid-November to mid-December. We have passed this period with some areas yet to be planted. Some replanting in some regions following the heavy rains of the past few months, which caused excessive floods in some areas of the Free State, for example.

I discuss more in this week’s segment.

My writings on agricultural economic matters are available on my blog: https://wandilesihlobo.com/

Podcast production by: Lwandiso Gwarubana, Richard Humphries, and Sam Mkokeli
01
JAN

Key trends in SA agriculture in 2023

Happy new year folks,

South Africa's agriculture will likely have a downbeat start into 2023. The gross agricultural value added for 2022, which will be released in March, will probably show a mild contraction. This would be a notable shift from two consecutive years of solid growth, with the sector expanding by 14,9% y/y in 2020 and 8,8% y/y in 2021.
Mild declines in critical crop harvests such as maize, production challenges in the sugar industry, trade friction in fruits, vegetables, beef and wool, and widespread foot-and-mouth disease weighed on the sector's performance this year. In a slightly more technical sense, the strong growth in the last two years has created an exceptionally high base, setting the ground for some pullback.
This year some of the challenges that dominated the agricultural calendar will again surface. In this first segment for the year, I reflect on are some challenges that I believe will be part of discussions, especially in the first half of this year.
Credit:

Production by Lwandiso Gwarubana, Richard Humphries, and Sam Mkokeli
25
DEC
2022

Jobs in SA agriculture

In this week’s segment, agricultural economist Wandile Sihlobo reflects on South Africa’s agricultural jobs data for the third quarter of 2022.

Although South Africa's agricultural sector faced numerous challenges in the 2021/22 production season – from tough production conditions in grains and oilseeds, disease outbreaks in livestock, and trade barriers in horticulture – the sector sustained jobs. In the third quarter of this year, there were 873 000 people in primary agriculture. This is up by 5% year-on-year (while down marginally by 0,1% quarterly).

Notably, this is well above the long-term agricultural employment of 780 000. As with the previous quarter, the increased farm activity in some vegetables, fruits and field crops sustained robust employment.

Still, the picture is not all rosy. The livestock, animal husbandry, forestry, and related services subsectors shaved jobs during this period under review. The decline in employment in livestock was expected as the subsector faces the spread of foot-and-mouth disease, which has led to a temporary suspension of exports and a reduction in activity in numerous businesses, thus weighing on farmers' finances.

Furthermore, the higher feed cost is an additional challenge for the livestock industry. This decline in agricultural jobs was mainly in the North West and Mpumalanga. Still, the reduction in the business activity in the subsectors mentioned above was compensated by the increasing work opportunities in horticulture and field crops. Thus, other provinces registered positive growth from the third quarter of 2021.

Credit:

Production by Lwandiso Gwarubana, Richard Humphries, and Sam Mkokeli
18
DEC
2022

SA tractor sales decline in November 2022

In this week’s segment, agricultural economist Wandile Sihlobo reflects on South Africa’s agricultural machinery sales.

After registering positive growth since May 2020, South Africa’s tractor sales fell by 5% year-on-year in November 2022, with 704 units sold. Still, the current sales are well above the long-term monthly average of 565 units, and reflect an environment where farmers were financially secured and confident about the seasons ahead, and thus increased investment in movable assets. Essentially, when farmers have a good year, allied industries benefit from spending the financial gains or the produce of the farming businesses. Agricultural machinery is one such industry that benefited from farmers' spending in 2020, 2021 and the greater part of 2022. During the same period, the combine harvest sales amounted to 23 units, significantly up from 8 units sold in November 2021.
The farmers, specifically grain and oilseed producers, expanded their area planted in the past two years and maintained a decent area in 2022. Weather conditions were favourable, specifically in the past two seasons, resulting in a large harvest for two consecutive seasons.

This was also when commodity prices remained elevated, supported by global events such as dryness in South America and Indonesia and rising demand for grains and oilseeds in China. Had it not been for higher global agricultural prices, the local grain and oilseed prices would have softened due to large harvests, and that would have weighed down the profitability. Therefore, these past few years' financial gains went to agricultural equipment improvement, among other farm activities. This year, the factors above continued to support grain and oilseed prices, along with the Russia-Ukraine war, which disrupted the supplies.

Importantly, this year the reasonably higher input costs and rising interest rates did not reduce farmers’ spending on machinery as we initially anticipated.

Credit:

Production by Lwandiso Gwarubana, Richard Humphries, and Sam Mkokeli
11
DEC
2022

SA agricultural exports up 10% in Q3

In this week’s segment, agricultural economist Wandile Sihlobo reflects on South Africa’s agricultural trade for the third quarter of 2023.

South Africa's agricultural trade data paint an encouraging picture, although the sector continues to struggle with poor roads network and inefficiencies in some rail networks and ports.
On the latter, there are promising discussions between Transnet and the agricultural industry focused on improving efficiencies and exploring co-investment options in some areas at ports. This will be a long-term endeavour, but its success will be meaningful for the export-oriented South African agricultural sector.
In the third quarter of this year, South Africa's exports of agriculture (food, fibre and beverages) amounted to US$3,7 billion, up 10% year-on-year (y/y). The significant factors underpinning this export value are the sizeable agricultural output in the 2021/22 production season and the higher commodity prices.
Citrus, maize, nuts, wine, apples and pears, sugar, fruit juices, berries, soybeans and wool were among the critical products exported in the third quarter.

Credit:

Production by Lwandiso Gwarubana, Richard Humphries, and Sam Mkokeli
06
DEC
2022

Resilience of SA agriculture

In this week's segment, I focus on critical events shaping South Africa's agriculture and performance. I expect a mild contraction in the gross value added following two years of solid growth. Still, it is essential to note that overall activity has remained strong, and the sector has maintained its core contribution of improving national food security and job creation.

I also discuss in the podcast key programmes that were launched, such as the Agriculture and Agro-processing Master Plan and the Land Bank's Blended Finance programme. These programmes are essential for the long-term growth of the sector.

The one area where there has been minimal progress and expectations were high at the start of the year is with the launch of the Agricultural Development and Land Reform Agency, which I believe could help accelerate the redistribution pillar of the land reform programme.

The Agency was mentioned on various occasions by South African President Cyril Ramaphosa and Minister of Agriculture, Land Reform and Rural Development Thoko Didiza. I understand that there has been considerable progress in structuring this Agency, and when launched, it could play an important role in land reform.

Credit:

Production by Lwandiso Gwarubana, Richard Humphries, and Sam Mkokeli
30
NOV
2022

Land Reform in South Africa

In this week’s special segment, agricultural economist Wandile Sihlobo speaks with Professor Johann Kirsten, Director of the Bureau for Economic Research, Stellenbosch University, about an article he co-authored with him on South Africa’s land reform.

Here is an extract:

South Africa’s land reform policy remains highly contested. But, in our view, a number of persistent myths about farmland statistics and the structure of commercial agriculture skew debates. This makes it difficult to reach some common understanding about the realities of land and agriculture in the country.

In 1994 when South Africa became a democracy, white farmers owned 77.580 million hectares of farmland out of the total surface area of 122 million hectares. The new government set a target of redistributing 30% of this within five years. This target date has been moved several times and is now 2030.

According to popular belief, between 8% and 10% has been redistributed so far. But as we show below this is incorrect as it omits a number of key statistics.

Only 17%-20% of the 77,58 million ha is suitable for field crop, irrigation and horticultural production. More than 55% of farmland is only ideal for extensive grazing (land that is poor and dry but animals can roam widely, the Karoo being an example), and another 20% for intensive pastures and animal production (land, the KwaZulu-Natal Midlands being an example, that receives good rains and has good pastures for grazing).

This shows that the potential of farm land being used to create full-time sustainable livelihoods is limited. This suggests that a careful and measured approach needs to be adopted in redistribution efforts.

These realities are the basis for our arguments against five standard myths about agriculture and land in South Africa. That’s not to say that there isn’t a great deal still to be done. But failure to recognise the gains that have been achieved means that policies can’t be developed based on what’s been achieved so far.

The article was published by The Conversation and can be accessed via this link: https://theconversation.com/land-reform-in-south-africa-5-myths-about-farming-debunked-195045
28
NOV
2022

Optimism about SA maize harvest

The United States Department of Agriculture (USDA) 's Pretoria office is a key institution and it is worthwhile to keep an eye on their views. They recently released an updated view of South Africa's 2022/23 maize production season, leaning strongly towards the views of South Africa's Crop Estimates Committee (CEC).

They forecast the country's commercial maize plantings at 2,60 million hectares in the 2022/23 season, broadly aligned with the CEC, whose data points to a possible area of 2,59 million hectares. This area is slightly below the 2021/22 season of 2,62 million hectares.

Still, it is well above the long-term average. Considering the USDA's yield forecast of 5,70 tonnes per hectare, South Africa's maize harvest could amount to 15,00 million tonnes in the 2022/23 season, marginally down from 15,33 million tonnes of the 2021/22 season. Still, this will be well above the annual consumption of 11,80 million tonnes and maintains South Africa as a net exporter of maize. Under such conditions, South Africa's maize exports could be above 3,00 million tonnes.

The usual export destinations for South Africa include Taiwan, Japan, Vietnam, South Korea, Botswana, Italy, Namibia, Eswatini, Mozambique, Spain, Lesotho, Angola and Zimbabwe, amongst others. These markets, especially the offshore ones, will likely remain dominant in South Africa's export list.

The countries whose imports could decline, depending on how widespread the favourable rains are, are the southern African countries. In the La Niña years, the whole region receives higher rainfall which should support crop production. The major issue that farmers in some southern African countries could struggle with is the higher input costs.

In the 20221/22 season, the likes of Tanzania saw a decline in fertilizer usage because of higher prices, which reflected in lower yields in some regions. With the fertilizer prices still over 20% higher than last year, although having softened from the months after Russia invaded Ukraine, the current levels are still relatively high and costly to farmers.

Regarding the subsistence farmers, the USDA forecasts an area of 300 000 hectares, down from 379 000 hectares in the previous season. With a yield expectation of 2,00 tonnes per hectare, subsistence farmers' production could amount to 600 000 tonnes in the 2022/23 season. This is also down from 657 000 tonnes in the previous season. Still, this is a decent harvest and will help cover the household needs in various communities.

In this week’s segment of the podcast, agricultural economist Wandile Sihlobo, provides more color on these dynamics and their impact on grain prices.

Credit:

Production by Lwandiso Gwarubana, Richard Humphries, and Sam Mkokeli

29 episodes

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