South Africa’s 2020/21 winter wheat season had a bad start because of drought. The Western Cape, which generally accounts for two-thirds of South Africa’s winter wheat plantings, experienced a delay of roughly three weeks. At the time, the Crop Estimates Committee (CEC) was convinced that plantings could fall by 2% year-on-year (y/y) in the province. After accounting for unfavourable weather conditions in other provinces, they estimated an 8% y/y decline in national winter wheat plantings for the 2020/21 season.

However, the grim outlook quickly changed after the first rain enabled farmers to accelerate plantings throughout the Western Cape and other provinces. The various interactions we have had with farmers in the Western Cape suggest that the area planted under wheat could be the same as in the previous season, and it might not have declined as the CEC suggests. We will have a clearer view on this point when the CEC releases its preliminary area estimate data for winter crops on 29 July 2020.

Positive prospects for winter wheat harvest

Sentiment about the 2020/21 winter wheat has improved notably since the start of the season. The recent rains in the Western Cape were particularly influential in improving soil moisture in the fields. If there are good follow up rains in the coming month, it is reasonable to assume that this could be one of the good seasons for winter wheat farmers in the province.

There is certainly a case for such optimism if we consider the latest reports from the South African Weather Service (SAWS), which forecasts increased chances of above-normal rainfall over the south-western and southern parts of South Africa between July and October 2020.

The late start of the season means that crops will require moisture for a longer period than usual. Hence, the SAWS forecasts are a positive signal for these winter wheat-growing regions of the country. It will be a month until we have a sense of how much the latest rains will contribute to overall yields and output, as the CEC will release the production forecast on 27 August 2020.

Possible increase in domestic wheat production

In the 2019/20 production season, South Africa harvested 1,5 million tons of wheat, which was down by 18% y/y (Exhibit 1). The country had to increase the volume of imports by 32% y/y to an estimated 1,8 million tons to meet the required annual consumption. This is well above the average annual imports of 1,6 million tons. About 85% of this volume has thus far landed on South African shores, and the rest could arrive before the end of the marketing year, which is 30 September.

The import requirements for the 2020/21 marketing year, which starts on 1 October 2020, will be clearer once we have a reliable estimate of the current crop. If weather conditions remain favourable, as the aforementioned SAWS forecasts suggest, we could see an increase in domestic wheat production. In such a scenario, wheat imports could decline from the estimated 1,8 million tons of the current marketing year.

Fortunately, the global wheat market, on which South Africa remains dependent, is in good shape. The United States Department of Agriculture (USDA) forecasts 2020/21 global wheat production at a record 761 million tons, up by 1% y/y. There are, however, reports of drought in various parts of Europe and the US, which will need close monitoring in the coming weeks, especially if the heatwave starts affecting crop-growing conditions.

In a nutshell

South Africa’s 2020/21 winter wheat production conditions have improved
notably from the worrying outlook at the beginning of the season because of beneficial rains, specifically in the Western Cape. But the country will remain dependent on global wheat supplies for half of its annual consumption. The indications on the global front are positive for the 2020/21 wheat harvest, although drought could become a challenge for parts of Europe and the US. – Wandile Sihlobo, Agbiz

Wandile Sihlobo, chief economist at Agbiz, shares highlights in his update on agricultural commodity markets. Click here for the full report on agricultural markets for the major commodities.

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