A few weeks back we noted that it is almost certain that South Africa’s agricultural economy will contract in 2019, mainly as a result of the poor summer crop harvest after drought. But there is cause for hope with South Africa’s 2020 agricultural performance.

Above-normal rainfall

On 30 August 2019, the South African Weather Service released further evidence which reinforces this view. The agency noted that the central and eastern parts of South Africa could receive above-normal rainfall between November 2019 and January 2021. The weather outlook for the northwestern regions of the country is unclear at this point, but we think there could be normal showers.

It is quite rare to find a season where the northeastern parts of South Africa experience above-normal rainfall while the western areas are dry, hence we are optimistic that the overall summer crop growing areas could receive sufficient rains in the 2019/20 production season.

Summer crop plantings

The planting season is due to start around mid-October in the eastern parts of South Africa. But we think there could be one-or-two-week delays in plantings in some areas that have lower soil moisture until the anticipated rainfall starts in November. Summer crop plantings in the northwestern areas should commence on time, not only because of anticipated showers but generally improved soil moisture due to late 2019 summer rainfall and cool winter which preserved moisture in some areas.

In the 2018/19 production season, most summer crop harvests fell by double-digits because of drier weather conditions at the start of the season. To zoom in on major crops in the 2018/19 production season, maize, soyabeans and sunflower seed production are respectively down by 12% y/y, 21% y/y and 24% y/y, to 11,02 million tons, 1,17 million tons and 680 940 tons.

Assuming good weather conditions, there could be a notable upswing from these levels. For example, the International Grains Council’s preliminary estimates for South Africa’s 2019/20 maize production are 12,8 million tons, which would be 16% higher than the current season and slightly above the five-year average production of 12,3 million tons.

Livestock farmers and agribusinesses

This would be a welcome development, not only for the summer crop farmers but also livestock farmers and agribusinesses. The livestock sector could benefit by potentially lower prices when the harvest increases. At the end of August 2019, South Africa’s yellow and white maize prices were respectively up by 15% and 22% from the corresponding period last year because of the lower harvests in the 2018/19 production season. Agribusinesses could benefit in various ways, from improved grain volumes for storage and through lower prices in entities that use maize and other summer crops.

The optimistic outlook doesn’t only lie rely on the potential recovery of summer crop production, but also winter crops and the horticultural sector. The Western Cape, which is amongst the key horticulture-producing provinces in the country, received good moisture in the past few weeks, which improved soil moisture and water levels in dams.

Boosting the agricultural economy

Going forward, the province is set to receive additional rainfall, all of which is conducive for the horticulture harvest of 2020, which would ultimately boost South Africa’s agricultural economic fortunes. Over the coming weeks and months, we will closely monitor the weather developments as the optimistic picture we’ve painted here depends on good rainfall. – Wandile Sihlobo, Agbiz

Wandile Sihlobo, head of economic and agribusiness intelligence at Agbiz, shares highlights in his update on agricultural commodity markets. Click here for the full report on agri markets for the major commodities.

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