While having improved from the first quarter of the year, South Africa’s agriculture trade surplus narrowed by 30% in the second quarter of this year compared to the corresponding period in 2018, recorded at US$789 million (Figure 1).

Lower export volumes

The narrowing of the trade balance was underpinned by lower export volumes of wool, edible fruits, wine and grains. This can be explained by two factors, which are animal health and the changing climate. First, the foot-and-mouth disease outbreak that occurred in Limpopo earlier this year resulted in a temporary ban of South Africa’s beef and other livestock products exports.

This continued for months while the authorities were still doing inspections and applying control measures, and thus, its impact is reflected in the trade data for the first half of this year. The beef industry is now back in export markets, but the wool industry continues to struggle to access the Chinese market as negotiations to resume exports are still underway.

Rainfall

Second, the drought that started in October 2018 and continued into early 2019 in some parts of South Africa led to a poor summer crop and horticulture harvest. For example, the major summer crops, which performed poorly during the 2018/19 production season – maize, soya beans and sunflower seed production are down by 12% year-on-year (y/y), 21% y/y and 24% y/y, to 11,02 million tons, 1,17 million tons and 680 940 tons, respectively. Moreover, the wine grapes harvest was down by 2% from 2018. All this subsequently led to lower export volumes in the second quarter of this year compared to a corresponding period in 2018.

Trade balance to remain in positive territory

From a destination point of view, the African continent and Europe continued to be the largest markets for South Africa’s agricultural exports, respectively accounting for 40% and 26% in value terms. Asia was the third-largest market, taking up 24% of South Africa’s agricultural exports in the second quarter of 2019. The balance of 10% value was spread across other regions of the world.

Overall, while South Africa’s agricultural trade balance could narrow this year because of the aforementioned animal health and unfavourable weather impact, we expect it to remain in positive territory.

Products showing a growing demand

In terms of national policy, in his 2019 State of the Nation Address, President Ramaphosa signalled that potential expansion in agricultural production would mainly be on export-oriented products.

There is already a clear pathway for this initiative as South Africa is well positioned in terms of export markets, and there is clarity about products that show a growing demand in the world market, such as horticulture products, and livestock, to a certain extent, to mention a few categories. – 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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