The latest data in South Africa’s agricultural sector reinforce the view that the 2020/21 production season could potentially deliver one of the largest harvests on record. This past week, the country’s Crop Estimates Committee (CEC) released its first planting estimates data, which show total summer grains plantings for 2020/21 at 4,2 million hectares, up by 6% from the 2019/20 season.
There is an expansion in most summer crops, except sunflower seeds, of which plantings declined by 5% year on year (y/y) to 473 300ha, which would be the smallest area in nine years. This decline is mainly due to some hectares being shifted to white maize plantings in the western regions of South Africa due to favourable prices.
The weather conditions across South Africa have generally been favourable since the start of the production season in October 2020. Since then, the widespread rain allowed plantings to commence on time, except for a few Limpopo regions, specifically the Springbok plains, which were drier than most areas of South Africa. Nevertheless, the past week’s rain has changed fortunes even for those more parched Springbok plains of Limpopo.
In the Free State, where the crop was generally in good condition before the past week’s rain, Agbiz is worried about potential damages, particularly in farms around Bultfontein, Hoopstad, and Wesselsbron. In the week ahead, these regions will need sunshine to ensure that waterlogging is minimised and the crop recovers.
Aside from the Free State, the crops in other provinces of the country appear to be in good shape, with expectations of average to above-average yields. Following the recent rain, sunshine across the country would do better for the crop than additional showers.
Starting with maize, if we apply a five-year average yield estimate of 5,30tons/ha to an estimated area planting of 2,78 million hectares (up 6% y/y), South Africa could have a harvest of 14,72 million tons in the 2020/21 season (15,41 million tons in 2019/20). This crop would be the fourth-largest maize harvest on record.
However, a realistic high-road scenario could also be constructed by assuming a possible yield of 6tons/ha on the back of favourable rainfall, which has improved crop conditions. When South Africa received higher rainfall in the 2016/17 production season, the average yield was 6,40tons/ha. Therefore, a yield assumption of 6tons/ha would not be far-fetched. Such a crop yield on an area of 2,78 million hectares would potentially lead to a harvest of 16,66 million tons. This would be the second-largest maize harvest on record.
The CEC will release its first production forecast on 25 February 2021. It is only then that we will have a better sense of where the crop will be. Still, the favourable crop conditions combined with an area planting of 2,78 million hectares, suggest that South Africa’s maize harvest should be within the range of 14,72 and 16,66 million tons that we have provided above. This will be measured against an annual maize consumption of 11,47 million tons, meaning South Africa will remain a nett exporter of maize. However, the implications on maize prices will most likely be evident around the end of February and into March 2021.
Over the past few months, the weaker domestic currency, growing demand for South Africa’s maize in the Southern Africa region and the Far East, coupled with generally higher global grain prices, provided support to the domestic maize prices. We think the domestic crop conditions will matter more for price movements from the end of February than has been the case over the past few months. Still, the scale of Cyclone Eloise’s damage in Southern Africa’s maize (Mozambique and Zimbabwe), which is yet to be fully quantified, will likely have implications on the domestic market.
If we assume an average five-year yield of approximately 1,82tons/ha and an area of 806 000ha that farmers planted, the overall harvest could amount to 1,47 million tons. This is up by 18% y/y and would be the second-largest harvest on record. Like maize, we think that a crop of this size is plausible, given the favourable agricultural conditions.
This, however, would not necessarily result in prices cooling off from current highs of R9 600/ton (up 63% y/y). The underlying price drivers are somewhat like those underpinning the maize market. Nevertheless, unlike maize, an increase in the soya bean harvest will still not change the fact that South Africa imports around half a million tons of soya bean meal. The country will always depend on imports, even at these harvest levels, to meet the growing demand for soya bean meal by the poultry sector.
If we use a five-year average sunflower seed yield of 1,35tons/ha with an intended area planting of 473 300ha, the harvest could be 638 955 tons. This crop would be down by 19% y/y and from the five-year average production.
A final thought
In conclusion, South Africa’s agricultural production outlook remains buoyant, thanks to increased plantings and favourable weather conditions. What will be crucial this coming week and the week after, is sunshine over the country’s summer-crop growing regions. Additional rainfall at this point would most likely cause waterlogging which, in turn, would undermine the yields. An essential date for official production estimates is 25 February 2021.
The forecast to be published on that day will likely provide a more precise direction for domestic grain prices and food price inflation over the coming months. But the data we have thus far provides comfort that South Africa could have yet another good summer crop production season in 2020/21. – Wandile Sihlobo, chief economist, Agbiz
Wandile Sihlobo, chief economist at Agbiz, shares highlights in his update on agricultural commodity markets. Click here for the full report on the agricultural markets for the major commodities. Find previous reports here.