After entering a technical recession in the second quarter of the year, the South African agricultural economy recovered in the third quarter, boosted by higher production of horticulture and animal products.
Within the horticultural subsector, the most notable performer was the citrus industry, which has thus far exported a record 2 million tons for the year. The uptick in animal products somewhat mirrors the recovery in the livestock sector after the 2015/2016 drought period. However, the agricultural sector is expected to contract in 2018 due to generally lower output of major agricultural commodities compared to 2017.
Data released by Statistics South Africa (Stats SA) show that the agricultural economy grew by 6.5% on a quarter-on-quarter seasonally adjusted annualised rate (q/q saar). While better performance was expected than in the second quarter (-31.9% q/q saar), the magnitude of the recovery came as a surprise. This can partly be explained by the base effects, as well as the recovery in the horticultural and livestock subsectors.
While this is generally a welcome development, it is likely to be short-lived as agricultural conditions remain tough in large parts of the country due to unfavourable weather conditions. The central and western parts of the country, which predominantly produce summer grain and oilseed, would have planted a large share of the crop at this stage, but there is still minimal activity on the ground due to dryness. The South African Weather Service recently noted that the next three months could bring rainfall over these areas, but this remains to be seen. Moreover, there are fears of an El Niño later in the 2019 summer season.
That said, the current summer crop started on sound footing, with farmers aiming to increase summer grain and oilseed planting by 5% from the 2017/2018 production season, to 4.03 million hectares. Tractor sales have also been robust, amounting to 5 818 units in the first 10 months of this year, up by 9% from the same period last year.
Overall, however, optimism has weakened, as confirmed by the Agbiz/IDC Agribusiness Confidence Index, which fell to 42 points – the lowest level since 2009. Above all, the weather remains a key factor that will determine the growth prospects of the South African agricultural economy in the coming year. – Press release