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Bountiful Forecast For Agriculture

3 August 2021 – As the harvest for the 2020/21 summer grains and oilseeds drew to a close and focus increasingly shifted towards the 2021/22 production season, which began in October, preliminary insights suggested that South Africa could have another good season despite less rainfall than in the 2020/21 season, said the Agricultural Business Chamber (Agbiz).

The chamber’s chief economist, Wandile Sihlobo, said yesterday that the three critical indicators they have thus far – tractor sales, the weather outlook for the next five months and grains and oilseed prices – paint a positive picture.

Sihlobo said local tractor sales for the first half of this year were up 27 percent year on year at 3 385 units.

The Agbiz/IDC Agribusiness Confidence Index, which measures the sentiment among agribusinesses and major farming entities, reached a record high of 75 in the second quarter of this year, from 64 points in the first quarter of 2021.

Agbiz said the weather outlook for the upcoming 2021/22 production season showed encouraging signs.

In its Seasonal Climate Watch for August to December 2021, the South African Weather Service noted that “the El Niño-Southern Oscillation (Enso) is currently in a neutral state and the forecast indicated that it would most likely remain in a neutral state for spring, with a likely change to a weak La Niña during early summer”.

“As we move towards the spring and summer seasons, Enso plays an important role in our summer rainfall. As such, the increased likelihood of a weak La Niña during early summer is expected to be favourable for above-normal rainfall in that period,” said Sihlobo.

Importantly, he said, the expected higher rainfall would most likely be a reality in the central to eastern regions of South Africa throughout December, while the country’s western areas would most likely receive normal rains.

The chamber said while it expected South Africa’s maize, soya bean and sunflower seed prices to soften somewhat in the second half of the year compared to the previous one, these were still and would remain attractive levels, which should incentivise farmers to maintain sizeable plantings in the 2021/22 season.

“For example, on 29 July 2021, yellow and maize prices were up 26 percent and 23 percent year on year (y/y), trading at R3 373 per ton and R3 227 per ton, respectively. On the same day, sunflower seed and soya bean spot prices were 50 percent y/y and 13 percent y/y up, trading around R9 285 per ton and R7 727 per ton, respectively,” said Sihlobo.

Agbiz said it would only know the farmers’ intentions to plant for the 2021/22 summer grains and oilseeds in October this year when South Africa’s crop estimates committee was scheduled to release the data.

The preliminary estimates from the US Department of Agriculture (USDA) pointed to a somewhat pessimistic outlook for South Africa’s 2021/22 maize area plantings, placing it at 2.5 million hectares, down 9 percent y/y.

The USDA attributed this potential decline in maize area plantings to a possible reduction in maize prices towards the end of the year.

“This is on the back of an expected decline in global maize prices, at a time where Southern African regional demand for maize will also weaken following large harvests across the region.

“However, the yield estimates are set to be roughly in line with the 2020/21 season, at around 5.9 tons per hectare, because of anticipated favourable weather conditions. Although we are not entirely convinced that an area of plantings for maize could fall to 2.5 million hectares in the 2021/22 season, such an area would be in line with 10-year average plantings for commercial maize in South Africa,” it said.

Sihlobo said such a decline would also mean that the area switches from maize to sunflower seed and soya beans, which in sum would still lead to an improvement in South Africa’s 2021/22 summer grain and oilseed production.

Against this backdrop, Agbiz said it was inclined to believe that South Africa’s consumer food price inflation could continue to moderate in the second half of the year from the higher levels of 7 percent y/y in June this year, and remain contained at relatively lower levels in 2022. Source (Business Report)