Agricultural Market Viewpoint with Wandile Sihlobo The Xchange Platform

Export opportunities for South Africa's agricultural products are opening up within BRICS+ countries. Over the past two years, China, the Kingdom of Saudi Arabia, and Egypt have widened market access for various agricultural products from South Africa.

Admittedly, Egypt and the Kingdom of Saudi Arabia have recently joined the BRICS+ grouping, and market access is part of the long-term bilateral engagements with South Africa. South Africa has access to selected fruits, wine, wool, meat and grains.

However, South Africa aims to broaden market access in BRICS+ for most of the country's agricultural products. For this reason, through the 2023 BRICS Summit in Johannesburg and the prior engagements, South Africa prioritized trade as a significant point on the agenda for discussion.

The political principals broadly agreed that deepening trade was necessary for the BRICS countries. Still, each country's trade and agricultural authorities are responsible for taking the lead and seeking market access from member countries.

The idea of a BRICS agricultural trade agreement that some argued for has not yet been thoroughly ventilated. The priority so far was for each BRICS member to work to reduce import tariffs and address the phytosanitary constraints for various products that BRICS member countries would present.

Even before adding the new members, the original BRICS countries were already significant importers of agricultural products. Between 2019 and 2022, this group's agricultural imports averaged US$255 billion annually, according to Trade Map data.

China accounted for 71% of all the agricultural imports into the group, followed by India at 11%, Russia at 11%, Brazil at 4% and South Africa at 3%. Despite these sizeable agricultural import figures, the intra-BRICS agricultural trade remained relatively low.

The products these countries imported include soybeans, beef, maize, berries, wheat, palm oil, poultry meat, cotton, barley, dairy products, pork, apricots and peaches, sugar, wool, sunflower seed, nuts, sorghum, goat meat, wine, grapes, bananas, avocados, mangos, guavas, and fruit juices, among other products.

South Africa produces some of these products in abundance and has surplus volumes for exports. Thus, the country championed a need to deepen trade in the 2023 BRICS Summit.

Admittedly, the positive reception that South Africa has received from some BRICS countries lately is not entirely because of the groupings' focus on trade. Indeed, some discussions regarding market access to China have been underway for some time. Still, when agricultural trade is prioritized in various political forums, there is naturally urgency to deliver some results.

With BRICS adding new members to form a bigger BRICS+, the agricultural trade opportunities have increased.

Listen to the podcast for a detailed reflection.

My writing on agricultural economic matters is available on my blog: https://wandilesihlobo.com/

Podcast production by Nelisiwe Tshabalala, Lwandiso Gwarubana, Richard Humphries, and Sam Mkokeli

Many, including myself, may have been a bit pessimistic about the 2023/24 summer crop growing conditions when we signalled a potential further downward revision of the harvest estimate this month.

The data released last week by the Crop Estimates Committee showed mild upward adjustments in the crop size from last month's figures. South Africa's 2023/24 summer grains and oilseed harvest is estimated at 16,0 million tonnes, up 1% from last month.

Indeed, this is not a cause for celebration. The figure does not change the reality that we have been through a challenging season of El Niño-induced drought and heatwave in February and March that weighed on the summer grains and oilseed harvest in various regions of the country. The current estimated harvest of 16,0 million tonnes is down 20% from the 2022/23 production season.

Maize

A closer look at the data shows that white and yellow maize harvest could be 6,4 million tonnes (up 2% m/m) and 6,9 million tonnes (roughly unchanged from last month). These revisions place the total maize production estimate at 13,3 million tonnes (up 1% m/m).

When viewed annually, white maize harvest is down 25%, with yellow maize down 13% from the 2022/23 season. The expected harvest of 13,3 million tonnes is down 19% from the 2022/23 season.

If it materializes, the expected harvest will be sufficient to meet South Africa's annual maize consumption of roughly 12,00 million tonnes, leaving the country with a small export volume. Still, we will likely see prices remaining elevated for some time because of the potentially tight supplies.

The Southern African regional demand, particularly for white maize, also remains a significant upside driver of prices.

Oilseeds

The 2023/24 soybean harvest remained unchanged from last month, estimated at 1,8 million tonnes (down 35% y/y). This annual decline results from lower yields in various regions of South Africa. We now believe South Africa may not play a robust position in soybean exports like the previous season. If anything, soybean oilcake imports this new season are now a possibility.

Meanwhile, the sunflower seed harvest estimate was lifted from last month by 4% to 615 000 tonnes (down 15% y/y). The area plantings are moderately down from the previous year, which means the primary driver of the annual decline in the harvest is the expected poor yields, especially as most of South Africa's sunflower seed is planted in the western regions that experienced dryness and heatwave in February and March.

Concluding remarks

The recent rains in much of South Africa's summer crop-growing regions are too late. The damage to the crop occurred in February and March during the heatwave and the El Niño-induced dryness. The current crop forecasts reflect this challenge, as the major crops are down notably compared to the 2022/23 production season.

Listen to the podcast for a detailed reflection.

My writing on agricultural economic matters is available on my blog: https://wandilesihlobo.com/

Podcast production by Nelisiwe Tshabalala, Lwandiso Gwarubana, Richard Humphries, and Sam Mkokeli

There are divergent views about the effectiveness and extent to which South Africa's agricultural policies have been implemented.

Regardless of how experts feel about the capacity of the state and the policy stance of the South African government since the dawn of democracy, the one undeniable fact is that the sector has grown tremendously. Data from the Department of Agriculture, Land Reform and Rural Development show that domestic agricultural output in 2022/23 was twice as much as in 1993/94.

Whether this growth has been inclusive and transformative is a question I will return to later in this piece.

For now, it's important to emphasize the growth of the industry and the drivers of its expansion. Significantly, this expansion was not driven by a few sectors but has been widespread -- livestock, horticulture and field crops have all seen strong growth over this period.

Of course, the production of some crops, most notably wheat and sorghum, has declined over time. This, however, had a lot to do with changes in agroecological conditions and falling demand in the case of sorghum, not policies.

These higher production levels have been underpinned, mainly by adopting new production technologies, better farming skills, growing demand (locally and globally), and progressive trade policy. The private sector has played a major role in this progress.

Listen to the podcast for a detailed reflection.

My writing on agricultural economic matters is available on my blog: https://wandilesihlobo.com/

South Africa has experienced two months of extremely dry and hot weather —
February and March. The impact of harsh weather conditions on agriculture across
the country is visible through crop failures. The 2023/24 summer grain and oilseed
production is down 21% year-on-year, estimated at 15.8 million tonnes.

We are now at an advanced stage of crop development where there would be
minimal to no improvement, even if it rains. Indeed, if one reflects on the past few
days, we have received some excellent rainfalls in various regions of South Africa,
but this has had minimal benefit on crops.

The soil moisture is enhanced, but this will unlikely improve our summer grain and
oilseed production outlook. However, the grazing veld for the livestock will be
improved somewhat.

The map below illustrates the increased soil moisture levels in the central and
eastern regions of South Africa following the recent rains. The improved moisture will help in the winter crop season, which starts at the end of this month in most regions of the country.

Regarding summer grain and oilseed production prospects, South Africa is in a
better condition than the rest of the southern African region, where there are massive crop failures and countries have to rely on grain imports.

South Africa has sufficient grain for domestic consumption; if the forecast crop
materialises, we hope it does.

Listen to the podcast for more insights.

My writing on agricultural economic matters is available on my blog:
https://wandilesihlobo.com/

Podcast production by Nelisiwe Tshabalala, Lwandiso Gwarubana, Richard
Humphries, and Sam Mkokeli

The past two years presented major challenges for the South African livestock industry. The spread of the Foot-and-Mouth Disease (FMD) and higher feed costs were the two major factors that weighed on their business.

As farmers, various feedlots, and the government worked to control the spread of the FMD, the impact was deepening on the revenues of farming businesses as they suddenly had to limit the movement of animals, and various export markets were temporarily closed. In the case of the beef industry, in 2022, the exports fell below the prior five-year average, totalling 26 881 tonnes, down 16% year-on-year, according to data from Trade Map. The exports recovered slightly in 2023, up 3% year-on-year to 27 675 tonnes.

Even as the beef industry confronted these challenges, it had already resolved that widening the export market would catalyze its long-term growth. There was evidence pointing to the expansion of exports. For example, between 2017 and 2021, South Africa's overall beef exports averaged 31 169 tonnes.

This was notable progress as the beef exports had averaged 26 670 tonnes five years prior, and the years before that were less than 15 000 tonnes. The spread of animal diseases threatened this export growth.

Between 2017 and 2021, the exports comprised, on average, 49% fresh beef and 51% frozen beef. The export markets were also diverse. For fresh beef, Kuwait, Jordan, United Arab Emirates, Mozambique, Lesotho, Qatar, Zimbabwe, Mauritius, and the Netherlands were some of the largest and most consistent markets. Similar markets and new ones were at the top of the list for frozen beef.

These included Lesotho, Mozambique, China, the United Arab Emirates, Jordan, Egypt, the Netherlands, Qatar, Hong Kong, and Kuwait. Fortunately, while some regional markets had temporarily closed off the red meat products from South Africa, some remained open. Thus, the exports did not collapse in 2022 and 2023, when animal disease was a major challenge.

This challenge was not limited to the cattle industry. Although the wool industry was not directly affected by FMD, some export markets temporarily closed due to concerns related to the disease. China, which accounts for more than two-thirds of South Africa's wool exports, temporarily closed for various periods in 2022 and 2023.

The impact of those temporary closures is visible on export volumes of wool. For example, in 2022, South Africa's wool exports fell by 19% year-on-year to 42 239 tonnes. The major decline in volume was in the Chinese market.

Fortunately, the engagements between the South African and Chinese authorities to reassure them of the safety measures in place to ensure that there is no spread of disease led to the resumption of exports. In 2023, South Africa's wool exports recovered 18% year-on-year to 49 715 tonnes.

The higher feed costs were a factor outside the control of the farmers and regulators. This was also not unique to South Africa but a global phenomenon. The rise in Chinese demand for grains, coupled with drought in South America, higher shipping costs, and the Black Sea war, were major drivers of grain prices in the past two years.

South Africa is interlinked to the global market; thus, the rise in international grain prices was also a reality here at home. For this reason, the livestock farmers had to contend with higher feed prices while simultaneously being squeezed in export markets.

My writing on agricultural economic matters is available on my blog: https://wandilesihlobo.com/

Podcast production by Nelisiwe Tshabalala, Lwandiso Gwarubana, Richard Humphries, and Sam Mkokeli

This month, we will have farmers in the Western Cape likely begin to prepare the soil for the 2024/25 winter crop production season by the end of April into May. Other major winter crop-producing provinces, such as Free State, Limpopo and the Northern Cape, will likely start around the end of May.

The production of winter crops outside the Western Cape has sizable irrigation support. These regions should benefit from the relatively higher dam levels from the early summer rainfall.

In major winter grains such as wheat, nearly half of the production in South Africa is produced under irrigation. The irrigation share in overall wheat production is essential in an environment where drier weather conditions and heat waves are causing significant damage to summer grains and oilseed regions.

The weather outlook remains uncertain for rainfed regions, which could negatively affect the planting in the 2024/24 season.

Listen to the podcast for more details and our outlook.

My writing on agricultural economic matters is available on my blog: https://wandilesihlobo.com/

Podcast production by Nelisiwe Tshabalala, Lwandiso Gwarubana, Richard Humphries, and Sam Mkokeli