Business Insider SA
Aug 30, 2020, 04:26 PM
In a little more than a week’s time, South Africa will most likely report a record economic slump – with economists expecting that second quarter GDP shrank by between 45% and 55% due to the coronavirus crisis and lockdown.
But amid the economic gloom, one sector is shining bright.
Much of the agricultural sector is positively booming, following bumper summer crops and with early indications that the winter season could also deliver strong growth.
“The favourable rains that the Western Cape received in the past couple of weeks, and good soil moisture in other provinces has been of immense benefit to the South African winter crops. We can now safely say – with caution, of course, as the season is still at early stages – that South Africa will not only have one of the [best] summer crops seasons but a brilliant agriculture season,” Agricultural Business Chamber of South Africa (Agbiz)’s chief economist Wandile Sihlobo said in a note on Friday.
In the first quarter of this year, the agriculture sector grew almost 28% – and Sihlobo expects it may expand by between 20% to 25% in the second quarter.
The bumper conditions in SA agriculture come after a very lean year due to various droughts and foot-and-mouth disease. The sector has been shrinking for four consecutive quarters, contracting by 7% last year.
But good rainfall over many provinces, much larger harvests, solid prices and a weaker rand – which helps South Africa exports overseas – all contributed to a strong performance.
On Friday, the National Crop Estimates Committee (CEC) confirmed that SA’s total summer grain and oilseed output during (17.85 million tons) was one of the largest on record– and 34% higher than last year, says Paul Makube, senior agricultural economist at FNB Agri-Business.
The total maize crop of 15.54 million tons is 38% larger than last year.
Looking ahead, the first winter crop estimate came in a massive 32% higher, as good rains and snow boosted crop prospects in the producing areas of the Western Cape, says Makube.
Sihlobo says the winter wheat harvest may be the biggest in a decade, while the barley and canola harvests could be the largest on record.
“Interestingly, grain prices – especially maize – have been unseasonably strong and will encourage farmers to plant more in the new crop season amid favourable production conditions with the La Niña weather pattern in the forecasts,” says Makube. La Niña, a weather pattern that begins in the Pacific Ocean, usually brings more rain to South Africa.
The wheat spot price in SA is currently around 9% higher than a year ago.
Over the past decade, South Africa has imported around 51% of its annual wheat consumption, but the bumper crop means that the country would need 300,000 tons less from importers this year, says Sihlobo.
Sihlobo also sees a recovery in the livestock industry in the third quarter, as demand from restaurants increase with South Africa moving to Level 2 of lockdown.
The citrus industry is also booming, with South Africa expecting to export 2.15 million tonnes this year, according to Justin Chadwick, CEO of the Citrus Growers’ Association. So far this year, citrus exports are up 19% from last year.