As was expected, 2016 was an extremely challenging tumultuous year for the agribusiness environment and farmers alike. The prevailing drought of the previous years continued its devastation over much of the country, and a declining economy and resultant constrained consumers led to dampened demand and declining output. In real terms, South Africa’s overall agricultural trade balance, despite remaining positive, fell sharply by as much as 22% and 11% in the first and second quarter of 2016.
However, the last quarter of 2016 showed evidence of some recovery in the Agbiz/IDC Agribusiness Confidence Index, with good rains falling in key production areas, indicating a potential turnaround situation. The situation around the country’s broader political economy, however, remains a major concern as it may impact on investment in agriculture and agriculture output.
On a positive note, weather indications suggest 2017 could bring much-needed relief to the sector. Weather forecasters are suggesting conditions could normalize throughout the country, which would improve soil moisture levels.
There also appears to be rising optimism among farmers: the 2016 data on intentions to plant suggest summer crops could increase 15% year-on-year to 3.7 million hectares. The summer crops are maize, sunflower seed, soybeans, peanuts, sorghum and dry beans.
The agricultural sector’s labour market showed resilience despite the drought conditions. According to recent data from Statistics South Africa, the sector created 7% more jobs in the third quarter of 2016 than the previous one. The sector’s total labour force stands at about 881,000 jobs.
Improvements were mainly in livestock, logging and related services, and game farming. Other sectors, such as animal husbandry services, crop-farming and fisheries suffered job losses.
The early harvest is expected in April 2017, and consumers could start to see the real benefits of the expected crop recovery roughly in the third quarter of 2017. However, this relief will mainly be on plant food products.
Meat prices are expected to remain high in 2017, or even rise, as farmers continue to restock their herds. The expected decrease in plant food prices would, ideally, lower the overall food inflation. However, meat could overshadow some benefits of this expected decrease because of its higher weighting. Meat constitutes about a third of the general consumer price index headline food basket.
In conclusion, the year 2017 promises a period of recovery for SA’s agricultural sector, but a full recovery could take two to three seasons, depending on the commodity.