The ongoing Covid-19 crisis has brought uncertainty to global trade because of disruptions in supply chains and weakening demand. South Africa’s agricultural sector, which is export-oriented, is one of the sectors I feared would be disrupted by the pandemic. So far, however, there have been minimal disruptions as the global agricultural and food sector has generally stayed operational.
The coming months could be even better as many countries are gradually easing restrictions on economic activity and the movement of people in the wake of lockdowns. In the first quarter of the year, a period before coronavirus lockdowns were implemented across the globe, South Africa’s agricultural trade was vibrant. The country recorded an agricultural trade surplus of US$773 million, according to data from Trade Map. This is up by 16% year-on-year, with exports having increased at a higher rate than imports.
The exports were underpinned by grapes, maize, wine, wool, pears, apples, plums, lemons and macadamia nuts, amongst other agricultural products. These products could continue to underpin South Africa’s agricultural exports in the second quarter of 2020, which largely corresponds with global lockdowns, but with some decline in wine exports which had briefly been impacted by domestic lockdown regulations.
While the second-quarter data will only be out next month, the high-frequency data from various commodity organisations and agricultural institutions point to continued robust agricultural exports over the past couple of weeks.
Citrus will feature prominently in the second quarter data onward, as its exports for this year are expected to reach a record 143.3 million cartons for the Southern Africa region, mainly from South Africa. The export activity of this particular product has also continued with minimal interruptions during the lockdown period.
Similar to citrus, maize will also dominate South African exports this year with the volume set to increase by 89% y/y to 2.7 million tonnes because of higher domestic harvest. This is also at a time where we expect an increased maize needs in the Southern Africa region, which is a primary market for white maize.
The African continent and Europe continued to be the largest markets for South Africa’s agricultural exports, respectively accounting for 44% and 29% in value terms during the first quarter of 2020. Asia was the third-largest market, taking up 19% of South Africa’s agricultural exports in the first quarter of 2019. The balance of 8% value was spread across other regions of the world.
In terms of imports, the leading products included wheat, palm oil, rice, poultry meat, sunflower oil and sugar. For the year, rice, wheat and palm oil will dominate the agricultural import product list. South Africa’s 2020 rice imports could amount to 1.1 million tonnes, up by 10% from 2019. Meanwhile, South Africa’s 2019/20 wheat imports could increase by 29% y/y to 1.8 million tonnes.
In a nutshell, while the pandemic will result in a loss of incomes in various regions of the world, and in turn, decline in demand for goods; the agriculture and food sector is one of the few that might not be as hard hit. As such, for 2020, South Africa’s agricultural exports could increase to levels over US$10 billion from US$9.9 billion in 2019. The key catalysts this year will be the increase in grains and horticulture output and to some extent the weakening domestic currency.
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