The ongoing COVID-19 crisis has brought uncertainty in global trade because of disruptions it is causing in global supply chains and weakening demand. South Africa’s agricultural sector, which is export-orientated, is one of the sectors we had feared would be disrupted by the pandemic, as we witnessed a couple of disruptions in some of the local ports. But the data shows that the country has managed to maintain trade as shown by the agricultural trade surplus which expanded by 32% y/y in Q2, 2020 to US$1.05 billion, as illustrated in Exhibit 1. Exports remained flat compared to last year, while imports declined notably.
The growth in exports was underpinned by citrus, wine, maize, apples, sugar cane, pears, avocados, grapes and macadamia nuts, amongst other agricultural products. These products will continue underpinning South Africa’s agricultural exports in the next two quarters of 2020. Citrus feature prominently from the second quarter data onwards as its exports for this year are expected to reach a record 142.6 million cartons, up by 12% y/y. Similar to citrus, maize will dominate this year; we estimate South Africa’s maize exports to reach 2.7 million tonnes, up 89% y/y because of higher domestic harvest.
From a destination point of view, the African continent and Asia were the largest markets for South Africa’s agricultural exports in the second quarter of this year, respectively accounting for 33% and 29% in value terms. Europe was the third-largest market, taking up 28% of South Africa’s agricultural exports in the second quarter of 2020. The balance of 10% 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, I believe 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, according to data from the International Grains Council. Meanwhile, South Africa’s 2019/20 wheat imports could increase by 29% y/y to 1.8 million tonnes. There could also be an increase in palm oil in the coming months.
In a nutshell, while the pandemic will result in a loss of incomes in various regions of the world, and in turn, a 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 the year, South Africa’s agricultural exports could increase from the US$9.9 billion of 2019 to levels above US$10.0 billion. 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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