This essay first appeared on Business Day, November 10, 2020
The most crucial time for SA’s summer crop and some horticulture products, and by extension the livestock sector, is between October and February each year. This is the summer rainfall period and therefore a determinant of the season’s harvest and veld conditions.
The 2020/2021 production season commenced at the beginning of October, with prospects of above-normal rainfall in most regions of the country. This means the possibility of a large harvest. October itself actually produced below-normal rainfall, but with La Niña-induced higher rainfall set to begin in November, there have already been good showers in most regions of the country.
The rains have improved soil moisture, primarily in KwaZulu-Natal, the central and northern Eastern Cape, eastern Free State and parts of Mpumalanga, which helped accelerate planting activity. The optimal planting window for maize and soya beans closes in the week of November 20 in the eastern regions of the country, while remaining open for the central and western regions until mid-December.
For the eastern regions, this means the areas that manage to complete planting within the next two weeks could have their crops benefit from improved soil moisture on the back of the early La Niña rainfall. Meanwhile, for the central and western regions, the rainfall will have a similar effect on crops, though there might be localised delays in plantings depending on the incidence of effective rainfall.
There is now more assurance about the La Niña occurrence after the report of November 6 by the SA Weather Service, which indicated that “El Niño-Southern Oscillation (ENSO) is now in a La Niña state and the forecast indicates that it will most likely remain and strengthen towards a strong La Niña state from late spring to early autumn (November 2020 to March 2021) … With this strong likelihood of a strong La Niña during summer there are increased chances of above-normal rainfall in the summer rainfall areas.”
Farmers have also been encouraged by the favourable weather prospects, as indicated by their intention to lift SA’s summer crop area plantings by 5% year on year to 4.15-million hectares. While we don’t have comprehensive seed sales data yet, the other indicator I have continued to monitor is tractor sales. These remained robust between June and October this year, with 4,713 units sold, up 5% year on year. This too illustrates farmers’ optimism about the 2020/2021 summer crop production season. The improved financial conditions after the second-largest summer crop harvest on record in the 2019/2020 production season, coupled with higher commodity prices, has also contributed to higher tractor sales and intentions to increase plantings in the 2020/2021 season.
From a macroeconomic standpoint, agriculture will again show positive growth in 2021, though at a much lower rate than the 10% year-on-year expansion the Agricultural Business Chamber of SA expects in agriculture’s gross value-added in 2020. The lower growth rate will primarily be a function of base effects, while the output will most likely be large, all else being equal.
The same is true for food price inflation, which we continue to believe won’t exceed 5% year on year in 2021 (from an expected 4.5% in 2020 and the actual rate of 3.1% in 2019).
The potentially larger harvest in 2021 could result in softening commodities prices from the higher levels experienced in October when maize and soya bean prices were up more than 20% year on year. The reasons for such an increase are demand and weaker currency effects. From February 2021, if the expectation of favourable weather conditions and generally large harvests holds for SA (and the entire region), commodities prices could soften notably, which will bode well for food price inflation.
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