Maize harvest kicks off: South African farmers brace for challenging season

Maize harvest kicks off: South African farmers brace for challenging season

South African farmers and workers in the maize-growing regions are getting ready for a busy period. The harvest season has just started and should gain momentum in the coming weeks, lasting until July for some areas.

There has already been good progress in the first two weeks of the new marketing year for the grain, which started at the beginning of May. For example, farmers delivered 1.2 million tonnes of maize to commercial silos in the first two weeks of the month. The overall expected maize crop for the year is 13.3 million tonnes according to data from the South African Crop Estimates Committee.

The delivery figures should be much higher in the next few weeks, however, with a possible slump in the figures for last week’s harvest activity — the third week of the month — which will be released by the service this week.

Some farmers might have taken a break last week to attend Nampo, one of the largest agricultural exhibitions in the Southern Hemisphere, held in Bothaville in the Free State.

While we are happy to see these harvest volumes, and hope the expected 13.3 million tonnes overall harvest materialises, we also think of the many farmers who lost much of their crops during the mid-summer drought and won’t have a lot to harvest this time. For them, the hope lies in the upcoming season, which starts in October.

Fortunately, the weather forecasts paint a promising picture of a return of a La Niña in the 2024-25 summer-crop production season. This would bring much-needed rain and support agricultural production in South Africa and the broader Southern African region.

Still, there will be financial strain in the coming months resulting from the significant crop losses caused by the mid-summer drought. The expected harvest of 13.3 million tonnes of maize is down 19% from the 2022-23 season and we are yet to fully understand the effect on farmers’ finances.

Still, if it materialises, the expected harvest will be sufficient to meet South Africa’s annual maize consumption of roughly 12 million tonnes, leaving the country with a small export volume.

Consumers will probably see maize prices remain elevated for some time because of the potentially tight supplies later this year.

The Southern African regional demand, particularly for white maize, remains a significant upside driver of South African maize prices. Zimbabwe, Zambia and Malawi have had a poor harvest and will require large maize imports later this year, going into the first quarter of 2025.

If we look beyond maize, we know that South Africa’s 2023-24 summer grains and oilseed harvest is estimated at 16 million tonnes, down 20% from the previous season. As well as maize, this figure comprises sunflower seeds, soybeans, sorghum, groundnuts and dry beans. The harvest of these grains and oilseeds is underway.

What is clear is that we are closing a difficult season for the South African farming community.

Farmers planted a slightly bigger area for summer grains and oilseed this season, which shows that the 20% year-on-year decline in the harvest we mention above results from poor yields, not the reduction in area planted.

With relatively warm clear skies and warm weather conditions in the days ahead for much of South Africa, the farming community will be working hard to complete the harvest in areas spared of the mid-summer drought misery.


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The preliminary projections for the 2024-25 global grains and oilseed production look promising

The preliminary projections for the 2024-25 global grains and oilseed production look promising

On May 10, the United States Department of Agriculture (USDA) released its flagship monthly report – the World Agricultural Supply and Demand Estimates. This report is keenly observed monthly by the agricultural market participants worldwide. It provides annual forecasts for supply and use of maize, wheat, rice, soybeans, sunflower seed, cotton and other grains and oilseeds. The report provides insight into these commodities in the US and the world.

The USDA typically provides their first estimates for each new marketing year in May. On Friday, we received the first estimates for the 2024/25 season. However, the observers of the USDA reports typically have to read the first month’s data with caution. These data are still preliminary as the season has recently started in the northern hemisphere, and the southern hemisphere is still at the tail end of the 2023/24 season. The 2024/25 season that the USDA is reporting about will only start around October 2024 in the southern hemisphere. So, a lot could change in most countries between now and October.

Moreover, weather forecasters, such as the International Research Institute for Climate and Society and the Australian Bureau of Meteorology, predict a return of a La Niña weather event in the 2024/25 season. This weather phenomenon typically leads to heavy rains in some regions, such as Southern Africa, while South America could see drier weather conditions. Still, the impact of the weather primarily depends on the intensity of the weather event. We can deduce that there remains major uncertainty about the global grain and oilseed production outlook for the 2024/25 season.

Be that as it may, the USDA projections paint a broadly positive picture of the harvest. For example, the 2024/25 global maize harvest is projected at 1.2 billion tonnes, well above the long-term average (although down 1% year-on-year). The annual decline is due to an expected shift in area planting in parts of the US from maize to soybeans and somewhat lower harvests in Argentina and Ukraine.

Moreover, the 2024/25 global wheat harvest is estimated at 798 million tonnes, up 1% from the previous season. The bigger harvests are expected in Canada, Australia, the US, Kazakhstan, and China.

The 2024/25 global rice production is projected at 527 million tonnes, up 2% from the previous season. This is on the back of the expected large crop in Asia. Also worth noting is that the USDA forecasts the 2024/25 global soybean harvest at 422 million tonnes, up 6% year-on-year. This improvement is due to the expected large harvest in Brazil, Argentina and the US.

These preliminary estimates paint an optimistic outlook for the 2024/25 global grains and oilseeds. If they were to materialize, the stocks would continue to improve and thus keep global grains and oilseed prices at moderate levels, which is beneficial to the consumers. Still, these are early days, and a lot will depend on the weather outlook.

So far, the International Research Institute for Climate and Society signalled the return of a  La Niña, a welcome development for the Southern Africa region, but less so for other major producing regions such as South America. One will have to keep a close eye on these production data in the coming months and how the USDA assesses the impact of weather.

Notably, the weather projections through the International Research Institute for Climate and Society are vital in assessing the coming season’s production prospects and commodity price expectations. If the La Niña is not strong, the world could still have a decent harvest of grains and oilseeds in the 2024/25 season. Moreover, if these forecasts are communicated carefully, the farmers may not be deterred from planting the typical crop area worldwide. If anything, they will carefully plan season production in various countries to deliver a decent harvest.


Follow me on Twitter (@WandileSihlobo). E-mail: wandile@agbiz.co.za

South Africa’s agricultural jobs up

South Africa’s agricultural jobs up

While South Africa’s agriculture has had a rough start to the year, characterised by El Niño-induced drought, the employment conditions remain encouraging. The data released by Statistics South Africa today shows that employment in primary agriculture lifted by 6% year-on-year to 941 000 in the first quarter of 2024. This is also up 2% from the last quarter of 2023.

Admittedly, the significant drought damage has been concentrated on the summer grains and oilseed regions, not across all agricultural subsectors, which somewhat explains the resilience in job data. Moreover, there could also be a lag in fully accounting for agriculture’s financial pressures and the impact on employment after that.

We can observe from the current data that jobs generally increased across most subsectors of agriculture in the first quarter compared with the corresponding period last year. The decline in employment was only in the production of organic fertilisers, fishing, and fish hatcheries.

Again, this could indicate the potential delay before the subsectors heavily impacted by the mid-summer dryness fully reflected the financial impact and subsequent jobs effect. We may have a complete picture of such in the second quarter jobs data.

The Eastern Cape, Northern Cape, North West, Gauteng, and Mpumalanga were behind the annual uptick in agricultural employment. These provinces broadly comprised various agricultural commodities or value chains. Thus, the uptick in jobs is not primarily on the back of a particular value chain but spread across a range.

Surprisingly, the Western Cape, KwaZulu Natal and Limpopo are amongst the provinces that recorded a mild decline in employment in the first quarter compared to 2023. These provinces are amongst those that hold significant shares of horticulture production, which benefitted from the irrigation throughout the harsh mid-summer season.

Meanwhile, the mild reduction in employment in the Free State could be somewhat explained by the province’s vast grains and oilseed production and the expected decline in production because of the drought.


Follow me on Twitter (@WandileSihlobo). E-mail: wandile@agbiz.co.za

South Africa’s agricultural machinery sales declined in April 2024

South Africa’s agricultural machinery sales declined in April 2024

South Africa’s tractor sales were down 8% y/y in April 2024, with 500 units sold. The combined harvester sales were down 75% y/y in the same month, with 26 units sold. The persistent decline in sales since the start of the year reflects the normalization of sales after a few years of robust activity.

For example, South Africa’s tractor sales for 2022 amounted to 9,181 units, up 17% y/y. This was the highest annual sales figure in the past 40 years. The combine harvesters also had an excellent performance of 373 units in 2022, up 38% y/y.

This was the highest yearly sales figure since 1985. In 2023, the tractor sales were down marginally from the previous year, while the combine harvester sales held the last year’s momentum.

These past few years, the generally strong agricultural machinery sales were primarily supported by ample grains and oilseed harvests when prices were also favourable.

Against this backdrop, we believe agricultural machinery sales are on the normalization path this year. Moreover, the higher interest rates have added pressure to farmers’ finances. Also, although various input cost prices, such as fertilizer and agrochemicals, softened since 2023, the prices are still generally well above the pre-COVID levels, thus adding pressure on farmers’ finances.

Still, the South African agricultural sector is not in good shape because of the harsh El Niño impact on summer grains and oilseed production. The Crop Estimates Committee, at the end of April 2024, placed South Africa’s 2023/24 total grain and oilseeds production at 16,0 million tonnes, which is 20% lower than last season’s harvest. This year’s overall decline in production prospects is primarily due to poor yields, not the area reduction, as farmers tilled more land than in the 2022/23 season.


Follow me on Twitter (@WandileSihlobo). E-mail: wandile@agbiz.co.za

BRICS+ offers an opportunity to lift South Africa’s agricultural exports

BRICS+ offers an opportunity to lift South Africa’s agricultural exports

Export opportunities for South Africa’s agricultural products are opening up within BRICS+ countries. Over the past two years, China, the Kingdom of Saudi Arabia, and Egypt have widened market access for various agricultural products from South Africa.

Admittedly, Egypt and the Kingdom of Saudi Arabia have recently joined the BRICS+ grouping, and market access is part of the long-term bilateral engagements with South Africa. South Africa has access to selected fruits, wine, wool, meat and grains.

However, South Africa aims to broaden market access to the majority of the agricultural products the country produces. For this reason, through the 2023 BRICS Summit in Johannesburg and the prior engagements, South Africa prioritized trade as a significant point on the agenda for discussion.

The political principals broadly agreed that deepening trade was necessary for the BRICS countries. Still, each country’s trade and agricultural authorities are responsible for taking the lead and seeking market access from member countries.

The idea of a BRICS agricultural trade agreement that some argued for has not yet been thoroughly ventilated. The priority so far was for each BRICS member to work to reduce import tariffs and address the phytosanitary constraints for various products that BRICS member countries would present.

Even before adding the new members, the original BRICS countries were already significant importers of agricultural products. Between 2019 and 2022, this group’s agricultural imports averaged US$255 billion annually, according to Trade Map data. China accounted for 71% of all the agricultural imports into the group, followed by India at 11%, Russia at 11%, Brazil at 4% and South Africa at 3%. Despite these sizeable agricultural import figures, the intra-BRICS agricultural trade remained relatively low.

The products these countries imported include soybeans, beef, maize, berries, wheat, palm oil, poultry meat, cotton, barley, dairy products, pork, apricots and peaches, sugar, wool, sunflower seed, nuts, sorghum, goat meat, wine, grapes, bananas, avocados, mangos, guavas, and fruit juices, among other products. South Africa produces some of these products in abundance and has surplus volumes for exports. Thus, the country championed a need to deepen trade in the 2023 BRICS Summit.

With BRICS adding new members to form a bigger BRICS+, the agricultural trade opportunities have increased. The Kingdom of Saudi Arabia and Egypt are some of the newest members. These two countries present enormous opportunities for widening South Africa’s agricultural exports. Egypt spends approximately US$16 billion a year importing agricultural products from the world market. These are mainly wheat, maize, soybeans, palm oil, beef, apples and pears, dairy, cotton, potatoes and tea, among other products. It is here that South African grain farmers, traders, and beef producers should focus on increasing exports.

Egypt even took the initiative of visiting South Africa at the start of this year in search of maize imports. The Department of Agriculture, Land Reform and Rural Development, and the South African Cereals and Oilseeds Traders Association were at the forefront of the engagements with Egypt for grain trade.

Similarly, the Kingdom of Saudi Arabia’s agriculture minister and senior leadership in agriculture visited South Africa earlier this year in search of grains and beef imports. The South African government authorities and industry also used the opportunity to showcase the various fruits South Africa could export to the Kingdom.

South Africa also raised the investment opportunities in the domestic business community that the Kingdom of Saudi Arabia could explore.

In the same view, China is steadily opening its markets for some South African agricultural products. With that said, there has been times where China has unfairly restricted South Africa’s wool exports. This issue has now been resolved and there is a unique protocol to handle wool exports even in times of animal disease outbreaks.

Russia is now the global chair of the agribusiness working group, having taken over from South Africa. Encouragingly, “deepening agricultural trade” amongst the BRICS+ community remains on the agenda for the year. During the year, the newly added members will also add their views on the working agenda of the agribusiness working group, which will later in the year be presented to the political leadership of the grouping.

Overall, while BRICS+ remains a political grouping with no formal trade structure, the bilateral agreements between BRICS+ countries for increasing trade are encouraging. South Africa will continue prioritizing the widening of agricultural exports in this grouping. Still, such efforts will not be at the expense of robust markets in Europe, Africa, the Americas, Asia, and the Middle East. South Africa’s agricultural sector still has room to grow, and trade is essential to the sector’s growth strategy.

Written for and first published on Business Day.


Follow me on Twitter (@WandileSihlobo). E-mail: wandile@agbiz.co.za

An end to an El Niño and the possible return of a La Niña in the 2024/25 summer season is positive for SA agriculture

An end to an El Niño and the possible return of a La Niña in the 2024/25 summer season is positive for SA agriculture

After a scorching summer season that led to significant crop failure, the El Niño cycle seems to have ended. The major weather forecasters, such as the International Research Institute for Climate and Society and the Australian Bureau of Meteorology, recently confirmed this view. We are currently in a neutral state, where neither El Niño nor La Niña is active.

Hope beyond the El Niño – winter cropping season prospects

While an end to an El Niño is always welcome development, it comes at a time when the 2023/24 summer crop season is on its tail end. Therefore, this update on weather conditions will not have a material impact on harvest prospects. If anything, ending an El Niño cycle would mean a normal transition into a winter season. Such normal weather conditions would favour the drying up of mature crops in the summer crop-growing regions, as well as improved harvesting conditions. It would also mean normal to favourable weather conditions for the winter crop-growing regions.

So far, the farmers have witnessed the damage of unfavourable weather conditions during the 2023/24 season and are cautious about the 2024/25 winter crop season. For example, the farmers’ intentions-to-plant data released by the Crop Estimates Committee this past week signalled a 3% year-on-year decline in South Africa’s 2024/25 winter crop plantings to 798 800 hectares. This figure comprises possible plantings for wheat, barley, canola, oats, and sweet lupines.

The decline in the area is primarily in wheat, which is down 3% year-on-year to 520 200 hectares. The barley plantings could also fall 5% year-on-year to 102 000 hectares, and the oats plantings could be at 20 500 (down 26% year-on-year) and sweet lupines at 15 000 hectares (down 6% year-on-year). Canola is the only winter crop whose area plantings could lift 8% year-on-year to 141 100 hectares.

Admittedly, it is still too early, and the farmers will adjust their planting decisions in the coming weeks as they progress with the seasonal activity.

The need for cautious optimism

Beyond the near-term winter crop season, the weather outlook for the 2024/25 summer season is also positive. The International Research Institute for Climate and Society forecasts a return of a La Niña weather phenomenon from May 2024 throughout the year. This means the excessively hot and drier weather conditions of the 2023/24 summer season that resulted in crop failures may have been temporary.

In the coming months, we could soon transition into a favourable rainy season for South Africa’s agriculture. However, it is certainly too early to be confident about the outlook.

Still, the rise in the probability of La Niña occurrence to over 50% from August 2024 throughout the year is a source of optimism. The 2024/25 summer crop season will start in October, and if the current La Niña forecasts hold, South Africa should receive early rains during that period to support the season.

Admittedly, the farmers across South Africa are focused on the current 2023/24 summer crop season, and the yield prospects are bleak for various regions. The financial impact of the poor 2023/24 summer crop season on farmers will be more evident over the coming weeks and months as the market receives crop deliveries.

Therefore, while the weather outlook for the 2024/25 season looks promising, this may be something that farmers will pay attention to after the harvest season of the current crop. By then, we will also better understand whether the La Niña will prolong into 2025 and for how long.

The current forecasts only cover until December 2024. The early months of 2025 are vital for summer crops. For example, the 2023/24 summer crop season started well, with favourable rainfall. It was only in February that the problem of dryness and heatwave intensified through to March. This two-month event changed the agricultural fortunes of the country for the worse.

Still, after a challenging 2023/24 summer season, the International Research Institute for Climate and Society and the Australian Bureau of Meteorology signal relief to an end of El Niño. Notably, the return of a  La Niña is an even more welcome development for agriculture.

While we primarily focused on crops in this note, the positive weather outlook applies to all agricultural activity in the entire Southern Africa region. We will continue to monitor these developments over the coming months.


Follow me on Twitter (@WandileSihlobo). E-mail: wandile@agbiz.co.za

South Africa’s summer crop production estimate has been lifted mildly

South Africa’s summer crop production estimate has been lifted mildly

Many, including myself, may have been a bit pessimistic about the 2023/24 summer crop growing conditions when we signalled a potential further downward revision of the harvest estimate in April. The data released at the end of April 2024 by the Crop Estimates Committee showed mild upward adjustments in the crop size from the previous month’s figures. South Africa’s 2023/24 summer grains and oilseed harvest is estimated at 16,0 million tonnes, up 1% from last month.

Indeed, this is not a cause for celebration. The figure does not change the reality that we have been through a challenging season of El Niño-induced drought and heatwave in February and March that weighed on the summer grains and oilseed harvest in various regions of the country. The current estimated harvest of 16,0 million tonnes is down 20% from the 2022/23 production season.

Maize

A closer look at the data shows that white and yellow maize harvest could be 6,4 million tonnes (up 2% m/m) and 6,9 million tonnes (roughly unchanged from last month). These revisions place the total maize production estimate at 13,3 million tonnes (up 1% m/m).

When viewed annually, white maize harvest is down 25%, with yellow maize down 13% from the 2022/23 season. The expected harvest of 13,3 million tonnes is down 19% from the 2022/23 season.

If it materializes, the expected harvest will be sufficient to meet South Africa’s annual maize consumption of roughly 12,00 million tonnes, leaving the country with a small export volume. Still, we will likely see prices remaining elevated for some time because of the potentially tight supplies.

The Southern African regional demand, particularly for white maize, also remains a significant upside driver of prices. On April 25, white maize spot price closed at R5 477 per tonne, up 56% y/y. At the same time, the yellow maize spot price closed at R4 420 per tonne, up 22% y/y.

Yellow maize prices have not increased much as the supply risk could be manageable through imports. There are ample maize supplies (yellow) in the world market. The International Grains Council (IGC) forecasts the 2023/24 global maize harvest to be 1,2 billion tonnes, up 6% year-on-year.

A majority of this expected global maize is yellow. The stocks are also robust, thus keeping the international yellow maize prices moderate. This also partly explains the relatively mild increase in yellow maize prices compared with the surge in white maize prices.

In the world market, outside the Southern Africa region, the other significant producer of white maize is Mexico. Given that the northern hemisphere is at the start of its 2024/25 production season, it may be helpful in the Southern African countries with poor harvests, such as Zimbabwe and Zambia, to continuously engage with Mexico or even the United States to plant white maize on contract for export to the region.

In my calculation, I think South Africa will not be able to fulfil the regional demand even if the forecast harvest of 6,4 million tonnes of white maize materializes.

Oilseeds

The 2023/24 soybean harvest remained unchanged from last month, estimated at 1,8 million tonnes (down 35% y/y). This annual decline results from lower yields in various regions of South Africa. We now believe South Africa may not play a robust position in soybean exports like the previous season. If anything, soybean oilcake imports this new season are now a possibility.

Meanwhile, the sunflower seed harvest estimate was lifted from last month by 4% to 615 000 tonnes (down 15% y/y). The area plantings are moderately down from the previous year, which means the primary driver of the annual decline in the harvest is the expected poor yields, especially as most of South Africa’s sunflower seed is planted in the western regions that experienced dryness and heatwave in February and March.

Concluding remarks

The recent rains in much of South Africa’s summer crop-growing regions are too late. The damage to the crop occurred in February and March during the heatwave and the El Niño-induced dryness. The current crop forecasts reflect this challenge, as the major crops are down notably compared to the 2022/23 production season.

Still, from a consumer perspective, South Africa is not in a crisis, in our view. The recent drought presents upside risks to food price inflation but not the overall basket. The challenge is primarily the white maize, especially considering the potentially more robust regional demand later in the year.

The favourable supplies of other grains in the world market, mainly yellow maize (also rice and wheat), and the moderating prices mean South Africa could be slightly cushioned in these commodities.

The IGC forecasts the 2023/24 global wheat harvest at 789 million tonnes, well above the long-term average. There is a lot of rice globally, with the 2023/24 global harvest forecast at 511 million tonnes, well above the long-term average. The 2023/24 global sunflower seed harvest is forecast at 57,9 million tonnes, well above average.

Still, the exchange rate will be important when assessing the possible imports of wheat and rice (and possibly yellow maize) into South Africa.


Follow me on Twitter (@WandileSihlobo). E-mail: wandile@agbiz.co.za

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