by Wandile Sihlobo | Sep 15, 2020 | Daily Notes
Some analysts, myself included, did not anticipate that the 2019/20 harvest and agricultural performance would be as robust as we have witnessed. This is clear from one of the essays I wrote for Business Day on December 10, 2019, which was titled – Another grim year ahead for the despondent agricultural sector (see here).
At the time, there was a high probability of drought in midsummer and the fresh outbreak of the foot-and-mouth disease in Limpopo which had reintroduced all the risks of export bans of animal products and meat. This was overwhelming evidence to convince one that we were perhaps heading towards another fairly bad season. Some regions which were supposed to have planted by December 2019 hadn’t progressed much because of dryness.
This depressing picture only changed from January 2020 when most regions of the country suddenly received good rainfall which enabled plantings. Thereafter, good growing conditions which led to the recent bumper harvests. This delay in plantings is evident through the maize harvest and producer deliveries, which was delayed by nearly a month this year because of the late start of the season on the back of dryness.
So, why am I bringing this up?
My intention is not to introduce doubt to the current favourable rainfall forecasts for the 2020/21 production season, but rather to reflect on the scars of the previous year. While most regions received late rains and proceeded well, parts of the Eastern Cape did not get sufficient rains to improve dam levels. This was muted until recently, with now increasing reports of a potential “day zero” in Port Elizabeth and surrounding areas.
While the average provincial dam level is 51% as of September 14, 2020 data; which is marginally higher than 2019, a closer look at various dams in the province is frightening. The water levels are too low (see here).
In various conversations I had with farmers in the province yesterday, I learned that the critical areas, at least from an agricultural perspective, are around the Amathola mountain watershed and on the Keiskamma dam where water levels are very low; and of course, Port Elizabeth. The aforementioned dam levels data corroborates this view. Also, I am told that Gamtoos farmers have very little water.
With this worrying picture, I am hoping that the forecast of La Niña rains could be a relief to the province (see here). The recent indications from the South African Weather Service suggested that we could receive the first rains towards the end of this month, specifically the eastern and southern regions of South Africa. So, aside from the government interventions that are needed in the province; one looks up with a hope of rains to ease conditions to the Eastern Cape.
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by Wandile Sihlobo | Jan 28, 2020 | Africa Focus
We rarely talk about Africa’s wheat production due to its size relative to other regions of the world. Africa produces only 3% of the world’s wheat, compared to the European Union region which produces 20% of the world’s wheat and Back Sea region which produces 17%. These low levels of wheat production in the continent are partly the result of unfavourable climatic conditions in most countries.
The 2019/20 wheat production conditions are hard to ignore, albeit the continent having lower production levels. Africa has experienced an increase in wheat production for two consecutive seasons, however, the wheat production could fall by 10% y/y in the 2019/20 season which would result in 26 million tonnes being produced.
The countries underpinning this expected decline in harvest are South Africa, Libya and Morocco. In all these countries the crop has been impacted by drier weather conditions during the crop growth stages which, in turn, weighed on yields potential.
Fortunately, other regions of the world had fairly good seasons and therefore boosted global wheat production. The International Grains Council forecasts the 2019/20 global wheat harvest at 761 million tonnes, up by 3% y/y. This has also kept global prices at softer levels. In the week of January 24, 2020, global wheat prices were down 3% y/y, trading around US$236 per tonne.
African consumers will subsequently be able to source wheat supplies from other parts of the world to fulfil the current shortfall, thereby increasing the amount of wheat the continent imports in the 2019/20 season by possibly 4% y/y to 51 million tonnes. The leading importers will be Algeria, Egypt, Libya, Morocco, Tunisia, Ethiopia, Kenya, Nigeria, South Africa and Sudan.
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by Wandile Sihlobo | Dec 23, 2019 | Agricultural Production
December is always a great month for me to get insight into South Africa’s agricultural conditions in a much more relaxing way when compared to my typical farm visits.
Each year I drive from Gauteng to the Eastern Cape, making frequent stops along the way to observe farming land and activities on various fields. This year I repeated a similar exercise, but the drive was not as enjoyable as it had been in the years before 2015. Back then, frequent droughts were not the norm in South Africa, and a December drive across the country this time of the year would be an opportunity to gaze through lush maize and soybeans fields, and also livestock and grazing veld.
Driving from Pretoria out through Gauteng offers a false sense of notable recovery in vegetation and farms due to recent rainfall. It is nicely green, although some farmers are still planting in areas bordering the Free State. But as soon as one drives through the Free State into the southern regions of the province that border the Eastern Cape, a notable change in the picture can be seen. The southern Free State to northern and central regions of the Eastern Cape are still very dry, and livestock grazing along the way and in nearby farms where I managed to stop is not looking well. This goes to show that the rains of the past few weeks were mainly concentrated into a few areas around Gauteng, Mpumalanga, KwaZulu-Natal and parts of the North West.
The rains the other regions of the country received in the past few weeks made minimal improvement in soil moisture and improving vegetation. Discussion with farmers in far areas, such Matatiele, paints a similar picture of relative dryness and a slow recovery in grazing veld. Maize farmers in these regions, and also other parts of South Africa, are also still planting, despite the optimal planting window having closed on 15 December in the western regions of the country and 15 November in the eastern region. What’s more, discussions with farmers in parts of Limpopo paint a similar picture of dryness and high temperatures, which is not ideal for farming.
Worryingly, the South African Weather Service noted in its 20 December 2019 Seasonal Climate Watch that “the rainfall forecast for late-summer (Jan-Feb-Mar) and early-autumn (Feb-Mar-Apr) indicates enhanced probabilities of below-normal rainfall over most of the country. With regards to temperatures, mostly higher than normal temperatures are expected this summer over most of South Africa with the exception of the far south-western parts that indicate lower than normal minimum temperature throughout late-summer and autumn.”
This is bad news for farmers in areas that are already in bad shape as southern Free State, Eastern Cape and parts of Limpopo, amongst other regions.
The key question on people’s minds might be – what does this mean for agricultural output in 2020? In as far as summer crop production are concerned, we will have a clearer picture of the area planted and crop conditions at the end of January 2020 when the official crop surveys are done. But as far as one can tell from activity on the ground and the aforementioned weather forecasts, South Africa is not yet out of the woods.
This uncertain outlook follows a 2018/19 production season where the major summer crops performed poorly — maize, soya beans and sunflower seed production are all down year on year, by 10%, 24% and 21%, to 11.3-million tons, 1.2-million tons and 680,940 tons respectively.
In terms of livestock, if dryness persists, it will be an added challenge to an already tough trading environment following an outbreak of foot-and-mouth disease (I have discussed this point here).
Overall, the drive from Gauteng to the Eastern Cape this year was not a pleasant one, but it helped provide an update of the realities of agricultural conditions at farm level. There is some level of uncertainty about the agricultural outlook, even though other parts of the country are seeing a positive change.
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by Wandile Sihlobo | Dec 21, 2019 | Agricultural Production
Essay by Wandile Sihlobo and Tinashe Kapuya
There are preliminary indications that Southern Africa could face yet another year of poor rains, which will inevitably lead to lower agricultural output. A recent report from the Group on Earth Observations Global Agricultural Monitoring Initiative (GEOGLAM) indicates a high probability of below-normal rainfall in Southern Africa between December 2019 and February 2020.
Figure 1: December 2019 to February 2020 Seasonal Rainfall Outlook
Source: GEOGLAM
The potential for a poor output in agriculture across the region brings into question the need for forward planning, which is key to mitigate the effects of food insecurity.
To this end, there is first a need to improve the timeliness and quality of agricultural conditions data across the Southern Africa region, especially for maize, which is a key staple crop. Unfortunately, this remains a challenge for most African countries with the exception of Zambia and South Africa who frequently release data on agricultural conditions and expected crops harvest.
What we currently know is that the maize planting season began across the region in mid-October and some countries in November 2019, and the process has thus far disappointed because of dryness in various countries, notably; Namibia to Mozambique, and southwards from Zambia through South Africa. These countries have already experienced a double-digit decline in maize production in the 2018/19 production season, leaving Zimbabwe and Mozambique as net importers of maize and other agricultural products. As a result, the forecasts of another drought have raised fears that there might not be a recovery in general agriculture production that many had hoped for going into the 2019/20 season.
But the dearth of timely data also increases prospects of a slow response from policymakers, the private sector and various non-governmental institutions which operate within the food industry in Southern Africa.
Although we are yet to know how crop conditions will materialize over the coming months, as well as the potential size of import needs thereof, early and timely confirmations of a poor harvest would be critical for planning and implementation of mitigation interventions. It is best to be warned about the impacts of below-normal rainfall rather than acting when it is too late.
This then raises two important questions for consideration;
- Where is Southern Africa going to find the white maize supplies?
- Does the Southern Africa region have the infrastructure to move potentially required maize imports efficiently?
First, Africa’s maize exporters in normal rainfall seasons include South Africa, Zambia and Tanzania. But in the 2019/20 production season, these countries could experience similar weather conditions as the rest of the Southern Africa region. This means their ability to export maize is limited. The focus should, therefore, be to import from countries outside the African continent. To this end, the only country that can potentially supply white maize is Mexico but it is unclear if there are sufficient supplies there that could serve the whole Southern Africa region (depending on maize needs which will be clear early 2020). Therefore, depending on how crop conditions will be by the end of January 2020, the Southern Africa region might have to encourage US farmers to increase their typically small hectares of white maize and produce for the Southern Africa market. The same message could be passed to the Mexican farmers. It might be too late to encourage South American farmers as they typically plant around the same time as Southern Africa.
Second, the infrastructure might not be the main challenge, especially if the maize and other agricultural import needs are detected ahead of time to allow for planning of flow of imports. South Africa and other coastal countries such as Mozambique have in the past managed to handle large volumes of agricultural imports and thus, there is not a lot of concern about this point if needs are determined on time.
Policy considerations
We will have a better sense of crop conditions and the potential size of maize imports in the coming months. In the meantime, policymakers can consider the following options as ways of easing food insecurity concerns within Southern Africa:
- Encourage white maize production under irrigation where possible in various countries
- Temporarily ease restrictions on imports of genetically modified (GM) white maize (this applies to the whole Southern Africa, with the exception of South Africa which has no restrictions).
- Capacitate local government institutions to improve the quality of information about agricultural conditions and flow of grain to market players.
- Collaborate with the private sector to ensure that required maize is sourced from various parts of the world timeously. This collaboration should include easing regulations on imports in countries where such exists.
Sihlobo is chief economist of the Agricultural Business Chamber of South Africa (Agbiz). Kapuya leads value chain research at the Bureau for Research and Food Policy (BFAP).
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by Wandile Sihlobo | Nov 4, 2019 | Agricultural Production
Over the past few months, I have written a few essays arguing that we shouldn’t worry much about the current heatwave in South Africa and that rainfall could soon provide some relief. I made this argument, leaning on the South African Weather Services (SAWS) views contained in its Seasonal Climate Watch published on 30 September 2019. At the time, the agency indicated that the central and eastern regions of South Africa were likely to receive above-normal rainfall between November 2019 and January 2020. This, of course, would have been timely given that this is a critical period for planting decisions for most summer crops, particularly maize, sunflower seed, soybeans, sorghum, peanuts and dry beans.
But the latest communication from the local weather bureau released on 04 November 2019 paints a markedly deteriorated picture with respect to the rainfall outlook over the coming months. The latest forecasts point to a possibility for below-normal rainfall over the eastern regions of South Africa between November 2019 and January 2020. Meanwhile, the western regions of South Africa could receive above-normal rainfall over the same period. From January 2020 onwards, the projected likelihood of dryness across South Africa is higher compared to the last September forecast. Making matters worse is that temperatures are set to be higher than normal levels over this period.
This essentially means that the 2019/20 summer crop production season might not be as good as I anticipated. Moreover, although the latest report from the Crop Estimates Committee showed that farmers intended to lift the area plantings for summer crops by 7% y/y in 2019/20 production season to 3.9 million hectares, I am concerned that this might also not materialize if dryness persists as weather forecasts suggest. The impact of this would then spillover to the livestock sector.
The key question is what does all this mean for broader agriculture performance going into 2020 and the food value-chain at large? It is too early to ascertain the impact as yet. One will have to monitor the developments in the fields for a few months in order to get a feel of potential agricultural performance in 2020. However, the latest data from SAWS suggest a growing likelihood that we will have a poor harvest, which will likely also have a negative impact on the livestock sector, all else being equal. Making matters worse is that the 2018/19 production season that we are coming off was not particularly good. It was dominated by dryness and as a result, major summer crop harvests were down by double-digit from levels produced the previous season.
As I write this article, there hasn’t been much activity on the fields thus far although the optimal planting window for our staple grain — maize — opened on 15 October in the eastern regions of South Africa, and closes on 15 November. The delays in planting are caused by dryness, as I indicated in the previous post.
This is all very worrying, specifically for farmers, but consumers can relax a bit, for now. South Africa has sufficient grain supplies for the 2019/20 marketing year which ends early 2020 (in February for oilseeds and April for maize). From April 2020 onwards, much will depend on what happens to the crop that is yet to be planted.
The news of drier weather conditions could, however, possibly lead to an uptick in agricultural commodity prices. The impact of which might filter through to consumer prices in three month time because of the lag from farm prices to consumer prices (I have discussed the food price transmission mechanism story here).
Given how badly South Africa needs rainfall, this is probably the only time where I wish these forecasts could be wrong. But science is science, and we have to work with the information we have at hand to plan for the months ahead. Thus far, the outlook for the agriculture sector is looking increasingly worrying.
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by Wandile Sihlobo | Oct 28, 2019 | Agricultural Production
In a normal season, by this period, farmers would be hard at work planting, especially in the central and eastern regions of South Africa. But this has not been the case because of dryness that has prevented farmers from planting. Soil moisture in South Africa’s farmland is rated very short (dry) in nearly all regions of the country with the exception of a few areas near the border of Eastern and Western Cape where soil moisture was rated marginally adequate on 25 October 2019, as illustrated in Figure 1 below.
Figure 1: South Africa’s soil moisture
Source: World Weather Inc.
Over the weekend, some regions in the central parts of South Africa received light rainfall, which is a welcome development. But this was not sufficient to make meaningful improvement on soil moisture. The country needs a consistent and slow rainfall which will help to replenish soil moisture and thereafter support planting and growing of the crop.
We are generally positive that such rainfall is likely. The weather forecast for the next two weeks shows prospects of rainfall across the summer rainfall (or crop-growing) areas of South Africa. More importantly, the South African Weather Service forecasts above-normal rainfall in the central and eastern regions of South Africa between November 2019 and January 2020.
As encouraging as this is, it comes with some level of uncertainty and hence it will be important to monitor the weather conditions over the coming weeks as that will influence farmers decisions to plant.
South African farmers intend to increase the area planting to summer crops — yellow maize, white maize, sunflower seed, soybeans groundnut, sorghum and dry beans — by 7% y/y to 3.9 million hectares. The crops underpinning this potential uptick in area plantings are maize (white and yellow), sunflower seed, soybeans and groundnuts, partly because of relatively attractive domestic market prices. Meanwhile, sorghum and dry beans hectares could decline notably from the area planted in 2018/19 production season.
Going forward, aside from monitoring weather conditions, an important date to keep diarised is 29 January 2020, because on this day the Crop Estimates Committee will release its preliminary plantings estimates.
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by Wandile Sihlobo | Sep 22, 2019 | Agricultural Production
Farming is proving to be one of the more challenging vocations in SA because of the ever-changing risk environment. Not only must farmers monitor economic conditions, changing consumer preferences and social dynamics, but the weather is proving to be the most unpredictable aspect of all.
An example is the Western Cape, where weather forecasters predicted the possibility of above-normal rainfall in 2019, and wheat farmers in that province worked hard to ensure they planted whatever good land they could find, in the hope that higher rainfall would lead to a better harvest and an improvement in their fortunes after years of drought.
For a while, the “gods of the weather” seemed to be on their side, as rainfall enabled planting and sustained the crop in good shape until the end of August. However, after that the province experienced much warmer and drier weather conditions, which caused damage in the fields, changing the once promising prospects of the harvest ahead to a depressing outlook.
In the middle of August, the SA Crop Estimates Committee predicted a wheat harvest of 1.92-million tons in the 2019/2020 season, which would have been the biggest harvest in a decade. It is now clear that this was a far-fetched prospect, as a number of farmers in the province continue to report crop losses.
As I write this column the weather forecast shows clear skies across the province for the next eight days, with the prospect of rainfall only in the week between September 23 and October 1, according to wxmaps — a George Mason University-hosted weather forecast website. If this materialises it may help ensure there is no excessive crop damage but it will not reverse the losses already incurred.
On September 12 Grain SA noted the crop damage and that farmers will be under financial pressure in the coming months as prices are unlikely to adjust for yield losses. I agree. If damage had occurred in crops where SA is typically a net exporter, such as maize, the effect on prices would have been noticeable.
But this is not the case for wheat, as SA imports about half (an average of 1.6-million tons) of what is consumed annually, and sales generally track the import parity price level. This means the drought may not result in large movements in domestic wheat prices. Wheat farmers will therefore not be compensated with better prices, despite the production declines, a point Grain SA tries to advance.
The factors that have the most notable effect on domestic wheat prices are global wheat market conditions and the exchange rate. But global wheat prices could remain at softer levels in the coming months because of a recovery in production in the EU and the Black Sea regions. Last week the US agriculture department placed its estimate for 2019/2020 global wheat production at 766-million tons, up 5% from the previous season.
For SA wheat users (millers and bakers), the expected poor domestic harvest in the Western Cape, and ultimately the country, will have a minimal effect on their cost structures. As long as the global wheat market is well supplied local wheat prices should be at comfortable levels, taking a cue from the global wheat market (assuming a generally stable exchange rate). The same applies to food price inflation dynamics.
While the picture looks comfortable for consumers in the near term irrespective of the erratic weather conditions, the sustainability of the farming system remains at risk. The challenge to farmers and the food value chain is how to adapt in a rapidly changing risk environment. There are no easy answers to this. My sense is that the government and private sector mitigate the risk and learn from best practices elsewhere.
Written for and first published in the Business Day newspaper on 18 September 2019
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