Understanding South Africa’s agriculture trade patterns

Understanding South Africa’s agriculture trade patterns

After reaching a record level of US10.6 billion in 2018, South Africa’s agricultural exports fell by 8% year-on-year (y/y) in 2019 to US$9.8 billion. This, however, was unsurprising as agricultural production data for 2019 showed a notable decline in a number of exportable commodities because of the drought.

The temporary ban on exports of livestock products and wool in 2019, following the outbreak of foot-and-mouth disease at the start of the year, also contributed to the decline in exports. Be that as it may, the top exportable agricultural products for 2019 included citrus, wine, grapes, apples and pears, sugar, macadamia nuts, wool and maize, amongst other products.

Over the same period, South Africa’s agricultural products imports declined by 4% y/y to US$6.4 billion. This was underpinned by the decline in the import value of rice, meat, wheat and palm oil. But these products remained amongst the top imported agricultural products in value terms. Overall, this subsequently led to a 12% y/y decline in South Africa’s agricultural trade surplus to US$3.4 billion, as shown in Exhibit 1.

Exhibit 1: South Africa’s agricultural trade
Source: Trade Map and Agbiz Research

From a destination point of view, the African continent and Europe continued to be the largest markets for South Africa’s agricultural exports, respectively absorbing 41% and 26% of total exports in 2019, measured in value terms. The leading products to these markets were beverages, fruit, vegetables, sugar, wool and grains.

Asia is also an important market for South Africa’s agricultural exports, demanding a 24% export share in 2019. Wool, fruit, grains, beverages, vegetables and meat were the leading products exported to this particular region. The Americas and the rest of the world (ROW) accounted for 5% and 4% shares, as shown in Exhibit 2. Exports to these regions were also dominated by fruits, beverages, vegetables, sugar and grains.

Exhibit 2: South Africa’s agricultural exports by region
Source: Trade Map and Agbiz Research

Looking ahead

South Africa’s agricultural exports could recover somewhat in 2020. The improved weather conditions this year has led to an increase in summer crops area plantings and prospects of a bigger maize harvest, which is an exportable commodity.[1] The South African wine grapes production is also set to increase in 2020, thus contributing to a larger wine volume output. [2]  There is also general optimism about 2020 harvest in the fruit industry, which supports our view of possible improvement in agriculture exports this year.[3] The industry that is still on the backfoot because of biosecurity concerns in the red meat sector. There is currently a ban on South Africa’s livestock products (including red meat) exports because of the foot-and-mouth disease outbreak that occurred towards the end of 2019.

Policy considerations

The South African government and private sector players have embraced a vision of expanding labour-intensive agricultural subsectors as part of a broader development strategy. This is to be an export-driven initiative. Such subsectors are mainly horticulture and to certain extent field crops. Fortunately, the top valuable agricultural exports over the past five years were also within these subsectors, which means that South Africa is on the right path in its agricultural development strategy.

With that said, while 24% share of South Africa’s agricultural exports goes to Asia, as previously noted, there is still potential to expand participation in that market. With India and China headlining the growth potential in Asia and the Far East, this region overall is significant enough to warrant more attention, especially given that there is currently no preferential market access for South Africa’s agricultural sector in this region.

South Africa is having to compete with the likes of Australia and Chile, who have secured trade agreements that have afforded them a significant competitive advantage which could end up threatening South Africa’s market share and future growth. Therefore, South Africa should continue to engage these countries for greater market access to agricultural products.

[1] We currently forecast SA’s 2019/20 maize production at 12.5 million tonnes (up 12% y/y), which means there could be over a million tonnes of maize for export markets.

[2] Vinpro, “SA wine grape crop set to be good, but below 5-year average”, December 10, 2019. Available at: https://vinpro.co.za/sa-wine-grape-harvest-set-to-be-good-but-below-average/

[3] USDA, “South Africa: Citrus Annual”, December 27, 2019: Available at: https://apps.fas.usda.gov/newgainapi/api/Report/DownloadReportByFileName?fileName=Citrus%20Annual_Pretoria_South%20Africa%20-%20Republic%20of_12-15-2019

Written for Agbiz.

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



Thailand, a key SA rice supplier, expects a poor harvest. Should South Africans be worried?

Thailand, a key SA rice supplier, expects a poor harvest. Should South Africans be worried?

Consumption of rice in South Africa is increasing, however, climate conditions in the country are not conducive to growing these grains. We fully depend on imports for all our annual requirements. In 2020, South Africa’s rice imports are set to increase by 10% y/y to 1.1 million tonnes. Thailand has consistently been a main supplier of rice to South Africa, accounting for an average 65% share of imports over the past five years.

Hence, concern started to build when estimates from the United States Department of Agriculture indicated that Thailand could harvest its second-lowest rice crop in a decade this year. The country’s harvest is estimated at 18.0 million tonnes. There, however, will still be a substantial volume of rice to export, roughly 7.6 million tonnes. While this looks decent, it is 31% lower than the volume of rice Thailand exported in 2018.

So, should South Africans be worried about this decline in Thailand’s rice production? I think we shouldn’t. The rice supplies in the global market remain awash. The 2019/20 global rice production could stabilize at 499.3 million tonnes, according to data from the International Grains Council.

The decline in Thailand rice production has somewhat been compensated by the expected large harvest in other leading rice-producing countries such as Indonesia, Bangladesh and the Philippines. What’s more, there will be 44.0 million tonnes of rice for export markets in the world. This is up 3% y/y, which further supports the notion that there will be enough rice supplies in the market to assist importing to countries such as ours – South Africa. Also, if one looks at rice prices, they’ve increased marginally since December 2019, with the exception of Thailand which has seen a drastic increase – see Exhibit 1 below.

Exhibit 1: Rice prices in selected countries
Source: International Grains Council

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

Pin It on Pinterest