Weather holds cards for South Africa’s agricultural economy

Weather holds cards for South Africa’s agricultural economy

It is almost certain that SA’s agricultural economy will contract in 2019, mainly as a result of the poor summer crop harvest coming after a drought.

The Western Cape, which typically provides a cushion when there is a drought in summer-rainfall areas, was not in good shape in the 2018/2019 season, particularly the horticulture sector. The case in point is the wine-grape harvest, down 2% from 2018, when it was already 14% lower than the long-term average.

But there is cause for hope with SA’s 2020 agricultural performance. While it will be months before we have a better sense of whether summer crops will be good, we have some tentative evidence from the Western Cape winter crops, horticulture and wine grapes.

On July 30, the SA Weather Service indicated that the winter-rainfall areas, mainly the Western Cape, could get above-normal rain from August to November. This comes after the Western Cape’s recent good showers, improving moisture and dam levels.

Latest figures from the Western Cape government show that on August 5 the province’s dams averaged 61% full, the highest level in four years. I do recognise, however, that some areas in the province have received far more rainfall than others, and dam levels vary across regions.

Also encouraging is the fact that while horticulture fields need some rainfall throughout the year, the crucial months for next season’s harvest size are August and September, especially for wine grapes. Given that these months fall in a period when there are expectations of rain in the Western Cape, it is a reason to be hopeful about 2019’s wine production.

Of course, I am always uneasy when I read that rainfall will be “above normal” as this also means there could be excessive moisture. But this would be rare for the Western Cape. If experience is anything to go by, the expected rainfall might be just enough to restore moisture levels.

Apart from the agricultural economic fortunes that could be boosted by good production in the Western Cape, employment could also receive a boost. Of the 842,000 jobs in the SA agricultural sector in the second quarter of 2019, the Western Cape accounted for 22% or 182,000 jobs. This number could rise at least 10% in the first quarter of 2020 when the harvest season is in full swing due to the addition of seasonal labour. That would not be an anomaly as Western Cape agricultural jobs totalled about 223,000 before the 2017 drought, and the sector is still recovering.

Apart from horticulture, wheat, barley and canola plantings will also benefit from improved moisture. The Western Cape accounts for 60% of SA’s winter wheat plantings, which means a potential improvement in the province’s winter crop could have a positive spillover for the country’s wheat fortunes.

The Western Cape has lifted wheat planting 2% from the area planted in 2018. While this is marginal, as farmers were cautious of erratic weather conditions at the start of the season, it is nonetheless encouraging. I must qualify that while wheat production could increase marginally in the 2019/2020 season, SA will remain a net importer of wheat. Our import needs are typically half of what we consume a year, so no marginal uptick in production can make a significant difference.

The full picture of 2020’s agricultural economic fortunes will also depend on the weather outlook for the 2019/2020 summer season. If rainfall normalises SA will be in full positive growth mode.

Preliminary estimates from the International Grains Council put SA’s 2019/2020 maize harvest at 12.5-million tons, up 17% year on year. This is not inconceivable, being in line with average long-term production. Such a harvest added to developments in the Western Cape, would mean SA’s agricultural economy is back in positive territory. This is what we hope for. The future lies in weather developments over the coming months.

*Written for and first published on Business Day on 07 August 2019.

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Weather holds cards for South Africa’s agricultural economy

The heavens have opened, but Western Cape agriculture still needs more rain

While memories of Day Zero warnings in late 2017 and early 2018 might be fading in Cape Town residents’ minds, the effects of the water shortages are still felt in some farming communities — and agricultural production has not fully recovered from the damage of the 2017 drought.

The slow agricultural recovery in Western Cape farming has been evident in a poor harvest in wine grapes and horticultural products in 2018 and 2019. This occurred despite the recent improvement in rainfall. The province will have to receive average or above-average rainfall for a few more seasons for orchards to bounce back to pre-2017 levels.

The recent rainfall across the Western Cape set a good basis for such potential improvement. In the week of 29 July 2019, the provincial dam levels averaged 54%, compared to 51% in the corresponding week last year. That said, I recognise that some areas in the province received much higher rainfall than others, and dam levels vary across regions.

The rainfall will not only benefit the horticulture fields; winter grains and oilseeds will also benefit from improved moisture. The Western Cape accounts for 60% of South Africa’s winter wheat plantings, which means a potential improvement in the province’s winter crop could have wider positive spillover for the country’s wheat fortunes.

Moreover, the Western Cape has lifted its wheat plantings by 2% from the area planted in 2018. This is a fairly small improvement and suggests that farmers remain cautious of erratic weather conditions.

The province is also a major producer of barley, canola and oats, which all stand to benefit from more sustained improvement in weather conditions. Encouragingly, feedback from farmers following the recent rainfall in the province has been positive, with winter crops reportedly in good shape.

There is, nonetheless, a need for more rainfall over the coming months to sustain the winter crops in good growing condition, which could then lead to higher yields. To this end, there is some hope. On 30 July 2019, the South African Weather Service changed its view from expectations of dryness later this year in the Western Cape to a positive outlook. The agency says “there is an indication of above-normal rainfall conditions during early-spring (Aug-Sep-Oct) for parts of the winter-rainfall region.”

Also, these are encouraging developments for horticulture fields which typically need moisture throughout the year, with crucial months for next season’s harvest size being August and September, specifically for wine grapes.

The rainfall over the Western Cape and thereafter agricultural activities will not only be beneficial for farmers and agribusinesses in the province but will also have positive spin-offs for the agricultural labour market and broader agricultural economy.

Over the past five years, the Western Cape has consistently been the leading employer in primary agriculture. The province accounted for 23% of the 829,000 jobs over this period. From an agricultural economy perspective, this makes the Western Cape the second biggest contributor after KwaZulu-Natal.

But more importantly, developments in the Western Cape serve as an important reminder of the urgency of thinking about strategies to shield farming activity in a world where we will increasingly have to contend with

This is an update of my Daily Maverick column that was published on July 30, 2019.

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SA horticulture is blooming, but there’s still room for growth

SA horticulture is blooming, but there’s still room for growth

The expansion in most agricultural subsectors in South Africa has been export-driven, particularly in the horticultural sector. This sector is labour-intensive, and the expansion also brought jobs.

This somewhat compensated for the dwindling labour participation trend in other agricultural subsectors over the past few decades due to technology advancement and consolidation of farms. The gains in horticulture have largely been the reason South Africa’s agricultural jobs have been stable over the past decade, bringing the average number employed in the industry to 767,000 between 2008 and 2018.

Of late, a number of policymakers, including President Cyril Ramaphosa, have expressed a desire to see agriculture continuing to play a pivotal role in rural economic growth and job creation through increased production.

While boosting production is conceivable if the focus is not only on boosting productivity on active farms, but expands to areas that have under-utilised land – Eastern Cape, KwaZulu-Natal, and Limpopo, among others – there needs to be an equal effort in opening up new markets. This is something South Africa has done well over the past few years, but now we need to expand beyond the destinations where we currently participate.

To illustrate this point – in 2018, South Africa’s agricultural exports amounted to $10.6-billion, a record level. This was underpinned by increased exports of oranges, grapes, wine, maize, apples, wool, lemons, mandarins and pears, among other products. About two-thirds of these exports went to Africa and Europe.

Asia is also an important market for South Africa’s agricultural exports and accounted for a 25% export share in 2018. This is a region where South Africa can still push the button a bit more to expand its footprint.

Within Asia, the countries that have been purchased a large share of South Africa’s agricultural produce included China, Hong Kong, Vietnam, Japan, Malaysia, Singapore, Bangladesh, South Korea, and Taiwan.

India, whose agricultural imports have nearly doubled over the past decade – from $11.2 billion in 2009 to $21.2 billion in 2018 – is down on the list of Asian countries that import agricultural products from South Africa.

Yet, if one looks into Asia’s leading agricultural products importers, India is ranked second after China. The growth in India’s agricultural imports has, in part, been driven by population growth and rising incomes.

The products that underpinned this tremendous growth in India’s agricultural and food imports included palm oil, soybean oil, sunflower seeds, coconuts, cashew nuts, cotton, sugar, apples, dates, greasy wool, whiskey, coffee, and grapes.

Its leading agricultural suppliers over the past few years have consistently included Indonesia, Ukraine, the US, Argentina, Malaysia, Brazil, China, Australia, Singapore, and Afghanistan.

South Africa, although a key producer and exporter of some of the aforementioned products (namely greasy wool, sugar, apples and grapes), doesn’t feature even on the top 40 countries supplying agricultural products to India.

In 2018, South Africa was ranked the 46th largest supplier of agricultural products to India by value, accounting for a mere 0.3% of the $21.2- billion worth of India’s agricultural imports. The key agricultural products that South Africa exported to India were pears, dog and cat food, greasy wool, oranges, apples, maize seed for sowing, cotton, and mandarins.

It is time South Africa starts to explore possible ways of boosting its exports to India, especially as the two BRICS countries are increasingly becoming warm towards each other from a political and diplomatic point of view.

Agricultural business leaders are keen to participate in the Indian market, but for that to happen, the South African government will have to engage with its Indian counterpart to resolve existing non-tariff barriers that hinder participation, specifically for horticulture products. All this will be in the spirit of boosting South Africa’s agricultural economy. We need to have the same zeal for creating export markets as we do for boosting production across South Africa.

*Written for and first published on Daily Maverick on 27 June 2019.

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