MORNING NOTE: Robust tractors sales suggest optimism about the 2020/21 summer crop season

MORNING NOTE: Robust tractors sales suggest optimism about the 2020/21 summer crop season

South Africa’s tractors sales maintained the positive path in September 2020, which has been underway since June, increasing by 23% y/y with 529 units sold (see Exhibit 1). This was boosted, to a certain extent, by improved farmers’ financial position following a large summer grains harvest in 2019/20 production season and combined with relatively higher commodity prices.

The available data for the first nine months of the year already show that the tractors’ sales performance will be much better than we anticipated at the start of the year and also better than the 2019 performance. Already, in the first nine months of 2019, South Africa’s tractors sales amounted to 3 924 units, up by 0.1% y/y.

Importantly, the robust tractors sales also provide clues about the 2020/21 summer crop production season, which started this month. An increase in sales suggests that farmers are optimistic about the recently started 2020/21 summer crop production season. The aforementioned higher commodity prices and expectations of favourable weather conditions for the summer season are some of the key factors that support this positive sentiment.

Nevertheless, I won’t get ahead of myself as we will know more about the upcoming season’s production prospects on 28 October 2020, which is the day when the Crop Estimates Committee will release the data on farmers’ intentions to plant.

Exhibit 1: There is some level of optimism, these tractors’ sales are solid
Source: South African Agricultural Machinery Association (SAAMA), Agbiz Research

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Rainfall across South Africa gets summer crops off to a good start

Rainfall across South Africa gets summer crops off to a good start

A version of this column was published on Business Day on 05 February 2020

My last column two weeks ago painted a bleak picture of SA’s 2019/2020 agricultural outlook, highlighting prospects of drought in some regions of the country. Lately, conditions have improved notably, and farmers managed to plant the area they intended.

This was confirmed by the preliminary plantings data released last week by SA’s Crop Estimates Committee (CEC), which put the 2019/2020 summer crop area at 3.97-million hectares. This encompasses yellow maize, white maize, sunflower seed, soya beans, groundnuts, sorghum and dry beans.

This planting area is up 1% and 8% from the intentions to plant data released in October 2019 and area planted in the 2018/2019 season, respectively. There is an improvement in area plantings of all crops, with the exception of sorghum and dry beans, whose area planting fell 28% year on year and 13% year on year, respectively.

With soil moisture having improved across the country after recent rains, these numbers signal the possibility of a good harvest in the 2019/2020 production season. This would particularly be the case if there is widespread rainfall within the next two months.

In its latest monthly Seasonal Climate Watch released on January 31, the SA Weather Service indicated that most regions of the country could receive below-normal rainfall between February and April 2020. This does not bode well for summer crops, which will need good moisture over the next two months’ pollination time for a number of regions that planted beyond the normal optimal planting periods because of delayed rainfall.

However, it is worth highlighting that this is not the first time the SA Weather Service has painted such a picture. In its December 2019 release the agency warned of the prospects of below-normal rainfall between January and March 2020, but the weather conditions during this period turned out differently. There was normal rainfall in most parts of the country in January and soil moisture improved notably, leading to favourable summer crop conditions.

In the case of staple grains such as maize, the CEC data reinforces the Agricultural Business Chamber of SA’s view that SA could see its maize harvest improving by at least 11% from the 2018/2019 season, reaching 12.5-million tonnes.

Here we’ve applied the preliminary maize planting data of 2.5-million hectares (up 10% year on year), at an average yield of 5-tonnes per hectare, which is plausible with current soil moisture. The US agriculture department forecasts SA’s 2019/2020 maize harvest at 12.8-million tonnes (commercial production only). Meanwhile, the International Grains Council (IGC) estimates 13.5-million tonnes.

What causes the difference between these organisations’ estimates and ours is the yield assumptions. The US department has a yield estimate of 5.1-tonnes per hectare, while the IGC has a much higher yield estimate of 5.4-tonnes per hectare. Both estimates are plausible if SA receives normal rains to support the crop within the next two months.

The highest average maize yield SA achieved over the past decade was in 2016/2017 at 6.4-tonnes per hectare. That was a year of a record maize harvest of 16.8-million tonnes from 2.6-million hectares. Even if SA receives normal rains that support the crop, we doubt such a harvest would be possible in the 2019/2020 season.

Importantly, a bigger maize crop from the 2018/2019 commercial harvest of 11.3-million tonnes would mean SA will remain a net exporter of maize and also that food price inflation could be contained at comfortable levels in 2020. The country’s food price inflation averaged 3.1% year on year in 2019, a year that saw elevated inflation of grain product prices and subdued meat prices.

Our sense is that 2020 food price inflation could average 4% year on year if there is a good maize harvest. Here I’m also assuming subdued red meat prices on the back of restricted exports after another outbreak of the foot-and-mouth disease in the country.

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South Africa’s farmland is dry

South Africa’s farmland is dry

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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