by Wandile Sihlobo | Sep 17, 2020 | Daily Notes
At the outset of the Covid-19 lockdown, agriculture and the food sector were classified as essential services to avoid disrupting the nation’s food supply. But there were always concerns about whether the agricultural value chains and logistics could work efficiently when most other sectors of the economy had ground to a halt.
Industry leaders quickly met, and with the help of the Bureau for Food and Agricultural Policy (BFAP) created a weekly value chain tracker covering all aspects of the sector. This proved an essential tool as challenges emanating from it were elevated to the legislators to be tackled swiftly and ensure the continuity of the sector.
Through the BFAP Covid-19 tracker, we also began to pick up challenges at the ports that led to delays in shipment and had various interactions with industry players. The delays were a great concern as SA’s agricultural sector is export-orientated. As the 2019/2020 production season was bountiful, we had greater volumes of field crops and horticultural produce to export than in previous years.
Continuous co-operation between industry players and the government reduced delays at the ports as the lockdown progressed. Another worry was the logistical challenges at receiving ports and general uncertainty about global trade due to disruptions caused by the pandemic to global supply chains and the debilitating effect lockdowns had on demand.
Yet against all odds, SA has managed to maintain vibrant trade, as illustrated by the agricultural trade surplus, which expanded 32% year on year in the second quarter of the year to $1.1bn, according to data from Trade Map. Exports were little changed compared with the same period in 2019, at $2.4bn, while imports declined notably to $1.3bn. The decline in imports can be attributed to slower domestic demand and large domestic crops.
The growth in agricultural exports was underpinned by citrus, wine, maize, apples, sugar cane, pears, avocados, grapes and macadamia nuts. These products will continue to support SA’s agricultural exports in the remaining two quarters of 2020. Citrus features prominently throughout the year and exports for 2020 are expected to reach a record 142.6-million cartons, up 12% year on year according to data from the Citrus Growers Association of Southern Africa. Similarly, we at the Agricultural Business Chamber estimate SA’s maize exports will reach 2.7-million tonnes this year, up 89% year on year due to a bumper domestic harvest.
The African and Asian continents were the largest markets for SA’s agricultural exports in the second quarter of the year, respectively accounting for 33% and 29% in value terms. Europe was the third-largest market, taking up 28%, and the balance of 10% by value was spread across the rest of the world. The main imports were wheat, palm oil, rice, poultry meat, sunflower oil and sugar. For the rest of the year, rice, wheat and palm oil will likely continue to dominate the imported agricultural product list.
Overall, though the pandemic will result in lower incomes in most world regions due to a decline in demand for goods, the agricultural sector is one of the few that might not be as hard hit. SA’s agricultural exports could increase in 2020 from 2019’s $9.9bn to more than $10bn. The catalyst will be the increase in grains and horticultural output, and the weakening domestic currency.
This all builds from great work various stakeholders in the agriculture, agribusiness, logistics and government sectors have done to ensure the continuous functioning of the sector throughout the lockdown period.
Written for and first appeared on Business Day, September 15, 2020
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by Wandile Sihlobo | Jun 6, 2020 | Agricultural Trade
The ongoing Covid-19 crisis has brought uncertainty to global trade because of disruptions in supply chains and weakening demand. South Africa’s agricultural sector, which is export-oriented, is one of the sectors I feared would be disrupted by the pandemic. So far, however, there have been minimal disruptions as the global agricultural and food sector has generally stayed operational.
The coming months could be even better as many countries are gradually easing restrictions on economic activity and the movement of people in the wake of lockdowns. In the first quarter of the year, a period before coronavirus lockdowns were implemented across the globe, South Africa’s agricultural trade was vibrant. The country recorded an agricultural trade surplus of US$773 million, according to data from Trade Map. This is up by 16% year-on-year, with exports having increased at a higher rate than imports.
The exports were underpinned by grapes, maize, wine, wool, pears, apples, plums, lemons and macadamia nuts, amongst other agricultural products. These products could continue to underpin South Africa’s agricultural exports in the second quarter of 2020, which largely corresponds with global lockdowns, but with some decline in wine exports which had briefly been impacted by domestic lockdown regulations.
While the second-quarter data will only be out next month, the high-frequency data from various commodity organisations and agricultural institutions point to continued robust agricultural exports over the past couple of weeks.
Citrus will feature prominently in the second quarter data onward, as its exports for this year are expected to reach a record 143.3 million cartons for the Southern Africa region, mainly from South Africa. The export activity of this particular product has also continued with minimal interruptions during the lockdown period.
Similar to citrus, maize will also dominate South African exports this year with the volume set to increase by 89% y/y to 2.7 million tonnes because of higher domestic harvest. This is also at a time where we expect an increased maize needs in the Southern Africa region, which is a primary market for white maize.
The African continent and Europe continued to be the largest markets for South Africa’s agricultural exports, respectively accounting for 44% and 29% in value terms during the first quarter of 2020. Asia was the third-largest market, taking up 19% of South Africa’s agricultural exports in the first quarter of 2019. The balance of 8% value was spread across other regions of the world.
In terms of imports, the leading products included wheat, palm oil, rice, poultry meat, sunflower oil and sugar. For the year, rice, wheat and palm oil will dominate the agricultural import product list. South Africa’s 2020 rice imports could amount to 1.1 million tonnes, up by 10% from 2019. Meanwhile, South Africa’s 2019/20 wheat imports could increase by 29% y/y to 1.8 million tonnes.
In a nutshell, while the pandemic will result in a loss of incomes in various regions of the world, and in turn, decline in demand for goods; the agriculture and food sector is one of the few that might not be as hard hit. As such, for 2020, South Africa’s agricultural exports could increase to levels over US$10 billion from US$9.9 billion in 2019. The key catalysts this year will be the increase in grains and horticulture output and to some extent the weakening domestic currency.
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by Wandile Sihlobo | Apr 9, 2020 | Agricultural Trade
Regular readers of this blog would know that I write often. But the frequency over the past few weeks has reduced somewhat because of the increased demand for time in this unusual time of the COVID-19 pandemic. For the sake of consistency and ensuring that I cover key agricultural events, I will commit into a Thursday evening newsletter (of course, this doesn’t mean I won’t post when there are important agricultural events).
Although global agriculture has not been hard hit by the COVID-19 pandemic as other sectors of the economy, the fears and uncertainty about how long the world will grapple with the virus have led to several countries introducing restrictive measures on exports. Wheat and rice have been the casualties of these new measures. Either one looks at Kazakhstan, Cambodia or Vietnam, there are introductions of export bans on wheat and rice.
Leaving the COVID-19 pandemic aside for a moment; the world has sufficient wheat and rice supplies. In the 2019/20 production season, global wheat production was 763 million tonnes, up 5% y/y and the stocks were at 275 million tonnes, up 4% y/y. In the case of rice, the 2019/20 global harvest is 499 million tonnes, roughly unchanged from the previous season, with the stocks at 177 million tonnes (up 2% y/y).
This goes to show that the restriction on exports is not because of fears of the scarcity of the commodities, but rather the uncertainty of how long it will last. Countries are then making drastic policy decisions to prepare for the worst. But their quest for safety has negative consequences to the importing countries of the commodities.
Consider South Africa, a country that imports about 50% of its annual wheat consumption of 3.4 million tonnes and 100% of its annual rice consumption of 1.0 million tonnes. Any glitches in the global wheat and rice markets have a direct impact on the South African consumer, perhaps more so on rice relative to wheat. The recent announcements of a ban on rice exports in Vietnam, coupled with logistical challenges in India amid the lockdown resulted into a drastic increase in rice prices over the past few days – see Exhibit 1 below. Depending on whether prices are sustained at these elevated levels, the South African consumer could be a casualty of the trade policy changes implemented in Vietnam, Cambodia and logistics glitches in India, amongst other developments.
Exhibit 1: rice prices
Source: IGC, Agbiz Research
This is a case even though; South Africa imports very small quantities of rice from the aforementioned countries. About 70% of South Africa’s rice is usually imported from Thailand, with 20% from India ad the rest from Pakistan, China and Vietnam, amongst other countries. What I will be watching closely in the coming days are developments in Thailand, any drastic policy changes there could have notable implications on the South African rice market, and also neighbouring countries. The imports are usually evenly spread across the year, with a slight peak in volumes in the last quarter of each year. On average, about 10% of the imported rice into South Africa each year is re-exported to Swaziland, Botswana, Zimbabwe, Lesotho, Namibia and Zambia.
Aside from the Southern African region, other countries that are notable importers of rice in the African continent are Benin, Côte d’Ivoire, Nigeria and Senegal. These countries, along with South Africa, collectively account for 44% of Africa’s 2020 rice import forecast of 17.6 million tonnes, according to data from the International Grains Council.
In the case of wheat, I am not as cautious of the current conditions as I am in rice. The reason being South Africa’s relative difference in dependency on wheat imports compared to rice, and also due to the encouraging communication from the Black Sea countries. For example, on April 6, Ukraine Chair Parliamentary Committee on Agrarian and Land Policy noted that the country’s domestic food security is intact with supplies sufficient to meet local and export demand. Hence, they don’t envisage export bans of wheat.
As of April 3, South Africa had imported 42% of the volume of wheat the country intends to bring into our shores within the 2019/20 season. The total is set to be 1.8 million tonnes. The leading supplies thus far are Germany, Lithuania, Poland, Latvia, Ukraine, Russia and the Czech Republic. As with rice, it is key that one monitors developments in the wheat market in these countries.
Aside from the aforementioned commodities, South Africa’s food supplies are intact, as I explained a few weeks back here. The restriction in exports that we are seeing is not necessarily a rise of “food nationalism” but rather fear induced by the uncertainty about the timeframe of the COVID-19 pandemic.
Quick links on what I’ve recently read
The IMF economists have an early view of the economic impact of the COVID-19 pandemic in 5 Charts (see here)
The OECD Economics Department is evaluating the initial impactofCOVID-19 containment measures on economic activity (see here).
Impact of COVID-19: Changing trade policy in a global pandemic – Potential implications for South Africa’s rice supply chain: The Bureau for Food and Agricultural Policy (see here)
What music am I listening to?
Not many people know this, but I listen to a lot of hip-hop. And in-between the challenges of COVID-19, I’ve soaked myself this week into Nas – The Lost Tapes 2 (full album) (listen to it here)
What I’m currently listening to.
Follow me on Twitter (@WandileSihlobo). E-mail: wandile@agbiz.co.za
by Wandile Sihlobo | Feb 20, 2020 | Agricultural Trade
This note is a bit delayed. I had to attend a conference this morning. Here is a Twitter feed for those keen to see what went down.
Back to business!
It is Thursday – a grain trade day. The South African Grain Information Services (SAGIS) releases the country’s grain trade data for the week of 14th of February 2020 at midday. The data covers grain and wheat. To reiterate a point I made last week, although grain trade data are important for tracking the movement of commodities into and outside South Africa, they are rarely market moving. This is because of the week’s long lag in reporting. By the time we receive the numbers from SAGIS, the key grain market players are probably aware of the levels of sales.
Maize
South Africa is a net exporter of maize. In the week of 7th February 2020, South Africa’s 2019/20 marketing year maize exports amounted to 976 279 tonnes (both white and yellow maize). This equates to 74% of the export forecast for this season (compared to 71% the previous week), which is an estimated 1.32 million tonnes.
The leading markets include Botswana, Ethiopia, Mozambique, Namibia, Zimbabwe and Eswatini. Taiwan, Vietnam, Japan and South Korea, who are usually amongst the key buyers of South Africa’s maize have been oddly quiet in the 2019/20 marketing year. This could be because of favourable prices elsewhere.
But one could see them returning to the South African maize market in the 2020/21 marketing year which starts in May 2020. The new season for maize production is expected to improve by, at least, 11% y/y to 12.5 million tonnes (some analysts are forecasting 14.0 million tonnes). This would boost supplies available for exports, and subsequently, to exert downward pressure on domestic maize prices. This would thus improve its attractiveness to maize-importing nations.
Nonetheless, that’s all in the future. In the 2019/20 marketing year which ends in April 2020, we expect South Africa to import 525 000 tonnes of maize, all yellow maize, albeit being an exporter of over a million tonnes of maize in the same season. These imports will mainly be for the coastal provinces of the country. This is up from an estimated 171 622 tonnes in the 2018/19 marketing year. The country has thus far imported 463 859 tonnes of yellow maize. The key suppliers are Brazil and Argentina.
Wheat
As we’ve pointed out in the previous note, South Africa’s 2019/20 wheat imports could increase by 28% y/y to 1.8 million tonnes because of expected lower domestic harvest on the back of unfavourable weather conditions in the Western Cape. In the week of 7th February 2020, South Africa’s 2019/20 season amounted to 537 812 tonnes, which equates to 26% of the aforementioned seasonal import forecast.
Concluding remarks
Aside from the grain trade data, it’s a quiet day in South Africa’s agricultural market with no major data releases. Those in Gauteng province of South Africa gather today at Africa Agri Tech conference in Pretoria – an opportunity to listen to industry leaders and hear about on-farm technological developments.
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by Wandile Sihlobo | Feb 16, 2020 | Agricultural Trade
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.
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by Wandile Sihlobo | Feb 13, 2020 | Agricultural Production
The South African Grain Information Services releases the country’s grain trade data for the week of 7th of February 2020 by midday. The data covers maize and wheat. While these data are important for tracking the movement of grains into and outside South Africa, they are rarely market moving. This is because of the week’s long lag in reporting. By the time we get a glimpse of the numbers, the key grain market players are probably aware of the levels of sales.
South Africa is generally a net exporter of maize. The exports for the 2019/20 marketing year have thus far amounted to 935 980 tonnes (both white and yellow maize). This equates to 71% of the export forecast for this season, which is an estimated 1.32 million tonnes.
The leading markets include Botswana, Ethiopia, Mozambique, Namibia, Zimbabwe and Eswatini. Taiwan, Vietnam, Japan and South Korea, who are usually amongst the key buyers of South Africa’s maize have been oddly quiet in the 2019/20 marketing year. This could be because of favourable prices elsewhere.
But one could see them returning to the South African maize market in the 2020/21 marketing year which starts in May 2020. The new season for maize production is expected to improve by at least 11% y/y to 12.5 million tonnes (some analysts are forecasting 14.0 million tonnes). This would boost supplies available for exports, and subsequently, to exert downward pressure on domestic maize prices. This would thus improve its attractiveness to maize-importing nations.
But that’s all in the future. In the 2019/20 marketing year which ends in April 2020, we expect South Africa to imports 525 000 tonnes of maize, all yellow maize, albeit being an exporter of over a million tonnes of maize in the same season. These imports will mainly be for the coastal provinces of the country. This is up from an estimated 171 622 tonnes in the 2018/19 marketing year. The country has thus far imported 452 229 tonnes of yellow maize.
In terms of wheat, as we’ve pointed out in the previous note, South Africa’s 2019/20 wheat imports could increase by 28% y/y to 1.8 million tonnes because of expected lower domestic harvest on the back of unfavourable weather conditions in the Western Cape. In the week of 31 January 2020, South Africa’s 2019/20 season amounted to 537 882 tonnes, which equates to 26% of the aforementioned seasonal import forecast.
That’s all on weekly grain trade development which will be out at midday. Later in the day, South Africa’s President, Mr Cyril Ramaphosa, delivers the State of Nation Address. This will be a most-watched event by analysts and South Africans at large.
PERSONAL NEWS:
Amazon already has a link to pre-order my upcoming book – FINDING COMMON GROUND: Land, Equity and Agriculture – you can pre-order here.
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by Wandile Sihlobo | Feb 3, 2020 | Africa Focus
On the 14th of August 2019, Nigeria announced that there would be restrictions on food and agricultural imports in the country. President Buhari took to Twitter to explain his rationale behind this step (see here). In summary, President Buhari wants to improve Nigeria’s agricultural production. His theory is that “restricting food imports, in the face of solid domestic demand will be a catalyst for domestic production”.
This was a bold move considering Nigeria being a notable importer of agricultural and food products. Over the past five years, Nigeria’s agricultural and food imports averaged US$4.7 billion, as shown in Exhibit 1 below. The products on top of the imports list are wheat, sugar, milk, palm oil, sauces and seasonings, bottled water, apples, pears, maize and vegetables oil.
Exhibit 1: Nigeria’s agricultural trade
Source: ITC, Agbiz Research
There is a potential to reduce the imports of some of these products, but this won’t be an overnight event like the Nigerian government had hoped. This will take years of investment in agricultural production and value chain, something that seems to be lacking as far as I can tell.
So, introducing a ban on imports of food might have been an oversight, perhaps the Nigerian government should have introduced import quotas and adjusted them along with improvement in production (to be clear, this is not something I particularly desire, but it could have worked for achieving the government goal).
Nevertheless, the negative impacts of the drastic policy of restricting food imports have now come to light. Bloomberg, a news organization, reports that staple foods’ prices, such as Jollof rice, have increased by 70% since the introduction of this policy in August 2019. What’s more, Nigeria’s overall food price inflation accelerated to a 20-month high in December 2019, reaching 14.7% y/y.
Nigerian farmers might be happy with these measures and adjusting production somewhat – something that government aims for. But this is coming at a heavy cost to Nigerian consumers.
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