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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This has not been a good year for southern Africa’s agricultural economy. The drought that started in October 2018 in some countries in the region and continued into 2019 has led to a double-digit decline in crop harvests. Take Kenya, SA, Zimbabwe and Zambia: maize production in the 2018/2019 production season fell year on year by 20%, 12%, 53% and 16% respectively, according to the latest estimates from the International Grains Council.
But there is cause for hope for southern Africa’s 2020 agricultural performance. The news out of Luanda (Angola), where the 23rd Southern African Regional Climate Forum convened a meeting with Southern African Development Community meteorologists, points to a potential improvement in rainfall in the 2019/2020 production season.
If we zoom in on SA, the forum’s message concurs with the forecast of the local weather service, which indicated on August 30 that the central and eastern parts of SA could receive above-normal rainfall between November 2019 and January 2020. The weather outlook for the northwestern regions of SA are still unclear at this point, but I think there could be normal showers. It is quite rare to find a season where the northeastern parts of SA experience above-normal rainfall while the northwestern areas are dry, hence my optimism that the overall summer crop growing areas could receive sufficient rains in the 2019/2020 production season.
The summer grains and oilseed planting season is due to start about mid-October in the eastern parts of SA, but I believe there could be a delay of one or two weeks as some areas have lower soil moisture. Rainfall typically starts in November. Summer crop plantings in the northwestern areas should start on time, not only because of showers expected but due to generally improved soil moisture after the late 2019 summer rainfall and cool winter, which preserved it in some areas.
In the 2018/2019 production season SA’s major summer crops — maize, soybeans and sunflower seeds — were down year on year by 12%, 21% and 24% to 11.02-million tons, 1.17-million tons and 680,940 tons respectively. Assuming good weather conditions there could be a notable upswing from these levels. The International Grains Council’s recently updated preliminary estimates for SA’s 2019/2020 maize production are up at 12.8-million tons, which would be 16% higher than the current season and slightly above the five-year average production of 12.3-million tons.
This would be a welcome development, not only for the summer crop farmers but also livestock farmers and agribusinesses. The livestock sector could benefit through potentially lower feed prices when the harvest increases. At the end of August 2019, SA’s yellow and white maize prices were up 15% and 22% respectively from the corresponding period last year because of the lower harvests in the 2018/2019 production season. The agribusinesses could benefit in various ways, from improved grain volumes for storage, and through lower prices in entities that use maize and other summer crops as inputs.
The optimistic outlook for SA’s agricultural economy does not only rely on the potential recovery of summer crop production but also on winter crops and the horticultural sector. The Western Cape, a key horticulture province in the country, received good rainfall in the past few weeks. This has improved soil moisture and water levels in dams. The province is set to receive additional rainfall, all of which is conducive to a good horticulture harvest in 2020, which will ultimately boost SA’s agricultural economic fortunes.
For the broader southern Africa region, improvement in rainfall would be a catalyst in breaking the cycle of food insecurity afflicting the likes of Zimbabwe. Most importantly, the agricultural sector still plays a huge role in the economy and labour market in a number of countries in Southern Africa, so an improvement in output would have much wider positive spin-offs. Farmers will have to closely monitor weather developments in the coming weeks and months, as the optimistic picture I’ve painted is still dependent on good rainfall.
This essay was written for and first published on Business Day on 04 September 2019.
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