by Wandile Sihlobo | Nov 25, 2019 | Agricultural Production
Over the past few months, South Africa’s Crop Estimates Committee (CEC) has consistently slashed down its estimate of 2019/20 winter wheat harvest from the view painted at the start of the season. The current estimate is now at 1.7 million tonnes (from 1.9 million tonnes at the start of the season), and likely to be revised down further when the CEC releases this month’s update tomorrow (November 26).
The downward revision could stem from the Western Cape, who’s harvest is nearly completed and the yields disappointed in various regions of the province. This is because of drier weather conditions between the end of August to September and later rainfall over the past couple of weeks when the crop had already matured. The late rains have not only caused damage in some areas but have also negatively affected grading levels of the crop.
These developments, however, have not been clearly reflected in South African wheat prices and are unlikely to in the foreseeable future. South Africa is a net importer of wheat and therefore its price levels are influenced by international wheat market conditions.
Currently, there are large wheat supplies in the global market. In its November 2019 update, the United States Department of Agriculture estimated 2019/20 global wheat production at 766 million tonnes, which is 5% higher than the previous season. As a consequence of this, the stocks could increase by 4% y/y to 288 million tonnes.
This will essentially keep global wheat prices at relatively lower levels, which is beneficial for consumers in importing countries such as South Africa. Unfortunately, the same cannot be said for farmers. (We currently forecast South Africa’s 2019/20 wheat imports at 1.6 million tonnes, up 14% y/y).
Written for Agbiz.
Follow me on Twitter (@WandileSihlobo). E-mail: wandile@agbiz.co.za
by Wandile Sihlobo | Oct 7, 2019 | Agricultural Production
We continue to observe developments in the winter crop growing areas of the Western Cape. There hasn’t been any notable rainfall thus far to improve crop growing conditions. The current weather forecasts show that the next two weeks could present more of the same – dryness.
This means that regions such as Overberg, which are already experiencing crop damage might not find a reprieve any time soon. Moreover, regions such as Swartland where the winter crops were still in relatively good shape could also experience losses within the next two weeks if dryness persists.
The Western Cape is a major producer of winter crops, accounting for 61% of area plantings in winter wheat and nearly all canola, which means that prolonged dryness and heat there could have an impact on the national crop size.
Other major winter crop-producing provinces such as the Northern Cape, Free State and Limpopo, amongst others, are mainly under irrigation and can, therefore, withstand harsh conditions as dams are at levels over 50% on average as of 30 September 2019.
Farmers’ reports out of the Free State suggest that the wheat crop in the province generally appear very good. The same is true for the Northern Cape.
South Africa’s Crop Estimates Committee (CEC) currently forecasts the 2019/20 wheat, barley and canola production at 1.81 million tonnes, 389 260 tonnes and 88 800 tonnes, which is 3%, 8% and 15% down from the previous season.
Looking ahead, we see a risk that the CEC might revise down further its winter crop production estimates when the next update comes out on 24 October 2019 given that weather conditions are expected to remain harsh over the next two weeks.
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by Wandile Sihlobo | Sep 22, 2019 | Agricultural Production
Farming is proving to be one of the more challenging vocations in SA because of the ever-changing risk environment. Not only must farmers monitor economic conditions, changing consumer preferences and social dynamics, but the weather is proving to be the most unpredictable aspect of all.
An example is the Western Cape, where weather forecasters predicted the possibility of above-normal rainfall in 2019, and wheat farmers in that province worked hard to ensure they planted whatever good land they could find, in the hope that higher rainfall would lead to a better harvest and an improvement in their fortunes after years of drought.
For a while, the “gods of the weather” seemed to be on their side, as rainfall enabled planting and sustained the crop in good shape until the end of August. However, after that the province experienced much warmer and drier weather conditions, which caused damage in the fields, changing the once promising prospects of the harvest ahead to a depressing outlook.
In the middle of August, the SA Crop Estimates Committee predicted a wheat harvest of 1.92-million tons in the 2019/2020 season, which would have been the biggest harvest in a decade. It is now clear that this was a far-fetched prospect, as a number of farmers in the province continue to report crop losses.
As I write this column the weather forecast shows clear skies across the province for the next eight days, with the prospect of rainfall only in the week between September 23 and October 1, according to wxmaps — a George Mason University-hosted weather forecast website. If this materialises it may help ensure there is no excessive crop damage but it will not reverse the losses already incurred.
On September 12 Grain SA noted the crop damage and that farmers will be under financial pressure in the coming months as prices are unlikely to adjust for yield losses. I agree. If damage had occurred in crops where SA is typically a net exporter, such as maize, the effect on prices would have been noticeable.
But this is not the case for wheat, as SA imports about half (an average of 1.6-million tons) of what is consumed annually, and sales generally track the import parity price level. This means the drought may not result in large movements in domestic wheat prices. Wheat farmers will therefore not be compensated with better prices, despite the production declines, a point Grain SA tries to advance.
The factors that have the most notable effect on domestic wheat prices are global wheat market conditions and the exchange rate. But global wheat prices could remain at softer levels in the coming months because of a recovery in production in the EU and the Black Sea regions. Last week the US agriculture department placed its estimate for 2019/2020 global wheat production at 766-million tons, up 5% from the previous season.
For SA wheat users (millers and bakers), the expected poor domestic harvest in the Western Cape, and ultimately the country, will have a minimal effect on their cost structures. As long as the global wheat market is well supplied local wheat prices should be at comfortable levels, taking a cue from the global wheat market (assuming a generally stable exchange rate). The same applies to food price inflation dynamics.
While the picture looks comfortable for consumers in the near term irrespective of the erratic weather conditions, the sustainability of the farming system remains at risk. The challenge to farmers and the food value chain is how to adapt in a rapidly changing risk environment. There are no easy answers to this. My sense is that the government and private sector mitigate the risk and learn from best practices elsewhere.
Written for and first published in the Business Day newspaper on 18 September 2019
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by Wandile Sihlobo | Aug 1, 2019 | Agricultural Environment and Natural Resource
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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