Agribusiness Outlook for 2019

Agriculture and agribusiness prospects

Meanwhile, the agricultural GDP rebounded on the third quarter of 2018, growing by 6.5% on a quarter-on-quarter seasonally-adjusted annualised rate. This tells us we are not out of the woods yet. The recent uptick in agricultural GDP is no cause for celebration. The recovery could well be temporary, and weak going forward as the weather outlook, which initially painted a positive outlook, proves to be a key challenge again for summer crop growing areas and could then negatively affect the performance of the agricultural sector in 2019. Having said that, the benefit of the recovery in the Western Cape’s weather conditions could provide a buffer in the sector in the first quarter of 2019. But, the overall annual performance will largely depend on weather conditions in the summer rainfall areas.

The optimistic outlook that we opened the 2018/19 production season with has changed. To recap, the season started on a sound footing with farmers aiming to lift the summer grain and oil seed planting activity by 5% from the previous season to 4.03 million hectares. These plans were followed by real action, as tractor sales amounted to 5 818 units in the first 10 months of this year, up by 9% from the same period last year. At the time, good rainfall in the eastern parts of South Africa enabled farmers to start planting. But the rainfall was erratic and not widespread. As a result, planting activity has proved to be a challenge in most areas, particularly the central and western regions of South Africa. At the same time, the optimal planting period is narrowing for most crops.

On November 30, the South African Weather Service offered an optimistic outlook pointing to a possibility of above-normal rainfall between December 2018 and February 2019. But this remains to be seen as there is still very little evidence of improvement in rainfall on the ground. Moreover, there are fears of an El Niño later in the 2019 summer season. While there are a number of reasons that were cited as a cause for despondency in the sector in the Agbiz/IDC Agribusiness Confidence Index, the weather impact featured prominently. Therefore, it would be right to say that the weather remains a key
factor that will determine the growth prospects of the South African agricultural economy in the coming year,” Mr Sihlobo added.

Grain industry

During the 2017/2018 season, 809 931 tons of white maize was exported. Due to the surplus, white maize was also used for animal feed. Although South Africa has been a net exporter of white maize during the past few years, 1 478 903 tonnes of yellow maize was exported this season. Possible new export markets are China, Malaysia, the Philippines and Middle Eastern countries. New Namibian market regulations which include food safety assessment, transportation and labeling requirements will have a huge implication for South African trade with Namibia. Statutory reporting to the South African Grain Information Service (SAGIS) of intent to import or export is now in place for maize and wheat. This directive may also apply to oilseeds in the future, as both soybean and sunflower are imported.

The SA Cultivar and Technology Agency (SACTA) levy is now applicable to wheat, barley, oats and soybeans. In 2019, Agbiz Grain will continue to play a crucial role in providing SACTA with cultivar information that is used to accurately calculate the levy distribution to seed companies. Early in 2019, SACTA will also launch its transformation plan which comprises a range of skills development options and enterprise development projects for farmer and agricultural business development.

Agbiz Grain has established a firm relationship with Transnet to collaborate on the migration from-road-to-rail and state of readiness. Major issues have to be addressed and reported back on within the next 12 months. During 2019, Agbiz Grain will continue with its series of R2R Task Team meetings between Transnet and various grain industry role players, including traders and processors.

Agbiz Grain continues to play a prominent role in the Forum Steering Committees of all the grains and oilseeds. The grading regulations for wheat will be improved to bring it more in line with international standards and at the same time provide an opportunity to compensate local farmers for producing good quality wheat. Changes will be implemented in the 2019 wheat season after the Department of Agriculture, Forestry and Fisheries (DAFF) has published the new regulations and the Johannesburg Stock Exchange (JSE) has made the necessary changes. Next year, a further relaxation of the release criteria for new wheat cultivars and wheat research priorities will be investigated in order to further stimulate the revival of the local wheat industry which is now firmly on track.

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