WHILE South Africa’s agricultural sector has had two consecutive years of strong growth, Agricultural Business Chamber (Agbiz) expects the sector’s gross value added to fall by roughly 3 to 5 percent year on year (y/y) given the high base from last year.
Agbiz chief economist Wandile Sihlobo said, “The overall field crops harvest will likely be lower than the previous season, although some crops such as soybeans and sunflower seed promise a large harvest. But this will not be the only source of potential contraction in the sector.
“The livestock sector, which accounts for roughly half of the sector’s gross value added, continues to face numerous challenges. First, the generally higher grains and oilseed prices, a key feed ingredient, have presented increased cost pressures to livestock and poultry farmers since 2020. For example, yellow maize prices were up by 38 percent year on year on 23 June 2022, trading at R4 357 per tonne,” Sihlobo said.
Statistics South Africa data released in March, show that South Africa's agricultural sector remained on the positive growth path last year registering an 8.3 percent y/y expansion. This followed a solid performance of 13.4 percent growth y/y in 2020.
While the farmers were able to manage the rising feed costs to some degree in the past two years, the current season presented new challenges including a massive outbreak of foot-and-mouth disease, as well as continued occurrences of swine flu and avian influenza.
South Africa has had 91 foot-and-mouth disease outbreaks in previously disease-free zones.
“While the outbreak does not necessarily mean a wide slaughtering of cattle for farmers and has now, encouragingly, been quarantined in various sites or farms, the economic impact still cuts deep. The impact on livestock auctions is huge, Sihlobo said
Moreover, bans by many countries on exports of South Africa’s livestock products constrained the growth of the sector, and harmed the potential for black farmers to reap the benefits from an increasingly export-oriented livestock sector.
South Africa’s beef industry is aggressively building its export activity, with exports having grown nearly seven-fold over the past two decades, reaching 54 334 tonnes in 2021. But we are still not able to export our top-quality beef products to the US, UK and EU markets where the returns will be much higher than exporting to the Middle East and other smaller markets,” Agbiz said.
“This ultimately adds financial strain on farmers. The financial pressure is not limited to the cattle industry but also to sheep, goats, pigs and poultry. For instance, China has temporarily suspended imports of South Africa’s wool for roughly three months due to the foot-and-mouth disease outbreaks.
“China is a significant market, accounting for roughly 70 percent of South Africa’s wool exports. The current export ban has a broad negative financial impact on the wool industry and the communities that rely on the industry,” Sihlobo said.
He said the National Agricultural Marketing Council estimates suggest that black farmers account for 18 percent, 13 percent and 34 percent of wool, mohair, and cattle production, respectively. Sihlobo said while the accuracy of the data was debatable, the point was that a sizeable share of agricultural output by black farmers was affected by the financial pressures.
“We highlight this data to note that these new entrant farmers might not have financial buffers to carry them through in a tough livestock market, as we already hear from established commercial farmers about these financial pressures,” he said.
Agbiz said the government had a critical role and the legislative, budgetary and coordinating tasks of public veterinary services and animal health services were absolutely vital in protecting the national livestock herd, and enabling the growth that the sector desperately needs.
Agbiz called on the Department of Agriculture, Land Reform and Rural Development to actively engage the Chinese authorities to resume exports.
“Our government should move with speed on its engagement. In the case of rising feed costs, the potential rains will be a saving grace that natural grazing veld will continue recovering well and assist the livestock, to an extent,” it said.
BUSINESS REPORT