South Africa, and the broader Southern Africa region continue to show signs that point to yet another favourable agricultural season in 2022/23, according to Agricultural Business Chamber chief economist, Wandile Sihlobo.
He said that in their Seasonal Climate Watch report last week, the South African Weather Service (SAWS) highlighted that “the El Niño-Southern Oscillation is currently in a La Niña state, and forecasts indicate that it will likely remain in this state during the remainder of 2022 and early 2023.”
A La Niña event usually has the strongest impact on rainfall during the mid-summer months.
“With the continued strengthening of the La Niña event, there is a high chance that it will have its usual effect on South Africa, generally for above-normal rainfall and below-normal temperatures over the summer rainfall areas,” it said.
Sihlobo said this suggested a move from the weak La Niña state initially anticipated a few months ago to a more normal state in the country and the region.
The likely improvement in soil moisture from now until February 2023 was a welcome development as this period covers the cultivation to the pollination stages of crops.
“Still, we continue to call for vigilance among farmers and agribusinesses over the next three months, which will likely be a high rainfall period. The 2021/22 summer season showed us that the environment has changed, and the La Niña rains could be more intense at times, negatively affecting agricultural activity.
“Therefore, attentiveness during the planting season is vital. Over the past few weeks, we have already seen encouraging momentum in planting activity in the eastern regions of South Africa, mainly in the yellow maize and soybean growing regions. From mid-November, we could see the planting activity increasing in central and western regions of South Africa, which predominantly plants white maize and sunflower seed.”
Sihlobo said farmers also sounded positive about the upcoming season, although rising input costs, especially for fuel, fertiliser and agrochemicals were consistently flagged as a major challenge for farmers.
The higher input costs were a challenge for farmers. For example, the herbicide prices, such as glyphosate, atrazine and metolachlor were up by 7%, 34% and 51% in September, compared with the same month last year, respectively.
The same trend persists in major fertilisers such as ammonium nitrate, urea and potassium chloride, whose prices were up by 64%, 23% and 17% on a year-on-year basis in September, respectively.
These overall increases were on the back of supply constraints and disruptions in production lines because of the Russia-Ukraine war and the pre-existing production challenges in the major global fertiliser and agrochemical-producing countries like China, India, the US, Russia, and Canada.
South Africa is more exposed to these shocks as it imports about 80% of its annual fertiliser consumption. Local prices tend to be influenced by developments in the major producing and consuming countries mentioned above. Much of the fertiliser imported by South Africa was used in summer grain and oilseed production. Fertiliser constituted about 35% of grain farmers’ input costs and a substantial share in other agricultural commodities and crops.
Moreover, the higher fuel prices also remained a challenge for farmers, and this was a significant share of the production costs, Agbiz said.
For example, fuel accounts for 11% of South Africa’s grain production costs. The majority of it was used during planting and harvesting time. This was the planting period for summer grain and oilseeds, while the winter grain farmers would also start harvesting in the coming months.
“What’s more, the agribusinesses that are focused on logistics matters directly involved in transporting their produce will also feel the impact of higher fuel prices. For example, about 80% of South Africa’s grain is transported by road.”
Sihlobo said, however, the higher commodity prices, if sustained at the current levels for some time, could help offset the challenge. For example, on November 3, 2022 yellow and white maize spot prices were up by 46% and 60% from last year, trading around R5 219 and R5 412 per tonne, respectively.
Meanwhile, Tallie Giessing, the chairman of the South African Agricultural Machinery Association (Saama), said October tractor sales of 1 268 units were significantly higher (48%), more than the 856 units sold in October, last year. These sales were the highest monthly sales in the last 40 years.
“With a favourable start to the summer rainfall season and better than expected winter crops, sentiment in the market remains good. This trend in sales should continue in the short term, at least into early 2023. Thereafter, with the inevitable higher equipment prices and input costs, initial predictions are that sales will stabilise. Future commodity prices will also have an important influence on sales,” Giessing said.
BUSINESS REPORT