[TOP STORY] Good rains augur well for SA’s 2023 agriculture season

SIMON BROWN: I’m chatting now with Wandile Sihlobo. He is the chief economist at the Agricultural Business Chamber of South Africa, Agbiz. Wandile, I appreciate the early morning time, as always. I was travelling over the holidays. I was down in the Eastern Free State, KZN Midlands, the south coast of KZN. Everywhere I went there was water. Dams that I’ve been seeing my entire life were fuller than I’ve ever seen. Is that a general trend that we’ve had, another year? I think this would make it the third year of really good rains around the country.

WANDILE SIHLOBO: Simon, happy new year. This is about the fourth year of really high rainfall across South Africa. I think this year again we’ve probably received more than we were bargaining for in some of the farming areas, to the extent that I think this is going to be roughly a month behind their typical period.

But still, it’s looking broadly relatively [good] in some areas, even though [there were] sections where farmers had to replant. In some they had to face delays in planting because of these excessively wet conditions.

SIMON BROWN: Yes. Too much rain is perhaps not always a good thing. It’s nice to fill the dams, but it’s tough if you are a farmer. I would imagine that then means we’re going to have good crop yields again. Are we still seeing good prices? We’ve chatted around getting some agri commodities out of Ukraine. That seems to be happening, sort of, but prices from the few agris that I check – and I’m thinking particularly of the maize and the wheat –still seem fairly elevated.

WANDILE SIHLOBO: Yes. Prices are still fairly elevated, Simon, even though the grain is coming out of Ukraine. But I think the risks are still there because everyone is watching because they don’t know what will happen next – will Russia still allow that deal to continue, and all of those things. So that’s the area that we’re watching.

But we’re also watching in South America where in Argentina it’s fairly dry. This week, for example, we saw soybean prices rising, largely pushed up by what’s happening in South America. I think broadly the commodity prices are still fairly elevated from levels that you would typically see, but will come off the higher levels that we saw right after the invasion of the Ukraine.

SIMON BROWN: So off those highs, but still elevated. What about input costs? We have chatted on fertiliser prices [and] diesel, which is a big input cost. It has of course come down, but still remains elevated. Farmers are perhaps getting more revenue, but paying more to get that extra revenue. A slight squeeze on margins, maybe?

WANDILE SIHLOBO: That was a major challenge this time around, because when farmers planted fertiliser prices were still up, plus 30% [on a] year-on-year basis. The same thing with the agrochemicals. And of course fuel prices were also up, elevated for some time. I think as the farmers were planning they had to acquire all of their inputs at those higher levels. Right now, though, if you look at the fertiliser prices, they are slowly coming down from the levels that we’ve seen over the past few months. But I think right now most of the colleagues have already planted; they planted with the higher input costs of the past few months. So there’s going to be that squeeze on the margins.

But I think the most positive thing is that the South African farmers went out and planted. In fact, if you were to look at the planting intentions data, they’d indicated that they could actually increase the area of planting by 1% compared to what [they] had planted last year – looking at somewhere around 4.3 million hectares or so. So that for me was encouraging, that folks are still planting; they’re not holding back because of these higher input costs.

SIMON BROWN: In my travels I saw farmers planting fields which patently hadn’t been planted perhaps in a couple of years.

What about load shedding? I mean, we think of a farmer and we think of someone out there in their tractor, and maybe in agriculture, in grains and the like power supply may be less of an issue. I imagine in livestock, particularly sorter……4:25 houses and the like, it is more important. How much does stage four, stage six, just this inconsistent power impact and challenge farming?

WANDILE SIHLOBO: At the moment Simon, we are at a stage where are we going to be doing a full survey to understand the full impact across subsectors of agriculture, because this is a major challenge for the sector. You see it in the poultry sector. It’s an issue for colleagues who have to irrigate in the horticulture [sector], but also in the grains. Remember, some of them are operating silos and you do need power in some of the facilities there. So load shedding is a major headache for everyone in the food sector.

SIMON BROWN: A last question. We had some issues towards the end of last year around fruit exports out of the Western Cape into Europe. Those were the sudden restrictions from the European Union. And [there were] some other challenges, particularly around Transnet. Has that [situation] resolved itself, or are fruit exporters still finding some challenges?

WANDILE SIHLOBO: That has been temporarily resolved.

SIMON BROWN: We’ll leave that there. That was Wandile Sihlobo, chief economist at Agbiz. Wandile, as always, I appreciate the early morning insights.