Insurance providers in the crop and livestock industry are assessing the situation on farms across the country, preparing for considerable claims as a result of losses from recent weather events, including El Niño and last week’s cold front.
Brendan Jacobs, Standard Bank South Africa’s head of agribusiness for business and commercial banking, told Business Times the bank continued to assess the extent of the impact on the basis of several factors. For example, the 2024 drought had raised concerns about the food inflation outlook for 2024.
Concerns were primarily based on the higher price of white maize and its products, while other products in the food basket might display moderate or largely sideways price movements this year.
He said South Africa was enjoying a white maize price rally, mainly because white maize was “practically only available in South Africa”, with the other main producer, Mexico, providing largely for its own market.
“Hence, the tighter domestic maize market should generally support maize prices this year, but they should peak in December 2024, as the planting of an expectedly larger crop for the next season comes into full swing.”
Jacobs said Standard Bank would continue to manage the risks associated with climatic shocks while it reminded clients of their options when it came to dealing with agricultural risks.
The recent occurrence of extreme climatic events — including flooding, cold snaps, excessive wind, and fires — has had a significant impact on agricultural production nationwide, leading to substantial damage to crops, livestock and infrastructure
— John Hudson, Nedbank Commercial Banking
“They can diversify or adjust the financial structure of the farm — the mix of debt and equity capital. Farm businesses also have access to various tools, such as insurance and hedging, that can help reduce their risks.”
John Hudson, Nedbank Commercial Banking’s head of agriculture, said that, while a comprehensive assessment of the full impact of the recent adverse weather events would require several weeks, he expected disruptions in farming businesses and potential inconsistencies in the short-term food supply.
“The recent occurrence of extreme climatic events — including flooding, cold snaps, excessive wind, and fires — has had a significant impact on agricultural production nationwide, leading to substantial damage to crops, livestock and infrastructure. Furthermore, the outbreak of foot-and-mouth disease in the Eastern Cape has compounded concerns regarding its implications for the agricultural sector and the country at large.”
While the impact appeared to be limited to a particular region, the financial repercussions were likely to be considerable.
Daniel Stevens, Santam’s head of agriculture crop, said South Africa had received widespread rains late last year and early this year. This was unusual in an El Niño season, which would typically start with drier weather conditions.
“Those good early-season rains led us to believe the country would have a decent harvest in the 2023/24 production season. But this view changed as the season progressed. The crucial production months of February and March were very dry and hot, resulting in yield losses in field crops such as maize and oilseeds.”
Santam covers the risk of drought under multi-peril crop insurance products, but on a small scale, as it is less than 2% of their total business. This season’s drought resulted in an increase in drought claims of R35m.
Wéhann Smith, Kuda’s CEO, said farmers had a horrendous couple of weeks in the Western Cape, with severe changes in weather patterns. He said this had been compounded by a lack of awareness among farmers, which had led to underinsurance. Kuda offers insurance for game animals and livestock.
“It is a challenging time to be a farmer right now. What is true today is not necessarily what was true 20 years ago. Farmers need to be extremely agile and adjust with the times. Severe cold fronts and droughts add to a number of challenges, such as reduced water availability and food security challenges, and these all affect the mortality rate of animals.”
The founder of Partnership for Green Future, Rehema Peters, said the region was witnessing first-hand the devastating effects of climate change, from deadly floods and erratic rainfall to prolonged droughts that devastate crops and livelihoods.
“Despite global treaties like the Paris Agreement, there’s a glaring gap between promises made and the real-life struggles of those most affected. Climate funding often misses the mark, neglecting projects that could directly benefit vulnerable communities.”
She called for actionable policies that prioritised clean-energy solutions, including tax incentives and local manufacturing of renewable technologies, to secure a sustainable future.
