In these times of higher food prices worldwide, it helps to know what is in store for the next agricultural season. A poor crop would mean food prices remain elevated for some time while a good crop would offer some relief.
The 2021/22 season is drawing to a close and farmers are at the tail end of harvesting maize, sunflower seeds and other grains.
Preliminary insights suggest SA could have another good production season in 2022/23.
However, the weather extremes experienced in the northern hemisphere during their summer could become a reality here too. There have been heatwaves in the UK, Spain, the US, China and other countries.
Still, the three critical indicators we have thus far — tractor sales, the weather forecast for the next five months, and grains and oilseed prices — paint a positive picture.
SA’s tractor sales for the first half of 2022 were up 18% year-on-year, at 4,133. Combine harvester sales amounted to 213, up by 37%. Farmers’ improved finances on the back of a solid production performance in the past two years when commodity prices — specifically for grains and oilseeds — were elevated, are the primary driver of the sales.
The generally positive sentiment is reflected in the Agbiz/IDC Agribusiness Confidence Index, which was at 60 points in the second quarter — though it had deteriorated since the start of the year as rising input costs, biosecurity concerns, hikes in interest rates and intensified geopolitical risks weighed on sentiment.
Global price movements and fuel prices remain the key upside risks
The interruption of citrus exports to the EU, the temporary closure of wool exports to China and foot-and-mouth disease in the cattle industry are also problems farmers have to contend with.
The weather outlook for the upcoming production season shows encouraging signs. Last week, the Australian Bureau of Meteorology said: “The ENSO Outlook continues at La Niña WATCH ... [which] means there is around a 50% chance of La Niña forming later in 2022. This is approximately double the normal likelihood.”
The South African Weather Service shared a similar sentiment in its seasonal climate watch for July to November 2022. With that said, the weather conditions require close monitoring after the extreme weather events in the northern hemisphere.
While we expect SA’s maize, soybean and sunflower seed prices to soften somewhat in the second half of the year, these are still at attractive levels which should encourage farmers to maintain sizeable plantings this season.
We will only know the farmers’ intentions for summer crops on October 26, when SA’s crop estimates committee is scheduled to release the data. We will have more data about the upcoming season when the Bureau for Food and Agricultural Policy (BFAP) releases the 2022 Baseline on August 17.
The outlook from analysts is encouraging. Preliminary estimates from the US department of agriculture forecast SA’s 2022/23 maize area plantings at 2,6-million hectares — above the 10-year average of 2,5-million. The yield estimate is forecast at 5,7 tonnes per hectare because of anticipated favourable weather conditions.
This means there is a chance the maize harvest could be 14,8-million tonnes, which would be slightly above the 2021/22 harvest. Soybeans, sunflower seed, sorghum, dry beans, horticulture crops and fruits could also have a good season.
SA will need favourable rains, not excessive, primarily between October and February , not only for field crops but for livestock and horticulture. For now, the indications are encouraging.
Against this backdrop, SA's consumer food price inflation could moderate in the second half of the year and remain contained at relatively lower levels in 2023.
Global price movements and fuel prices remain the key upside risks.
• Wandile Sihlobo is chief economist of the Agricultural Business Chamber of SA (Agbiz) and author of Finding Common Ground: Land, Equity and Agriculture.
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