Business Maverick

Business Maverick

Optimism takes root: SA agribusiness confidence shoots up in Q3

The resilience of global agriculture will continue to be tested as the pandemic impacts both the supply-side and demand-side of the world economy, say the writers. farming sa 01

Agriculture has been one of the few bright spots in the South African economy and that is now feeding into business confidence, which in turn is key for future investment decisions. 

Agbiz/IDC Agribusiness Confidence Index (ACI) had a nice rebound in the third quarter (Q3) of 2020, rising to 51 from 39 in Q2, the Agricultural Business Chamber of South Africa (Agbiz) said on Monday, 14 September. For the ACI, like most confidence indices, 50 is the neutral mark, so it is back in positive territory. 

Pointedly, agriculture was the only sector of the economy to expand during the Q2 meltdown which saw the economy contract 51% on an annualised basis and by over 16% compared to the quarter that came before. While the other sectors that comprise GDP were wilting, agriculture, forestry and fishing grew at a brisk rate of 15.1%.

“The underpinning driver is large outputs in the 2019/20 production year, coupled with higher commodity prices,” Agbiz said in a statement. So production and prices are both rising. That combo is sure to put a smile on a farmer’s face. South Africa’s maize harvest for example is estimated to be almost 40% higher this year than last at over 15.5 million tonnes. Meanwhile, white maize futures have risen around 38% since the start of June to over R3,200 a tonne, a reflection of 

The ACI is comprised of 10 subindices. The one measuring capital investments confidence rose six points to 44, which suggests that farmers are more prepared to invest in productive capacity. 

“The monthly sales of movable assets such as tractors and combine harvesters have been fairly robust of late, at levels higher than 2019 since June 2020,” Agbiz noted. 

“The subindex measuring the volume of exports sentiment improved by 19 points from the second quarter of 2020 to 55 in the third quarter. This too is supported by large agricultural output, which combined with the weaker domestic currency, have led to a notable uptick in exports of agricultural products over the past few months,” it said. 

And “confidence regarding general agricultural conditions improved by 27 points to 79 in the third quarter, which is the highest level since the second quarter of 2014, indicating a good agricultural season.” This one is in part weather-driven and the outlook on this front is favourable. 

The sun it must be said has not shone on all sub-sectors on the industry. The wine and tobacco sectors are suffering a hangover from the prohibition on the sale of alcohol and smoking products that was in place for much of the harder lockdown. The game farming industry was also hit by restrictions on travel that prevented hunters and other outdoor enthusiasts from spending money at such venues. And uncertainties still cloud policies around land reform. 

But for now, the sector is one of the rare success stories to emerge from the catastrophe that is the South African economy. And while hunger and poverty are on the rise, South Africa is still able to feed itself. With spring in full swing, expect more green shoots from the agricultural sector. DM/BM  


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