Against the backdrop of a contracting overall economy with South Africa’s gross domestic product (GDP) for 2020 forecast to decline by over 8% year-on-year (y/y), there is a silver lining in the agricultural sector outcomes for the next season.
Following two consecutive quarters of stellar performance by the agriculture sector with 28.6% and 15% quarter-on-quarter (q/q) seasonally adjusted annualised growth, we expect a similar feat in the remaining quarters of 2020 due to a combination of a good crop harvest, strong agriculture exports and the unseasonably high commodity prices.
Broad summary of the agriculture outlook
- Agriculture growth momentum will continue into 2021, contributing positively to overall SA GDP outcomes
- Favourable production conditions on the back of a La Nina weather pattern will spur farmers to plant more area under summer crops and improve grazing for livestock.
- Supplies of grain, oilseeds and horticulture crops will be adequate for the year ahead.
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- Surplus production of agriculture commodities will tame food inflation and contribute towards a benign overall consumer inflation in 2021.
- The implications are for interest rates to remain at record lows for a bit longer, benefiting consumers.
- Strong export drive to continue due to the increased availability of product and high international demand.
- Positive feed input cost outlook for the livestock sector as higher grain and oilseed output will eventually limit further upside for raw inputs.
- Consumer consumption trends are expected to continue to change with more emphasis on safety, reliability of quality and supply, and ethics in food production systems.
- Pressure on disposable incomes will lift grain consumption which forms part of basic products and staple food.
Written by Paul Makube, Senior Agricultural Economist at FNB
Original article on Farmers Review Africa