Winter is a crucial season for South African agriculture, with a few of its key area crops being produced in the course of the chilly months of June, July and August, and maturing after that, with harvesting in December. Preparation of the land for winter crops begins in April, which can also be the identical time harvesting of the summer season crops begins.
Farmers within the Western and Northern Cape, Free State, Limpopo and different winter crop rising areas are making preparations for rising winter wheat, canola, barley and oats.
All the nation’s wheat manufacturing takes place in the course of the winter months, making the winter season an essential contributor to the nation’s wheat wants. South Africa produces roughly 60% of its wheat necessities and imports the steadiness. It additionally produces, on common, about 90% of its barley annual consumption. Home manufacturing of oats is about 64% of annual consumption. The nation is self-sufficient in canola manufacturing. Barley, oats and canola are all winter crops.
This yr, the outlook for winter crops is clouded by a tough working surroundings, particularly the areas which are underneath irrigation.
The 2 largest headwinds are energy cuts and greenback power. However, there are additionally positives which ought to take the stress off meals worth rises which have hit customers onerous. These positives embody a fall in the price of inputs, like fertiliser and agrochemicals, in addition to good harvests from the summer season season simply ending.
The primary contributing issue is the rise in recurring energy cuts which can have an effect on irrigation. South Africa’s agriculture has by no means confronted a interval of energy cuts as extreme as the present ones.
The agricultural sector basically is closely reliant on sustainable power. For instance, latest work by the Bureau for Meals and Agricultural Coverage (BFAP) reveals that roughly a 3rd of South Africa’s farming earnings is immediately depending on irrigation. This reveals that disruptions in energy provide typically places in danger a substantive share of the South African agricultural fortunes.
Of all South Africa’s area crops, wheat has the most important manufacturing – about half – underneath irrigation. Of the opposite key area crops, about 15% of soybeans, 20% of maize and 34% of sugar manufacturing are underneath irrigation.
The potential disruption of irrigation would result in poor yields, and in the end a poor harvest. Such an eventuality would result in a rise in wheat imports.
Trade role-players and the federal government are alert to the issue and are monitoring the affect intently via a ministerial activity crew. As well as, Eskom, the ability monopoly, together with the federal government, are exploring prospects of decreasing energy cuts that are anticipated to spike in the course of the winter when demand often rises.
The second headwind is that South African farmers haven’t benefited totally from the decline over the previous yr within the US greenback costs of a few of their key inputs similar to agrochemicals. That is due to the weakening of the South African rand in opposition to the greenback, shaving off a few of the advantages of the worth decline in US greenback phrases.
Thirdly, farmers are experiencing decrease commodity costs in contrast with final yr. However a drop in enter costs is offering a essential monetary cushion.
There are positives
On the plus aspect, the realm plantings for all South Africa’s main crops are anticipated to be above the five-year common space. That is in accordance with Crop Estimates Committee, a authorities and business physique that screens crop manufacturing.
Secondly, enter costs have come off from final yr’s highs. For instance, in February 2023, important agrochemicals similar to glyphosate, acetochlor, and atrazine have been down in rand phrases by 32%, 18%, and a pair of%, respectively in comparison with February 2022. These worth declines have continued via to March 2023.
These declines would have been greater had the South African Rand not weakened in opposition to the US greenback over the identical interval. That’s as a result of in US greenback phrases, the costs of the exact same agrochemicals are down by 30% from February 2022. Costs of pesticides and fungicides have additionally declined notably from final yr’s ranges.
Additionally price noting is that in February 2023, important fertilisers similar to ammonia, urea, di-ammonium phosphate and potassium chloride have been down 6%, 36%, 28% and 14% in rand phrases, respectively. Once more, in US greenback phrases, the worth decline was extra notable, which speaks to the affect of the comparatively weaker South African rand on imported merchandise.
These worth modifications in inputs are important as they affect huge elements of the grain enter prices. For instance, fertiliser accounts for a 3rd of grain farmers’ enter prices, whereas different agrochemicals account for roughly 13%.
A 3rd constructive issue is that the climate circumstances for the winter crops additionally stay constructive. In its Seasonal Local weather Watch replace revealed on 03 April 2023, the South African Climate Service famous that the winter crop rising areas of South Africa will obtain rains.
A fourth constructive issue is that the summer season crops, that are nearing the harvest course of, are in fairly good situation. I typically count on an ample harvest in most summer season crops, which is aligned with the view of the Crop Estimates Committee.
From a client perspective, developments are broadly constructive and bode properly for some moderation in client meals worth inflation within the second half of the yr, when the decline in commodity costs may start to filter into the retail costs.
The one main threat is electrical energy stability. That is as a lot a threat for farmers as it’s for customers.
Nevertheless, I’m hopeful that the federal government’s interventions, such because the load curtailment and diesel rebate, to restrict the injury of the electrical energy disaster to meals manufacturing will assist.
If the federal government’s proposed interventions assist throughout irrigation intervals – afternoons and evenings – South Africans can count on a beneficial winter season. The discount in energy cuts can even be significantly helpful for meals processors.