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Agriculture contributes to economic growth!- South Africa

The household expenditure for consumers increased and this support the market for domestic agricultural products. Equally important for primary producers is the fact that the secondary industrial sector’s growth increased by 4,5% in the third quarter.

The total quarterly nominal GDP growth for South Africa reached 2,2%. Agriculture recovered after the dismal performance due to the previous season’s drought and other contributing factors including biosecurity issues and a strong Rand. Second to the manufacturing industry (7,5%) agriculture recovered by a growth rate of 6,5%. Policy uncertainty and recent announcements regarding land policy and the insufficient rainfall during the planting of grain and oilseed crops weighs on the sector. Food security in terms of our capacity to provide in our own needs and not to be dependent on food imports needs to be a priority. A country that exports food ensures affordable food for the population. For this, we need to improve our logistic infrastructure, access to markets and the latest on farm technology. For now, it needs to rain sufficiently to get the crop planted. Certain production areas in the summer rainfall region received up to now less rainfall than during the very dry 2015/16 production season.

Highlights

The latest GDP figures for the 3rd quarter shows an increase in consumer spending which is positive for livestock product prices going into the festive season.

Livestock

The total supply of US beef, pork, chicken and turkey in cold storage at the end of November was 2.179 billion pounds, 4.9 per cent higher than a year ago and 10.2 per cent higher than the five year average. However overly negative on price increase, the drawdown in US meat stocks during November was 10.7 per cent compared to 9.3 per cent average of the last five years. This underpins global meat prices.

The lower fuel price, festive season and seasonal increase in demand for imported beef provides underlying support for local beef prices. However, uncertain weather conditions for the new season and higher grain and oilseed prices can weigh on future weaner calf prices.

The increased demand for mutton during the festive season are seasonal and provide strong underlying support for local Class A prices.

Pork prices are supported by price increases in poultry, beef and mutton during the festive season and lower fuel prices. The seasonal demand for imported pork shoulders and ribs support prices.

The bullish underlying factors provide support for further price increases for especially whole fresh and frozen birds. IQF price increases are limited by the strong Rand supporting imports. ABSA AGRI TRENDS 

Wessel Lemmer


Senior Agricultural Economists, Absa group


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