While memories of ‘Day Zero’ warnings in late 2017 and early 2018 might be fading in some Cape Town residents’ minds, since weather conditions have improved in 2018, the effects of the severe water shortages are still vivid in some farming communities.
This is specifically the case as agricultural production has not fully recovered from the damage of the 2017 drought. The slow recovery has been evident in, amongst other factors, a poor harvest in wine grapes and some horticultural products this year and in 2018. This occurred despite the recent improvement in rainfall. The province will have to receive average or above-average rainfall for a few more seasons in order for orchards to bounce back to pre-2017 levels.
The recent rainfall across the Western Cape set a good basis for such potential improvement. In the week of 22 July 2019, the provincial dam levels averaged 50%, which is roughly in line with the corresponding week last year. Given that the rains continued for the better part of last week, we suspect that the dam levels data update which will be released later today will show further improvement. This would be a welcome development. That said, we recognise that some areas within the province received much higher rainfall than others, and thus, dam levels vary across regions.
The rainfall will not only benefit the horticulture fields; winter grains and oilseeds will also benefit from improved moisture. The Western Cape accounts for 60% of South Africa’s winter wheat plantings, which means a potential improvement in the province’s winter crop could have wider positive spillover to the country’s wheat fortunes. Moreover, the Western Cape has lifted its wheat plantings by 2% from the area planted in 2018. This is a fairly small improvement and suggests that farmers remain cautious of erratic weather conditions. The province is also a major producer of barley, canola, oats, which all stand to benefit from more sustained improvement in weather conditions. Encouragingly, feedback from farmers following the recent rainfall in the province has been positive with winter crops reportedly in good shape.
There is, nonetheless, a need for more rainfall over the coming months in order to sustain the winter crops in good growing condition, which could then lead to higher yields. To this end, there is still some level of uncertainty. On 28 June 2019, the South African Weather Service cautioned of a high likelihood of dryness between July and September 2019. Seeing that July 2019 weather events proved the agency’s estimates wrong, and yielded rainfall in July, we start the month of August this week with the hope of a similar scenario.
The winter crops will need moisture at least until the end of September, which is when all crops would have matured. Also, winter crops in the Western Cape are generally rain-fed, hence the need for consistent rainfall, albeit the dams have been in better shape. But the horticulture fields will need moisture throughout the year, with crucial months for next season’s harvest size being August and September, specifically for wine grapes.
The rainfall over the Western Cape and thereafter agricultural activities will not only be beneficial for farmers and agribusinesses operating in the province, but it will also have positive spin-offs on the agricultural labour market and broader agricultural economy. Over the past five years, the Western Cape has consistently been the leading employer in primary agriculture. The province accounted for 23% of the 829 000 jobs over this period. From an agricultural economy perspective, this makes the Western Cape the second biggest contributor after KwaZulu-Natal.
But more importantly, developments in the Western Cape serve as an important reminder of the urgency of thinking about strategies to shield farming activity in a world where we will increasingly have to contend with the unpredictable effects of climate change.
Aside from the Western Cape’s developments
South Africa’s maize supplies for the 2018/19 production year are shaping up better than we previously feared at the beginning of the year when dryness in the western parts of the country led to delayed plantings. There is now clear evidence that South Africa will remain a net exporter of maize in the 2019/20 marketing year. We explained this in the attached file.
In terms of data, this is a relatively quiet week on the domestic agricultural data front. There are three important data releases;
On Tuesday, Stats SA will release the Quarterly Labour Force Survey for the second quarter of 2019. To recap; South Africa’s primary agricultural employment fell by 1% year-on-year in the first quarter of 2019 to 837 000. The subsectors that faced a notable reduction were field crops, livestock and forestry, partly due to a reduction in area plantings on the back of unfavourable weather conditions in the case of field crops.
The numbers of the second quarter of 2019 might remain at levels lower than what we saw in the second quarter of 2018 due to an expected reduction in grains and oilseeds production. However, this dip could be slight as these industries are not as labour-intensive as the other subsectors of South Africa’s agriculture. Moreover, we suspect that the expected annual decline in South Africa’s wine grapes production could also have led to reduced activity in the vineyards.
On Wednesday, SAGIS will release the grain producer deliveries data.
On Thursday, we will get the weekly grain trade data for the week of 26 July 2019.
