The South African government and private sector players have embraced a vision of expanding labour-intensive subsectors as part of a broader agricultural development strategy
Such subsectors are mainly horticulture and to a certain extent field crops, which combined accounted for two-thirds of the 880 000 jobs in the third quarter of this year.
What’s more, the top valuable agricultural exports over the past five years were also within these subsectors, as shown in Figure 2 in the attached file. These top-10 exportable agricultural products accounted for a 52% share of the average US$9.5 billion worth of agricultural exports in the period between 2014 and 2018. This underscores the vision of expanding labour-intensive subsectors with a focus on export-led growth.
While on average, not all these subsector agricultural exports have seen an enormous expansion, the majority of them has (Figure 3 in the attached file). The ones that have shown contraction in the value of exports over the observed period have largely been because of a drought-induced decline in local production, most notably in the Western Cape in 2017.
Aside from the aforementioned top-10 products, other agricultural products that are still relatively small in value terms but with higher growth rates of exports are figs, pineapples, avocados, guavas, mangoes, strawberries, raspberries, blackberries, black, white or red currants, gooseberries, and beef. Most importantly, these are also products that are labour-intensive and therefore expanding production would be in line with South Africa’s broad agriculture vision.
Another important observation from the agricultural trade data is that within the top-exportable agricultural products, there are limited value-added products, aside from wine, fruit juices, animal foods, and sugar. In a million possible jobs that were mentioned in chapter six of the National Development Plan, the value-chain or agro-processing was at the core because of the possible job multipliers.
While agro-processing accounts for roughly a third of South Africa’s total manufacturing output, a large share of the output is utilised domestically. This is an area that South Africa should also focus on developing in addition to the labour-intensive agricultural subsectors. Overall, the current trajectory of agricultural production is in line with the broader vision of growing South Africa’s agriculture sector.
Western Cape wheat harvest estimate could be revised down
Over the past few months, South Africa’s Crop Estimates Committee (CEC) has consistently slashed down its estimate of 2019/20 winter wheat harvest from the view painted at the start of the season. The current estimate is now at 1.7 million tonnes, and likely to be revised down further when the CEC releases this month’s update on 26 November 2019.
The downward revision could stem from the Western Cape, who’s harvest is nearly completed and the yields disappointed in various regions of the province. This is because of drier weather conditions between the end of August to September and later rainfall over the past couple of weeks when the crop had already matured. The late rains have not only caused damage in some areas but have also negatively affected grading levels of the crop.
These developments, however, have not been clearly reflected in domestic wheat prices and are unlikely to in the foreseeable future. South Africa is a net importer of wheat and therefore its price levels are influenced by international wheat market conditions.
Currently, there are large wheat supplies in the global market. In its November 2019 update, the United States Department of Agriculture estimated 2019/20 global wheat production at 766 million tonnes, which is 5% higher than the previous season. As a consequence of this, the stocks could increase by 4% y/y to 288 million tonnes. This will essentially keep global wheat prices at relatively lower levels, which is beneficial for consumers in importing countries such as South Africa. Unfortunately, the same cannot be said for farmers.
Data releases this week
We start off today, with the US Department of Agriculture’s US crop conditions data for the week of 25 November 2019. This data should give us a sense of the US crop-growing conditions, and thereafter the potential size of the harvest.
On Tuesday, the CEC will release its 4th production estimates for South Africa’s 2019/20 winter crops, and also final production estimates for 2018/19 summer crops. But our primary focus will be on winter crop for now, specifically wheat. We will turn our attention again to summer crops at the end of January 2020 when the CEC releases the summer crop preliminary planting data.
On Wednesday, the South African Grain Information Service (SAGIS) will release the grain producer deliveries data for the week of 22 November 2019. This covers both summer and winter crops. But we particularly monitor winter wheat data as farmers continue with the harvest process in the Western Cape. In the week of 15 November 2019, about 588 921 tonnes of the expected 1.8 million tonnes of wheat in the 2019/20 season had been delivered to commercial silos.
On Thursday, we will get the weekly grain trade data (wheat and maize), also for the week of 22 November 2019. In brief, maize exports for the 2019/20 marketing year have thus far amounted to 636 779 tonnes, which equates to 58% of the import forecast for this season. At the same time, we expect maize imports of about 450 000 tonnes, all yellow maize, mainly for the coastal provinces of the country. This is up from an estimated 171 500 tonnes in the 2018/19 marketing year. The country has thus far imported 359 057 tonnes of yellow maize.
In terms of wheat, South Africa’s 2019/20 wheat imports could increase by 14% y/y to 1.6 million tonnes because of expected lower domestic harvest on the back of unfavourable weather conditions in the Western Cape. The seventh import consignment of the 2019/20 marketing year was 17 744 tonnes. This placed total imports for the 2019/20 season at 358 794 tonnes, which equates to 22% of the seasonal import forecast.
