Farmers reducing planting? Not so fast | Fin24

Farmers reducing planting? Not so fast

Oct 27 2018 18:00
Wandile Sihlobo

On October 11, I wrote an article in Business Day challenging the view which suggested that 'farmers might reduce planting', possibly due to uncertainty caused by land reform.

At the time, I used South African Agricultural Machinery Association data which indicated that in the first nine months of the year, SA tractor sales amounted to 5 001 units, up 7% from the corresponding period in 2017, as a basis of my argument.

On October 25, the South African Crop Estimate Committee provided further tentative evidence indicating that local farmers intended to increase the area plantings for summer grains and oilseeds by 5% to 4,03 million hectares in total from the 2017/18 production season.

Maize and soybeans are among the crops set to record a notable uptick in plantings, whilst sunflower seed plantings could decline marginally.

One way of explaining this farmer optimism are the favourable commodity prices. Yellow and white maize prices are up by more than 20% from levels seen in October 2017. In terms of soybeans, the growing demand from the animal feed industry is the source of optimism.

To further refute the claims of reduced plantings, between May and August this year SA farmers planted 508 350 hectares of winter wheat, up 3% year on year, and 119 000 hectares of barley, up 30% year on year. There is also fairly good activity in other field crops, horticulture and the livestock sector.

With numbers like these, it was, from the onset, clearly inaccurate to state that "South African farmers have reduced plantings".

Encouraging barometer

This is not to suggest that all is rosy in the South African agricultural sector. In September the Agbiz/IDC agribusiness confidence index fell below the 50 neutral mark to 46 index points, suggesting that agribusinesses are somewhat downbeat about business conditions in the country.

The root cause of the pessimism was the lingering uncertainty around land reform policy and weak economic growth, among other issues.

The recent 'intentions of farmers to plant' and tractor sales data are therefore an encouraging barometer of the activity on the ground and the investment trajectory in the SA agricultural sector.

Of equal importance is the fact that even though the recent tractor sales and intentions to plant data paint a fairly optimistic picture about activity in the sector, the decline in confidence remains a concern.

As the Agricultural Business Chamber pointed out in its official statement in September, "the deterioration in confidence could potentially curtail investment and long-run growth prospects and gains in the agricultural sector".

In conclusion, I have cautioned about the medium-term risk of a possible El Niño event later in the summer. Aside from land reform policy developments, this will be a key determinant of whether South Africa achieves a good harvest or its crops wither. I am slightly at ease as weather forecasters suggest that the weather event could be later in the season, and also be weak. We shall see!

Wandile Sihlobois head of agribusiness research at the Agricultural Business Chamber (Agbiz). Twitter: @WandileSihlobo

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