Western Cape drought erodes SA status as wheat importer

South Africa is traditionally a net importer of wheat, but the Western Cape drought, which led to a decline in domestic wheat production, resulted in an increase in wheat imports to 1.9 million tonnes – the second-highest level on record, according to Wandile Sihlobo, head of agribusiness research at Agbiz.

In the latest Agbiz newsletter, Sihlobo says a notable share of the wheat imports was in the first quarter of 2018.

Although the trade impact of the severe drought in the Western Cape was muted in the first quarter, in his view, it will be felt in the coming quarters, as the 2017/2018 table grape production and major fruit production declined by double digits year-on-year (y/y).

However, he points out that at this stage it is too early to say precisely how big this impact is likely to be.

Sihlobo says research from the University of Cape Town shows Western Cape rainfall last year was the lowest in more than 80 years. In contrast, in 2017 SA's agricultural exports surpassed $10bn (about R134bn) for the first time. It was boosted by growth in exports of edible fruits, beverages, spirits, vegetables, grains and other farm products.

The $10bn figure represented a 15% y/y increase from $8.7bn. Africa and Europe were the largest destinations for SA's agricultural exports, collectively absorbing 67% of total exports last year in value terms. Asia was also an important market, taking 24%. The Americas and the rest of the world accounted for 5% and 4%, respectively.

In the same period, SA agricultural imports increased by 5% y/y, reaching $6.7bn, particularly driven by wheat and rice.

According to Sihlobo, the first quarter of 2018 started on a positive footing, with agricultural exports amounting to $2.3bn, up 8% from the corresponding period in 2017, according to data from Trade Map. This was boosted by increased sales of edible fruits, beverages and spirits, vegetables, wool, sugar and cereals.

Agricultural imports in the first quarter of 2018 were worth $1.8bn, up 2% from the corresponding period in 2017. This was driven by a notable uptick in grain imports, particularly wheat and rice.

"Perhaps good production in other fruit-producing provinces such as Limpopo could slightly offset the losses and keep the SA agricultural trade balance in positive territory in the coming quarters," adds Sihlobo.

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