Cape Town - Overall, South Africa is in a comfortable position regarding food production, according to Wandile Sihlobo, head of agribusiness intelligence at Agbiz.
In the latest Agbiz newsletter Sihlobo said the weather prospects for the next season are painting a promising picture, which increases the chances of another good harvest.
"This essentially means food inflation will remain on a downward trend with key upward risks to monitor in the short-term being the red meat products and weather developments in the Western Cape," he said.
Sihlobo pointed out that this year there was a large summer grain and oilseed harvest of 18.10 million tonnes. This is a 92% annual increase. There was also a rebound in vegetable production.
The maize price has already declined by over 60% from July 2016. This has, however, not yet been fully reflected at retail level due to time lags in the food processing chain, according to Sihlobo.
He said that the most recent updates from international forecasters suggest that the possibility of an El Niño reoccurrence have subsided to levels below 40% from now to February 2018. The probability of having a normal season has increased to levels above 40% and could reach 60% by February 2018.
"This means that South Africa could have a normal production season with average rainfall in 2017/18. This is a good development for the sector, as it eases concerns and allows farmers and food value chain participants to plan properly for the season ahead with some level of certainty," said Sihlobo.
"More importantly, this will also bode well for food inflation for the coming year. In May 2017, the SA Reserve Bank estimated that food inflation could decelerate to 5.5% in 2018 from the forecast 7.7% for this year."
Sihlobo cautioned that it is not all rosy in the agricultural sector.
"The winter crop farmers in the Western Cape had a rocky start to this season characterised by drier weather conditions. For wheat, in particular, the crop is a month and a half behind schedule and continues to be strained by lower soil moisture on the back of lower rainfall," he said.
Dam levels in the Western Cape are also cause for concern.
The Western Cape is the main dryland winter wheat producing region of SA, which means the province’s wheat crop’s survival depends on the amount of rainfall received in a particular season.
"Fortunately, about half of South Africa's wheat is under irrigation in the Northern Cape and Free State provinces, which should cushion potential losses as dam levels in these respective provinces benefited from summer rainfall," said Sihlobo.
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