Despite good rainfalls in the Western Cape, agri-production not yet out of the woods - economists

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Although dam levels in Cape Town are, on average, more than 60% full after a season of good rainfall, additional rain is still necessary to ensure improved harvests, says agricultural economist Wandile Sihlobo.

In a video posted from his Twitter account, Sihlobo commented on the impact of improved rainfall in the Western Cape on winter crops such as wheat, barley and canola. A large portion of winter crops in South Africa are farmed in the Western Cape.

"The crop is looking great at this point, but there is a need for additional rainfall throughout August and September," Sihlobo said. Crops which are "rainfed" - or rely on rain for irrigation - need the additional rainfall to ensure their yields will be good, too, he stressed.

"In the Western Cape we received good rainfall but we are in no way out of the woods," Sihlobo said. Having better yields will have a direct benefit on jobs in the farming sector, he added. 

Global yields

South Africa is a net importer of wheat, and will likely remain so, Sihlobo said. The global market for wheat has improved, with production up 6%, he explained. The increase in wheat supply means the global price of wheat will remain "soft" over the next year, which will be to the benefit of importers like South Africa.

Speaking to Fin24 by phone on Wednesday, Sihlobo said the recent rainfall would not have an immediate effect on food price inflation.

"Expect food price inflation to be subdued, mainly due to the weak passthrough to consumers. The food companies are finding it hard to pass through some of prices because of weak demand," he said.

Paul Makube, senior agricultural economist at FNB Business, commented that the sector is still in recovery mode following the drought, and will only see full recovery in the next few years if current conditions are sustained.

However, he acknowleged that the improved rainfall has positively impacted the growing of annual winter crops, as well as fruits critical for export., meaning the Western Cape agriculture sector will likely see a rebound in its production. "Good production conditions should boost yields thereby ensuring an impressive harvest. The perennial crops, mainly fruit, will continue to recover from the previous drought and also produce a better harvest," Makube said.

As for food inflation, Makube noted that it had been relatively contained due to the good agriculture output.

"However, weather will be critical in the next 10 weeks as it will signal price direction. Delayed rains may result in lower plantings and push prices upwards thereby threatening the current inflation outlook," he said.

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