Wandile Sihlobo | Agriculture took a nosedive in the third quarter, but it's likely just a blip

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Wandile Sihlobo
Wandile Sihlobo

Before disappointing data on agriculture's performance in the third quarter, the prevailing view was that the sector was a shining light in SA. But there's no need to be discouraged yet, says Wandile Sihlobo.

The third quarter agricultural economic performance data surprised many people. Before its release, the prevailing view was that agriculture was a shining light. But the gross value-added data went against the grain and showed a 13.6% quarter-on-quarter (seasonally adjusted) contraction in the third quarter of this year.

Should this change our view of the sector's outlook? No.

The recent decline is understandable as the year's third quarter is a relatively quiet period in agriculture, with much of the harvest activity distributed in other quarters of the year. However, the surprising observation was that agriculture was down -7.2 from the third quarter of 2020.  

This quarterly downswing was also reflected in the recent agricultural jobs data, which fell by 4% quarter-on-quarter in the year's third quarter - although annual job performance was positive, up 3% from the third quarter of 2020.

What is worth noting is that the quarterly agriculture gross value-added data tend to be volatile. At the Agricultural Business Chamber of SA (Agbiz), we are still confident of full-year growth in this sector. We expect the final quarter of the year figures to show a strong rebound, which will potentially lead to positive performance for 2021.

Our colleagues at the Bureau for Food and Agricultural Policy (BFAP) forecast South Africa's agricultural growth for 2021 at 7.6% y/y (following solid growth of 13.4% y/y in 2020). This far surpasses our initial projection of 6.0% for the year.

This optimism is rooted in favourable weather conditions, which boosted crop yields and improved grazing veld, coupled with increased area plantings for crops in 2020/21. For example, the primary grains such as maize and soybeans saw production reaching 16.2 and 1.9 million tonnes. This is the second-largest harvest in maize and a record harvest in soybeans. Other field crops also generated large yields in 2020/21 compared with the previous year.

Within the horticulture subsector, the South African Wine Industry Information and Systems forecast the 2021 wine grape crop at 1,5 million tonnes, 9,0% more than the 2020 harvest.  Thanks to a good harvest, the Citrus Growers' Association reported a record export of 162 million cartons in 2021, up by 19 million from 2020. A notable 9% annual increase in apple and pear exports was also due to a large domestic harvest.

The livestock sector was disadvantaged by various challenges this year, including biosecurity challenges such as foot-and-mouth disease outbreaks and high feed costs. Still, the subsector is holding relatively well.

Overall, the poor performance in South Africa's agricultural economy is likely a temporary blip.

Wandile Sihlobo is an agricultural economist. He is on Twitter, @WandileSihlobo and blogs at Agricultural Economics Today. Views are his own.

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