If current economic and global shocks do not taper off, South Africa’s agricultural sector could be in for slower growth. This, at a time when farmer profits in the animal and field crop sectors are already under immense pressure and expected to deteriorate. This was revealed by Dr Tracy Davids, commodity markets and foresight manager at the Bureau for Food and Agricultural Policy (BFAP).
Davids was giving an overview of BFAP’s latest agriculture outlook for 2022 to 2031 on Wednesday, 17 August 2022.
Starting off on a positive note, she said that in the past two years the agricultural sector managed to thrive amid turbulent times. The sector recorded 25% growth in 2021 when compared to 2019. Despite this growth, BFAP has predicted tough times ahead for both livestock and field crop farmers.
“We still foresee growth this year, although slower than what we’ve seen in the past two years. Much of this growth [was] supported by the field crop sector. We do, however, see a contraction for the next two years and a conservative growth path after that.”
BFAP’s cautious outlook is largely due to current energy and fertiliser costs, shipping delays and costs, world price normalisation, as well as domestic and international spending power. These factors, Davids said, will have a considerable impact on the growth of the sector going forward.
“The higher input costs environment has added considerably to producers’ risks in an already volatile environment. This also has cash flow implications, particularly for smaller producers, and productivity will be critical.”
Crops: Farmers must ensure optimal productivity
While field crops have been a star performer for the past three years, thanks to a rare combination of strong yields and prices supported by global levels, BFAP predicts a sharp declines in revenue for field crop farmers.
“Within the field crop sector in particular, we see margins closing over the next few years and it will remain critical to remain on top of the productivity curve. Research and development, but also recent investment into top technology and precision equipment, will support us as we aim to do that,” Davids said.
Meanwhile, BFAP has also predicted a drop in profitability for summer crops on dryland and irrigation in the next two years. A steady increase is expected from 2024 onwards.
What about the livestock sector?
According to Davids, the animal sector has grown fairly consistently, although the last few years’ trend have not been that steep amid many animal disease challenges.
“Currently, revenue is expected to increase but input costs are a major factor. High grain prices are spilling over into animal feed,” Davids said.
Animal health management, she stressed, must improve. “Animal health is really critical to enable productivity growth and export opportunities.”
In his opening statement, Mooketsa Ramasodi, director-general for the department of agriculture, land reform and rural development, said that improving South Africa’s animal health strategy required an all-hands-on-deck approach.
“Biosecurity is a shared responsibility,” he said. “It is everyone’s responsibility. Everyone needs to attend to their responsibility so that we can protect the economy, the environment and the community from these threats.”
Pointing to Mzansi’s active battle with foot-and-mouth disease and the current transportation ban of cattle for 21 days, Ramasodi said that the move, although viewed as a drastic decision, was necessary.
“We need to preserve our industries and ensure that the plans that we have entrenched for the growth of our sector remain on a critical path of success.
“In implementing measures, although very difficult, it is necessary if we are to achieve the growth and transformation envisioned in the red meat industry, or the wool industry that is currently facing the very same issue.”
Sector must act decisively
Ending off, Ramasodi said he had no doubt that the 2022-2031 BFAP outlook would continue to influence policy and investment decisions in the country. He implored the sector to utilise BFAP’s baseline to continuously reimagine a sustainable agricultural and agro-processing sector.
Meanwhile, Davids pointed out that their outlook was generated amid great uncertainty, much of which comes from global factors. How those global factors play out, will have a significant impact on how the outlooks play out in the end.
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