Farmer and agribusiness confidence in Mzansi’s business landscape is down once again, but the drop in the Agbiz/IDC Agribusiness Confidence Index (ACI) slowed down considerably, compared to the first quarter of the year. By June 2022, the index went down only two points after a 12-point drop in the first quarter of 2022. The score now sits at 60.
According to Agbiz chief economist Wandile Sihlobo the drop in sentiment is due to rising input costs, biosecurity concerns, hikes in interest rates, intensified geopolitical risks, as well as ongoing weakness in municipal service delivery and network industries, among others.
Yet anything over 50 shows that agribusinesses are generally optimistic.
The index comprises ten subdivisions and one of the two sub-indices below 50 points is the sub-index for general economic conditions. This index fell by five points to 43 and reflects uncertainty around geopolitical tensions, inflation concerns, a general slowdown in the global economy, and more domestic events such as load shedding, Agbiz says.
Unsurprisingly, the sub-index for export volumes declined by six points to 71. Agbiz believes it reflects expected lower summer crop and wine grape harvests and livestock export constraints because of the foot-and-mouth disease outbreak, although 71 still indicates robust export conditions.
What is surprising, on the other hand, is the capital investments sub-index, which increased by 6 points to 73. “These are encouraging results at a time when farm input costs are rising and adding pressure on farmers and agribusinesses,” says Sihlobo. He adds that the tractor and combine harvester sales also indicate a positive outlook among farmers.
Other sub-indices
The turnover sub-index is up by seven points to 93, the highest level since the third quarter of 2015, while the net operating income sub-index remained unchanged at 79.
In terms of market share, the index fell by five points to 71. Horticultural, machinery and financial services were mainly the respondents who signalled weaker expectations.
Employment measures increased by five points to 64 as harvesting of both summer crops and various horticulture products pushed up seasonal work.
The general agricultural conditions sub-index fell by six points to 54, possibly because of weather events, but is still well above the neutral mark of 50.
Different to the other subdivisions, a decline in the indicators for debtor provision for bad debt and financing costs is viewed as a positive development. Both the debtor provision and financing cost sub-indices fell: by two and 14 points to 43 and 4, respectively.
This is generally favourable, Sihlobo says, and reflects the tail end of farmers’ financial gains of the last two robust seasons.
Bits of good news
Agbiz says the second-quarter results show that the sector is still on a sound footing but it should not be taken for granted. Risks to the sector’s health include the rising prices of critical inputs, which will pressure farmers and agribusinesses in coming months, along with external global disruptions.
Addressing the local challenges within the country’s own control could, however, have a far more positive impact on the long-term growth of this sector.
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