South Africa's agriculture sector has shown remarkable resilience in spite of disruptions in both the global and the domestic market and input environments.
Although the industry had to deal with a combination of challenges, most sub-sectors in the agricultural and 0 industries showed extreme resilience, according to the Bureau for Food and Agricultural Policy's (BFAP) baseline Agricultural Outlook 2023/32. The positive trends are mainly spillovers from the momentum in the grain and oilseed sectors over the past three years, BFAP stated in the report.
The past three years have been among the most volatile to date in global grain and oilseed markets. The FAO Food Price Index serves as a measure of underlying agricultural commodity prices globally, and in 2022 reached unprecedented levels as Russia's invasion of Ukraine added uncertainty at a time when supply was already constrained.
While global stock levels have been trending downwards amid poor weather conditions, the past three years have been among the best on record in South Africa's summer crop sector, due to the rare combination of large domestic crops and high prices, which emanated from international dynamics.
Lately global prices have, however, moved into a declining cycle and this is expected to spill over into South African markets. This, according to the BFAP report, implies that margins will become tighter over the next few years, requiring continuous innovation to remain on top of the productivity curve.
At the same time, the cost of agricultural inputs remain elevated resulting in reduced producer margins.
Added to the El Niño predictions of drier and hotter spells over the coming production season, the energy crisis in particular will provide significant challenges across the value chain, which constrains competitiveness in the sector and has added significantly to capital and operational expenditure.
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