"In a period riddled with disruptions in both the global and the domestic environment, the agriculture sector was the most consistent contributor to GDP growth in 2020 and 2021. Over the past 18 months, however, challenges in the global environment have escalated as the war in Ukraine, the energy crisis, and persistently high inflation have threatened to derail the global post-pandemic economic recovery. Risks remain elevated, particularly in light of recent difficulties in renewing the Black Sea Grain Initiative.
Furthermore, South Africa’s agriculture and agro-processing sectors have had to deal with the implications of an animal health system that is threatening to collapse, crumbling road and water infrastructure, congestion at the ports, and a national electricity crisis leading to severe load-shedding and unplanned blackouts. These factors have tested the sector’s resilience to the extreme and, with approximately 50% of revenue dependent on exports, are raising concerns around the sector’s competitiveness.
GRAIN DRAIN
Much of the growth since 2020 has been underpinned by the field crop sector due to the rare combination of near-record harvests and high prices, which were underpinned by global factors. In 2022 however, the sharp increase in input costs constrained GDP growth despite strong revenue performance. Looking forward, prices of the main summer crops will continue to trade at export parity in the near term, which implies that they will follow the global downward trend.
The same holds true for wheat, where prices tend to trade at import parity levels. This implies that margins will become tighter over the next few years, requiring continuous innovation to remain on top of the productivity curve.
This story is from the October 27, 2023 edition of Farmer's Weekly.
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This story is from the October 27, 2023 edition of Farmer's Weekly.
Start your 7-day Magzter GOLD free trial to access thousands of curated premium stories, and 9,000+ magazines and newspapers.
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