04 July 2017 Read: 180
NAMPO is the biggest agricultural event in the Southern Hemisphere. It attracts major players and decision makers into one proverbial room, to engage on the health of the agricultural sector in South Africa – this year; NAMPO came at a time when the industry is posed for record harvests.
“The sector is on course for recovery after the devastating 2015/16 production season, however, the Western Cape (WC) and parts of the Eastern Cape (EC) are exceptions as conditions there have deteriorated with water levels in dams falling way below 20% full. Despite this, NAMPO provided some key insights into the sector” says Paul Makube, Senior Agricultural Economist for FNB Business.
Makube provides an outlook of the sector post NAMPO:
Positive growth in harvest – According to the recent Crop Estimate Committee (CEC) report, South Africa’s potential harvest of grain and oilseed crops for 2016/17 jumped 7% from the previous month to 18.03 million tons in May 2017. The maize crop has been revised higher by 7.54% from last month to a record 15.63 million tons. The rebound in maize production will help reduce pressure in the livestock industries such as poultry, pork and feedlots where it constitutes almost 70% of the feed.
Maize prices stabilize – Maize prices have responded to this improved supply dynamics and weakened, they are currently trending below the R2, 000/t level for both white and yellow maize. Both the yellow and white maize prices have edged below export parity, around R1, 800/t and R1, 900/t respectively.
Positive knock on effect on animal feed – In the case of oilseeds, both the sunflower and soybean crops are expected to be up on last year at 853,470 tons and 1.23 million tons respectively. These two crops are used as plant protein sources in animal feed in the form of soymeal and sunflower meal. Further processing for consumer products such as sunflower oil, soybean oil, etc. will improve availability and subsequently lower prices.
Pressures on wheat market – Poor production conditions affected planting in the Western Cape; however, the short term rainfall outlook has improved with heavy rains expected this week. The Free State and North West will however offset the potential loss in production because, apart from the Western Cape, the water table and dam levels have improved significantly this season.
Growth in livestock – The livestock market remains on an upward trajectory with gains across the board due to tight supply as a result of herd rebuilding in the case of beef and sheep. The meat-to-maize ratios have improved significantly in the past few months because of the combination of higher meat and lower maize prices, an indication of improved profitability for feedlots, poultry and pork production systems.
“The strong rebound in agricultural output bodes well for inflation going forward and consumers will breathe a sigh of relief as most grain and horticulture products and by-products should decline in price. This should assist the SARB to keep interest rates on hold for a bit longer” concludes Makube.