Agriculture set to dip after two very good years

There was good news and bad news relating to South Africa’s agricultural sector in Moneyweb’s extensive interview with Wandile Sihlobo, chief economist of Agbiz.

First the good news. After months of rising food prices, Sihlobo expects food inflation to peak in July at about 8%, and then to tail off for the rest of the year. He predicts that food price inflation for 2022 will average 6.5%, the same as in 2021.

In particular, he expects prices of fruits, meat and vegetables to soften in the second half of the year, while prices of other goods in the food inflation basket are likely to remain elevated.

There was bad news for the agricultural sector as a whole. Agriculture has been booming for the past two years, as other sectors have suffered, but that good run has come to an end. Sihlobo predicts that, despite a good performance in the first quarter of 2022, agriculture will post a decline of between 3% and 5% for the full year.

The main reasons are lower harvests of grain and other crops after two years of record harvests, and the spread of foot and mouth disease which is limiting exports of beef and wool. The maize harvest is likely to be 10% below last year – but still a good harvest. The 14.7 million tonnes will be above the long-term average of 12.8 million tonnes, and there is likely to be 3.2 million tonnes for export.

While Sihlobo is concerned about the spread of foot and mouth, and other diseases such as swine flu and bird flu, he says the government has received a veterinary report it commissioned on how to improve the country’s handling of livestock diseases.

“Once the industry engages it, we’ll set up the practical steps of rebuilding our biosecurity side in the livestock industry, and I think we’ll be on a good footing.”

So even the bad news has a silver lining.