Sihlobo said these ACI results for this year’s fourth quarter showed that the mood in the sector was upbeat. Picture: Ayanda Ndamane / Independent Newspapers
Confidence in the agricultural sector leapt 10 points to reach 58 points in the last quarter of this year, its highest level in over two years.
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Wandile Sihlobo, chief economist at the Agricultural Business Chamber of SA (Agbiz), said this level of the ACI implied that South African agribusinesses remained generally optimistic about business conditions in the country.
Sihlobo said these ACI results for this year’s fourth quarter showed that the mood in the sector was upbeat, reflective of the potential recovery in agricultural conditions following a challenging season of drought and animal diseases.
He said this optimism was as a result of a combination of factors, including favourable weather conditions, with expectations that La Niña rains will be supportive of the 2024/25 agricultural season.
Moreover, he said the stable energy supply, improvements in port efficiency, and the better political climate following the formation of the Government of National Unity (GNU) were some of the aspects the respondents cited as key factors underpinning their optimism.
“We should build on this optimism for the sector’s long-term growth,” he said.
“This will require collaborative efforts between business and government on pushing for the effectiveness of the network industries, better management of the municipalities, further efforts to open new export markets, and managing better the biosecurity matters.”
Professor Maxwell Mudhara, an agricultural economist from the University of KwaZulu-Natal, said the optimism reflected in the ACI will likely increase agricultural production investments and, subsequently, higher outputs.
“The developments will mean that food prices may stabilise and, at best, decline. This might mean that there will be reduced food price inflationary pressure,” Mudhara said.
“Since most of South African's population are net food purchasers, easing food price inflation would be a welcome relief nationwide. Extrapolation implies that the food security outlook is favourable as consumer purchasing power could improve or be unchanged.”
Nevertheless, Mudhara said the price effects will not be immediate as the season was only starting and far from realising harvests. He added that price stabilisation could eventually prevail in the second half of next year.
“Nutritionally, the emerging optimism may not translate to better nutritional outcomes at an aggregate level as farmers are likely to continue to produce mainstream commodities,” he said.
“The government should identify mechanisms for agricultural producers in drought-prone areas to diversify production commodities.
John Hudson, the head of agriculture at Nedbank Commercial Banking, said the rise in confidence was expected.
Hudson said a more favourable weather outlook and turn in interest rates have added to the positivity following the election outcome.
“The expected La Nina weather system has not fully materialised yet, resulting in some grain producing areas experiencing severe high temperatures with patchy rain,” he said.
“We will need to watch the weather closely over the next 3 months and, if we experience a better summer production season compared to last year, we could see the positive trend in the Agbiz Confidence Index continuing.”
BUSINESS REPORT