South Africa’s agricultural sector is likely to experience an unusual period of three consecutive favorable seasons
South Africa has not had three consecutive favorable agricultural seasons for a long time. But the 2021-22 season is likely to be one more period in a prolonged cycle of favorable weather conditions and good agricultural activity in South Africa. The 2019-20 and 2020-21 production seasons were characterized by abundant rainfall, which supported agricultural activity in the country and resulted in great harvests.
Typical cycles are two seasons of high agricultural production followed by a notable drop due to drought. The only periods in the recent past that have seen three successive years of favorable weather conditions and a bountiful harvest were in the 2007-08, 2008-09 and 2009-10 production seasons. During this period, the commercial production of maize amounted to more than 12 million tonnes per year, with an average of 12.5 million tonnes per year.
A sharp decline in maize area, especially during the 2005-06 production season, characterized the previous seasons. This was mainly caused by drought and resulted in a lower harvest of 6.6 million tonnes in 2005-06 and 7.1 million tonnes in the 2006-07 production season. Other key summer crops such as sunflower seeds and soybeans recorded similar production declines, particularly during the 2006-07 season.
For maize, 2019-20 and 2020-21 was the first time in history that South Africa’s maize yields exceeded 15 million tonnes in two successive seasons – 15.3 million tonnes in 2019-20 and 16.4 million tonnes for the 2020-21 season. Other sub-sectors of agriculture, mainly horticulture, also recorded large production volumes in essential fruits like citrus. Deciduous fruits and wine grapes also showed an improvement in production compared to the decline in previous years.
As the summer crop planting season approaches from October, the weather forecast shows a good outlook for above normal precipitation for the 2021-22 summer season. At the end of July 2021, the South African Weather Service reported that South Africa could experience another La Niña this summer, although lower than in 2020-21. This would build on relatively higher soil moisture across the country following the La Niña rains in the 2020-21 season.
On August 12, the International Institute for Climate and Society echoes a similar sentiment like the South African Weather Service, expecting weak La Niña for the coming season. Importantly, from September 2021 to January 2022, the odds of La Niña are greater than 50%. These forecasts suggest that summer growing areas of South Africa may receive above normal rainfall during this time.
Another important dynamic of a La Niña is that it could bring drought to regions like South America. We I witnessed it in 2020-21 and downward revisions to Brazilian and Argentinian cereal production forecasts due to low yields. A repeat of this scenario would mean preliminary predictions of a significant harvest in those areas that the United States Department of Agriculture and the International Grains Council recently released would most likely be cut in the next few months.
In such a scenario, world grain prices would not drop noticeably in the coming months as I had planned before (although they will likely remain at lower levels than at the start of 2021). Such price dynamics would spill over into the South African grain market, as it had been through much of 2020 and into this year. Price levels above long term average would be an incentive for farmers to maintain an area planning of just over four million hectares for summer crops as in previous years (although there may be a switch between different crops depending on the profitability).
Farmers were already optimistic about production conditions, as obvious from tractor sales. In the first seven months of this year, tractor sales in South Africa were 26% higher than in the corresponding period in 2020, at 3,934 units. But sales for much of last year have been negatively affected by the foreclosure restrictions, so the base is warped slightly. Nonetheless, 2020 has also been a good year for tractor sales in South Africa, so going beyond it means we are seeing good momentum this year. In 2020, tractor sales amounted to 5,738 units, up 9% from 2019, supported by the large summer harvest of grains and oilseeds in 2019/20.
The difficulty that farmers face this season is rising input costs. In July, agrochemicals such as glyphosate, atrazine, acetochlor were respectively up by 151%, 30% and 24% from July 2020. Fertilizer products such as ammonia, urea, di-ammonium phosphate and potassium chloride have been up 184%, 104%, 115% and 98%, respectively, from July 2020.
This means this year’s profit margins will be reduced and farmers would have to strive for higher yields in order to thrive. The outlook for rainy weather presents an environment conducive to potentially higher crop yields in the 2021-22 season.