The Crop Estimates Committee (CEC) on Friday boosted its estimate of maize production for South Africa for 2022–2023 by 2% from the previous month to 16 million tons attributable to favourable weather conditions.
This bodes well for improving profit margins in the livestock sector, FNB Agri-Business senior agricultural economist Paul Makube said.
As regards consumers, Makube said with food inflation having been trending at double-digit levels with the April update coming in at 11.3% year on year (y/y), the bullish supply outlook for summer crops had already dampened grain and oilseed prices and they expected the benefits to pass through in the second half of this year.
“This means SA will go into the next season with a relatively good carryover stock as the historical local consumption is just below 11.8 million tons.
“Similarly, the soybean crop was expected at another record of 2.76 million tons, which is 23.6% higher y/y (year on year),” he said.
According to ReportLinker's Livestock Market Outlook 2022-2026, South African Livestock Production was projected to reach 13.3 million heads by 2026, a 0.5% decrease compared to 2021. This was a 1.1% decrease compared to 1966. In 2021, South Africa ranked 27th, with Venezuela overtaking it with 13.7 million heads. Brazil, India and the US, respectively, occupied positions two, three and four.
South African Livestock Import was set to reach $309 million (R6 billion) by 2026, growing 3.3% year on year, since 2005.
Makube said although summer crop yields were currently high, commodity prices were now off the boil following two years of a strong rally with both white maize and yellow maize futures already trading below the highs of more than R5 000 a ton (/t) at R3 667/t and R3 780/t, respectively.
He said the renewed rand weakness had provided some support lately, but still failed to lift prices to last year's levels.
Agricultural Business Chamber chief economist Wandile Sihlobo said the ample soybeans harvest and improvement due to an expansion in the area planted and the expected higher yields meant South Africa could meet its domestic demand and remain with more than 300 000 tonnes of soybeans for the export markets.
This soybean export expansion was a new territory for South Africa, which until recently, had been a net importer of soybeans and soybean products, and positive for the agricultural trade balance, said Sihlobo.
Other small crops, such as groundnuts and dry beans, were lifted from April estimates to 51 510 tonnes (up 6% y/y) and 48 560 tonnes (down 8% y/y), respectively.
Absa Relationship Banking Senior Agricultural Economist Dr Marlene Louw said the current big harvest on land has been key in limiting further staple food price increases (compared to 2022 levels) and they were of the view that this would also be an important determinant of lower food inflation during the second half of the year.
“From a production perspective, good yields have also ensured favourable returns to producers despite local and global grain and oilseed prices trending downward since the start of the year,” Louw said.
However, Thabile Nkunjana, an agricultural economist for Agro-Food Chains at the Markets and Economic Research Division at the National Agricultural Marketing Council, said while a large maize crop was good news - especially for cash strapped consumers as it often kept prices at moderate levels - it was crucial to remember that South Africa was still a minor player in the global maize or grain market and had no control over prices thereof.
Although the increase in crop output was welcome news, he pointed out several changes might have an impact on farmers’ profits and consumer pricing could still happen as a result of market forces, which would then determine local farmers’ earnings and food prices.
Nkunjana said since soybeans were one of the primary ingredients used in the production of poultry, the increase in soybean production would benefit the poultry industry.
He said that as a result, the poultry industry was expected to become more competitive in the global market, which was excellent news for the local industry that was attempting to upscale its output and expand its export market footprint from the present 50 000 tons exported per year.
BUSINESS REPORT