With the current drought gripping South Africa now pushing agricultural conditions to its limits, the local grain industry yesterday urgently appealed to the government for support and assistance.
Grain SA said immediate action was needed to provide financial assistance through an agricultural disaster fund, access to affordable credit remedies and affordable income insurance, enabling producers to weather the crisis and sustain their livelihoods.
It is not yet clear what implications the crisis will have on food prices and availability.
According to data from Fitch Solution Industry Report, South African Agribusiness Report Q4 2023, South Africa’s biggest crop is grain, which includes barley, maize, oats, sorghum and wheat. This contributes more than 30% to the total agricultural product.
South Africa is facing a severe drought crisis, exacerbated by extreme heat waves, leaving the nation's grain producers’ reeling. Some producers are receiving below 50% of their average rainfall in the current season.
The scorching temperatures and prolonged dry spells have ravaged agricultural lands, severely impacting both developing and commercial producers.
With financial strains mounting due to decreased yields and rising production costs, the South African grain industry said it was calling on government for support and assistance to alleviate the burden on producers.
Derek Mathews, the Grain SA chairperson, said the sweltering temperatures had led to decreased yields, squeezing profit margins and threatening the viability of entire operations.
“Many commercial producers are grappling with the prospect of crop failures and financial losses, further exacerbating the strain on their businesses,” Mathews said.
This was on the back of the industry already experiencing a negative growth in gross domestic product (GDP) for the past two quarters, placing the agricultural sector in a technical recession.
In the last quarter of last year, the agriculture, forestry and fishing industry decreased by 9.7%, contributing to a 0.2 decline of a percentage point to the quarter’s GDP growth. This was primarily due to decreased economic activities reported for field crops, animal products and horticulture products.
According to Grain SA, grain and oilseeds form part of 70% of all food and, therefore, had a large multiplier effect throughout various industries.
It said the financial strain on grain producers had far-reaching implications, not only for their own livelihoods, but also for South Africa’s GDP and food security.
Tobias Doyer, the Grain SA CEO, said the current conditions highlighted the realities of agricultural production and the impact of climatic conditions on food security and -prices on South Africans, but also the Southern African community.
“Agricultural producers are currently engaging with financiers and agribusiness to ensure that they can resume production in the next season. However, it is clear that a number of producers are in severe distress and will need support to ensure the sustainability of our food production sector,” Doyer said.
Further, Grain SA said the impact was also pronounced among developing producers, who often lacked the financial resources and infrastructure to withstand such adversity.
Investments that have been made in developing the agricultural sector were diminished due to the disaster of the drought. These producers were facing dire financial constraints, struggling to keep their farms afloat amidst dwindling resources and mounting debts, it said.
Maxwell Mudhara, a Professor of Agricultural Economics and director of the Farmer Support Group at the University of KwaZulu-Natal (UKZN), said with agriculture being in a technical recession this meant some losses of assets, which would slow-down the future recovery of the sector.
“However, as the performance of the agricultural sector is weather-determined, rather than depending purely on cycles in economic performance, the situation could improve drastically once the El Niño effects disappear, especially if the recession has not undermined the sector’s asset base.
“Nevertheless, a continuation of the negative spiral could prevail if the weather and electricity patterns do not improve in the second quarter of 2024 and beyond,” Mudhara said.
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