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Despite some headwinds, the positive agricultural export trend is likely to continue.

admin by admin
February 5, 2021
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Despite some headwinds, the positive agricultural export trend is likely to continue.
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Although not at the peak of last year, the contribution of South Africa’s agricultural sector to the country’s gross domestic product is still very positive. This is despite the severe impact of flooding in KwaZulu Natal, the war between Russia and Ukraine, and even an outbreak of foot and mouth disease (FMD) in China that led to a temporary ban on the importation of cloven hooves. From South Africa.

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The good news is that this strong performance of South African agri is likely to continue in the future. We remain in a La Niña climate, which means we can expect the good rains of recent months to continue into our winter and possibly into the upcoming peak agricultural season. The outlook for summer cereal crops is still very positive, with sunflower, soybean and corn crops on record.

In fact, the country’s commercial summer grain and oilseed crop is about 18 million tons, while the country’s largest livestock production is 14.9 million tons. And when you consider that domestic corn consumption averages just under 12 million tons, the reserve level and strong export prospects are both very good.

SA maize production has decreased by 9.8% from last year

Of course, successful agricultural sector performance is much more than rainfall and positive climate for growth. There are a number of other factors – both positively and negatively – that will affect SA’s agricultural production and exports for the remainder of 2022.

Perhaps the most obvious of these is the ongoing Russian-Ukrainian war. While it is hard to imagine anything positive coming out of this devastating war, the reality is that the consequences for South Africa’s agricultural sector have indeed been mixed – and this is likely to continue as the world goes forward. A much longer period of conflict is expected in the region.

SA Agri Production, Export

On the one hand, production that was expected to flow to Russia and Ukraine was suddenly suspended from SWIFT, which had a major impact on all countries engaged in agricultural production with the two countries.

South Africa is one such country, but due to its lack of scale, the disruption has had a significant negative impact on the agro export sector. Of course, there were some exporters who still had the opportunity to send produce to Russia, for whom the sharp increase in demand translated into strong agricultural commodity prices.

Going forward, demand for quality and affordable agricultural produce in both countries will increase significantly as export restrictions imposed by several of their key supply regions remain. While this may present opportunities for South African agri exports, the extent to which exporters in this country take advantage of those opportunities still largely depends on overcoming logistical challenges and ensuring payment security for importers in war-torn regions.

Another important factor shaping SA Agri’s export potential is freight. Overall shipping costs have been on a steep and steady rise in recent months.

In addition, the global supply chain disruptions and infrastructure shortages caused by Covid-19, which remain largely unaddressed and freight complications and costs, are likely to have a very negative impact on agri exports in the coming months and years. .

The flip side of this freight challenge coin for South Africa is that 41% of the country’s agricultural output is exported across Africa.

While this does not insulate exporters from the ups and downs of freight and fuel costs, it does allow the savvy exporter to build a stronger and more resilient export supply chain, which is immune to the effects of global freight challenges. And with the positive impact of the recent African Continental Free Trade Area (AfCTA) agreement being widely felt, there is real potential for South African exporters to build highly resilient and highly profitable operations on the continent.

The immediate export opportunities in Africa and globally are expected to be very strong, with 160 million tons of production expected to be exported this season. This represents a significant year-on-year growth from the 2.4 million tonnes exported in 2021.

Compensating for rising global inflation

The rand exchange rate against most major currencies also remains favorable to generate good margins, which will hopefully reduce any pressure from a rising global inflation environment. In terms of citrus, in particular, the recent agreement with China on export/import protocols will have a very positive long-term impact on South Africa’s citrus exports to that country in the coming years.

In the long term, many of the global events described above – and the Russia-Ukraine conflict in particular – may have the effect of creating a greater focus on ensuring a more open and fair global trade landscape for all international trading partners. The hope is that this can lead to a global shift in thinking about removing unfair tariff regimes, some of which still limit South Africa’s competitiveness in many export markets.

A typical example is the recent EU mandate to control the false codling moth (FCM) requiring citrus imports to undergo mandatory cold treatment and pre-chilling measures up to 25 days prior to shipment. This is despite the SA industry having a strict FCM risk management system and providing more scientific evidence.

If this change takes place, it will not only create more open markets and export-friendly global conditions, but will also create additional impetus for new digitized agri-systems that have been affected by the movement restrictions created during the Covid-19 pandemic. It has enabled the rapid implementation of digital processes for product inspection and business transactions.

Such more open markets and digitally enabled trade will have very positive implications for South Africa’s agri-export sector, particularly allowing it to continue to build on the strong foundations laid in recent years.



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