Unfavourable weather conditions in the Western Cape coupled with relatively lower global demand for maize exports were the key drivers of the decline in confidence in the agricultural sector, according to the agriculture business chamber (Agbiz).
The latest Agbiz/Industrial Development Corporation (IDC) agribusiness confidence index dipped by another two index points in the third quarter to 54 points. (A reading above 50 indicates expansion.) This came as drought conditions continued to grip the Western Cape, a key agricultural economy.
"Although there are a number of factors driving sentiment of the other sub-indices, the unfavourable weather conditions in the Western Cape province and relatively lower global demand for maize exports were the key drivers of the decline in sentiment in the third quarter of this year," said Wandile Sihlobo, the head of economic and agribusiness research at Agbiz.
After good summer rainfall in other parts of SA in 2017 led to record maize and soybean harvest, confidence in the general agricultural conditions sub-index declined by 17 index points in the third quarter of this year to 48.
"This is largely underpinned by unfavourable dry weather conditions in the Western Cape province — which is a key producer of winter grains, horticulture products and wine," said Sihlobo.
The perception with regard to economic conditions declined further by 9 points in the third quarter of 2017 from the previous quarter to 40. This reflected relatively downbeat expectations for overall economic growth performance this year, according to Sihlobo.
Confidence in employment in the agricultural sector remained unchanged from the previous quarter, at 59 index points.
"Although this is encouraging, the weather remains a key deciding factor regarding the outlook of SA’s agricultural jobs market," said Sihlobo.
He said despite the decline in the Agbiz/IDC agribusiness confidence index in the third quarter, the print is still in expansionary territory.
"With that said, a number of agribusinesses are concerned about persistent dryness in the Western Cape and Eastern Cape provinces, and the effect on crops and business," said Sihlobo.