Biggest challenges for farmers are load shedding and dollar strength

Winter is an important season for South African agriculture, with some of its key field crops produced in June, July and August, with harvesting in December.

Farmers in the Western and Northern Cape, Free State, Limpopo and other winter crop growing regions are making arrangements for growing winter wheat, canola, barley and oats. All of the country’s wheat production takes place during the winter.

SA produces roughly 60% of its wheat requirements. It also produces, on average, about 90% of its barley annual consumption. Domestic production of oats is about 64% of annual consumption. The country is self-sufficient in canola production.

Power cuts and dollar strength

This year, the outlook for winter crops is clouded by a difficult operating environment, especially the areas that are under irrigation. The two biggest headwinds are power cuts and dollar strength.

There are also positives which should take the pressure off food price rises.

These positives include a fall in the cost of inputs, like fertiliser and agrochemicals, as well as good harvests from the summer season just ending. The main contributing factor is the increase in recurring power cuts which will affect irrigation.

The agricultural sector is heavily reliant on sustainable energy. For example, recent work by the Bureau for Food and Agricultural Policy shows that roughly a third of SA’s farming income is directly dependent on irrigation.

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This shows that disruptions in power supply generally puts at risk a substantive share of the SA agricultural fortunes.

Of all SA’s field crops, wheat has the largest production – about half – under irrigation. Of the other key field crops, about 15% of soya beans, 20% of maize and 34% of sugar production are under irrigation. The potential disruption of irrigation will lead to poor yields, and a poor harvest.

Industry role players and the government are alert to the problem and are monitoring the impact closely through a ministerial task team.

Farmers benefits

In addition, Eskom and government are exploring possibilities of reducing power cuts, which are expected to spike during the winter.

The second headwind is that farmers have not benefitted fully from the decline over the past year in the US dollar prices of some of their key inputs such as agrochemicals. This is because of the weakening of the rand against the dollar.

Thirdly, farmers are experiencing lower commodity prices compared with last year. But a drop in input prices is providing a financial cushion.

On the plus side, the area plantings for all SA’s major crops are expected to be above the five-year average area. This is according to the crop estimates committee.

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Secondly, input prices have come off from last year’s highs. A third positive factor is that the weather conditions for the winter crops also remain positive.

In its Seasonal Climate Watch update published on 3 April, the SA Weather Service noted that the winter crop growing regions will receive rains.

A fourth positive factor is that the summer crops are in reasonably good condition. From a consumer perspective, developments bode well for moderation in food price inflation in the second half of the year.

-Sihlobo is a senior fellow, department of agricultural economics, Stellenbosch University