Wheat prices have moderated markedly as at the end of last month South Africa's wheat spot price traded around R6 650 per tonne, down 10% year on year (y/y), according to Agricultural Business Chamber (Agbiz) chief economist Wandile Sihlobo.
For producers, however, the decline in wheat prices raised concerns about a potential reduction in plantings.
“But this past week, we learned that South African farmers are reasonably optimistic about the 2023/24 season. In its recent data, the crop estimates committee indicated that farmers intend to plant 542 600 hectares of wheat in the 2023/24 season, which is 3% up from the five-year average area planted (although down 4% y/y).
“In our view, such an area planted, combined with favourable weather conditions, would yield a solid harvest of 2.03 million tonnes. We assumed an average yield of 3.75 tonnes per hectare, which is a possibility if the weather conditions remain favourable throughout the season, as the forecasts suggest,” Sihlobo said.
Moreover, farmers intended to plant 109 100 hectares of barley, up 8% y/y (but below the five-year average planting).
“If we apply the same logic here of a five-year average yield of 3.38 tonnes per hectare in an area planting of 109 100 hectares, South Africa could have a barley crop of 368 758 tonnes in the 2023/24 season (up 19% y/y). The canola planting intentions are at 127 500 hectares, up by 3%, and a record area planting. Combined with an average yield of 1.71 tonnes per hectare, such an area suggests 218 025 tonnes of harvest this season, 4% higher than the previous year,” he said.
Also worth noting was that South Africa had been progressively growing its oats crop.
In the 2023/24 season, farmers intend to plant 29 600 hectares, up 10% y/y and well above the long-term average.
The chief economist said that while the season was still early, the planting activity and weather conditions of the next two months were crucial in determining whether the intended area was successfully planted or even exceeded.
He said they would have an update on the area plantings when the crop estimates committee released the preliminary area planted data in July, while the first actual production forecast would be released in August.
Overall, Sihlobo said the planting intentions data and the favourable weather outlook suggested South Africa could have a decent winter crop harvest.
Anthony Clark, an independent analyst at Small Talk Daily, said in a note yesterday that after four sparkling years of good harvests of more than 15 million tons versus a norm in the 12 million ton range, the unprecedented four-year La Nina weather oscillation was forecast to revert to a El Nino for the 2024 season.
“I have been commenting on this issue since mid-2022 as a sector risk,” he said.
At this stage, a mild El Nino was forecast which, if confirmed, will have a subdued effect on the agricultural sector. A harsh El Nino will take up back to the 8 to 9 million-ton maize crop of the 2015/16 seasons and the havoc that caused to farm revenues and the sector, he said.
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