Agriculture reverses course and dips by 2.1% in Q2 of 2024 following a strong Q1 outcome.

Following a surprisingly robust quarterly growth of 13.5% in Q1, agriculture reversed course as widely expected and fell by 2.1% q/q in Q2 of 2024 with a -0.1 percentage point contribution to overall GDP. South Africa’s GDP was still pedestrian after clocking 0.4% in Q2 from a revised flat growth in Q1.?

The downbeat activity in the agriculture sector was not a surprise as the severe midsummer drought forced a reduction in harvest estimates for summer crops with South Africa’s biggest staple, maize, cut by 20.5% y/y to 13.06 million tons and soybeans falling sharply by 35.8% y/y to 1.78 million tons, according to the National Crop Estimates Committee’s 7th?estimate report. The total summer grains and oilseed harvest estimate showed a whopping 22% y/y decline to 15.69 million tons.?

The cumulative total maize delivered to the country’s silos for the 2024/25 season in Q2 showed an almost 6% drop in deliveries relative to the previous year. For winter crops, the total area planted was down by 1.6% y/y at 807,250 hectares with the wheat area which accounts for almost 63% of the total declining by 5.9% y/y at 506,300 hectares. All these are an indication of reduced activity in the field crop industry.

The seasonal downturn in demand impacted negatively on the animal products industry, hence the poor showing in its contribution to agriculture GDP outcomes for Q2. The Q2 preliminary data on livestock slaughtering (excluding the June 2024 figures for cattle and sheep) showed an almost 22% q/q drop in the slaughter rate at 2.7 million head, which is 20% below the same period last year.

Nonetheless, the medium-term seasonal outlook points to a potential rebound in agriculture fortunes for the year ahead. While the El Ni?o-Southern Oscillation (ENSO) is currently still in a neutral state, forecasts still indicate that it is dissipating and likely to strongly transition to the La Nina weather pattern at the onset of the summer season. The South African Weather Services’ forecasts further indicate above-normal rainfall for the central parts and the south-eastern coastal areas of the country during the spring and early summer seasons.

Further positive developments are that the fuel price outlook shows a decline after three consecutive months of cuts, the electricity supply remains stable, and potentially an interest rate cut in the next SARB’s MPC meeting. All this augurs well for renewed confidence in the sector.