File picture: Juho Tastula

Johannesburg - The Agricultural Business Chamber (Agbiz) and Industrial Development Corporation's (IDC) agribusiness confidence index has dipped below 50 points for the second quarter of this year after the worst drought in years negatively affected the sector.

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This is the fifth consecutive quarter in which the index has fallen below the 50 points mark. According to Wandile Sihlobo, an agricultural economist at Agbiz, an index point below 50 indicates contraction in South African agribusiness activity.

“Therefore a 47 index point suggests that agribusinesses are still holding a pessimistic view regarding business conditions in the country,” Sihlobo said.

The index recovered by 4 index points in the second quarter, up from 43 as compared with the first quarter of the year - but still below the crucial 50 points mark.

Falling short

Sihlobo said it was not surprising to see the agribusiness index falling short “as the industry experienced an El Nino-induced drought between last year and this year”.

However, on a quarterly basis, the perceptions of agribusinesses improved in the majority of sub-indices, with the exception of export volumes and economic growth prospects subindices, he said.

The index also shows that in the subindices confidence, general agricultural conditions improved 6 index points in the second quarter to 23.

“Prior to this period, there were fears that some areas might experience frost that could have further limited yields of late planted crops. However, conditions generally turned out to be relatively favourable,” Sihlobo said.

The perceptions regarding employment in the agribusiness sector marginally improved in the second quarter of this year by 2 points to 54, but this is 7 points down when compared with the same period last year. An annual decline could be linked to a drop in primary agricultural activity.

“South African farmers planted 22 percent less area of summer crops this year. Agricultural conditions could improve in the coming months. A number of weather forecasters suggest that there is a 65 percent chance of La Nina occurrence towards late spring through the summer season of 2016/17.”

 

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