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Economists: Agriculture sector’s poor GDP performance is likely a ’temporary blip’

Agriculture’s poor figures were said to be expected as the third quarter was a relatively quiet period in agriculture, with much of the harvest activity distributed in other quarters of the year. Picture Leon Lestrade.

Agriculture’s poor figures were said to be expected as the third quarter was a relatively quiet period in agriculture, with much of the harvest activity distributed in other quarters of the year. Picture Leon Lestrade.

Published Dec 8, 2021

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THIS year’s agricultural sector’s poor performance in the third quarter, which surprised on the downside with a 13.6 percent seasonally adjusted contraction quarter on quarter, was likely to be a temporary blip, according to the sector’s economists.

Statistics South Africa (Stats SA) revealed yesterday that the country’s real gross domestic product (GDP) shrunk by 1.5 percent in the third quarter, following downwardly revised growth of 1.1 percent in the second quarter.

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Agriculture’s poor figures were said to be expected as the third quarter was a relatively quiet period in agriculture, with much of the harvest activity distributed in other quarters of the year.

This contraction was also reflected in the recent agricultural jobs data, which fell by 4 percent quarter-on-quarter in the year's third quarter (employment increased on a year-on-year basis by 3 percent).

FNB Agribusiness senior agricultural economist Paul Makube this was indeed a surprise outcome given the already positive indications of good performance with third quarter 2021 exports rising by 8 percent year on year (y/y) led by gains in, among others, citrus, maize, wine, sugar, other fruits and nuts.

Makube said that overall sector confidence, the latest Agbiz-IDC Agribusiness Confidence Index, cruised to a second record high since 2001 at 74 points, which to some extent downplayed the recent challenges of high input costs and the July unrest.

He said they, therefore, maintained the view that the agriculture sector would rebound in the last quarter and post a strong overall 2021 performance above 7 percent on the back of the relatively higher agriculture commodity prices and another excellent seasonal outlook following the 2020/21 bumper harvests.

Absa Agribusiness senior agricultural economist Dr Marlene Louw said agriculture’s relatively poor performance during the third quarter of 2021 was largely a result of earlier-than-usual grain and oilseed deliveries.

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“For example, maize deliveries more than doubled in the second quarter of 2021 compared to the same period last year, suggesting that a larger than usual share of summer crop production was delivered in the second quarter instead of the third,” Louw said.

She said that citrus usually also makes a significant contribution to GDP in the third quarter. However, this time export returns were negatively affected by distribution disruptions associated with the riots as well as port and shipping delays, which contributed to products reaching their destinations later than planned.

According to her, this was amplified by a general downward trend in global citrus prices combined with a stronger exchange rate compared to the third quarter of last year.

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Absa AgriBusiness said that based on the sizeable harvests in grains and oilseeds and prices in most agricultural commodities holding firms, they still believed that agriculture would perform well this year, with expected growth of around 7 percent.

Agricultural Business Chamber(Agbiz) chief economist Wandile Sihlobo said most high-frequency data of the past couple of months has painted a positive picture of South Africa's agricultural economy.

“What is worth noting is that the quarterly agriculture gross value-added data tend to be volatile, but we are still confident of full-year growth in this sector. We expect the final quarter of the year figures to show a strong rebound, which will potentially lead to positive performance for 2021,” said Sihlobo.

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The Bureau for Food and Agricultural Policy forecast South Africa's agricultural growth for the year at 7.6 percent y/y following strong growth of 13.4 percent y/y last year.

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