Land Bank is in dire need of support from the Treasury
DURBAN - With production finance likely to prove a challenge for the agricultural sector, industry players are looking to tomorrow’s Medium-Term Budget Policy Statement (MTBPS) for guidance on whether the cash-strapped Land Bank will receive support from the National Treasury.
The Land Bank, which has been facing a liquidity crisis, finances roughly 29 percent of agricultural debt and supports entrants into the sector, making it critical to food security.
The Agricultural Business Chamber (Agbiz) said the Land Bank was the sector’s current major risk, which could hit production decisions in the 2020/21 season.
The chief economist at Agbiz, Wandile Sihlobo, said winter crops were in good shape and attention was shifting towards the 2020/21 summer crops. “While farmers in the summer crop growing areas of South Africa are preparing the soil for the 2020/21 production season, the winter crop is maturing, and the harvest could begin at the end of November for wheat. The Western Cape is a pillar of South Africa’s wheat production, accounting for 48 percent of the expected 2.02 million tons of wheat in the 2020/21 season, up 32 percent year-on-year,” said Sihlobo.
He said the majority of other winter crops – such as barley, canola and oats – were also in good shape, with yields expected to be mostly above average. This was based on Agbiz’s observations, feedback from farmers in the Western Cape, and insights from the Crop Estimates Committee (CEC), with wheat yields for the year at 3.97 tons per hectare, compared with a five-year average of 3.28 tons per hectare.
Sihlobo said they did not expect any major changes to the aforementioned production estimate of 2.02 million tons.
“The weather conditions have generally been favourable since the last assessment, not only in the Western Cape but across all wheat-producing provinces, such as the Northern Cape, Free State, Limpopo, North West and the Eastern Cape.”
With some level of confidence in the wheat production prospects and overall winter crops, the focus on the CEC’s releases would likely be on the summer crops numbers, which would reveal farmers intentions to plant. This data would be crucial in formulating a view about the 2020/21 summer grains harvest, specifically in major grains such as maize, soya beans and sunflower seeds. Sihlobo said the intentions to plant data could have implications for grains prices if there was a major deviation from what the market currently expects.
“For example, Reuters analysts’ survey shows an expected 1 percent increase in maize area plantings to 2.64 million hectares. If this materialises, it would be the largest area planting in six seasons. With the current attractive maize prices, which are up by more than 20 percent from this time last year, and the expected La Niña, which could bring rains, it is plausible that farmers could increase maize plantings,” he said.