The Bureau for Food and Agricultural Policy (BFAP) has highlighted the continuing economic growth of the South African agricultural sector during the first quarter of this year (Q1 2022) but has warned that this growth was expected to decelerate “drastically” over the course of this year. In year-on-year (y-o-y) terms, the country’s agricultural gross domestic product (GDP) grew by 3.6%, and in quarter-on-quarter terms by 0.8%.

Agriculture, the BFAP pointed out, was one of the few sectors of the economy which had displayed consistent growth in the past few years. However, the growth rate had begun to slow, because of increasing costs, which have been eating into profits. This trend would continue.

“While prices are high, production costs increased very sharply and continue to rise with the war in Ukraine ongoing,” reported the BFAP. “Logistical constraints are another factor that will bring profitability under pressure.”

As the GDP performance of the various agricultural subsectors were not published, the BFAP used disaggregated nominal gross value of production (GVP) figures, released by the Department of Agriculture, Rural Development and Land Reform (DALRRD), as indicators of the subsectors’ growth. DALRDD divided agriculture into three subsectors – animal products, field crops, and horticulture. In y-o-y terms, animal products grew by 2%, field crops by 11% and horticulture by 5%.

Although it displayed the lowest growth rate, the animal products subsector remained the largest contributor to absolute GVP growth during this period of the year, noted the BFAP. Although meat prices had been rising since the middle of last year, revenue growth had been limited by decreasing numbers of livestock being slaughtered. During Q1 2022, in y-o-y terms, beef prices rose 12% while slaughter volumes declined by 3%, and sheep meat prices increased by 4% while slaughter volumes fell by 5%. Poultry prices jumped 17% and slaughter volumes increased by 4% (because of increased investment into the sector following the completion of the poultry masterplan). Pork prices dropped by 16%, slaughter volumes were sharply up, but increased sales volumes gave the pork industry positive growth. However, the entire animal products subsector was being pressured by rising feed costs, a trend that started 18 months ago but which had accelerated because of the Russo-Ukraine War (both countries normally being major agricultural exporters) and poor weather in the US, which had delayed the planting of summer crops.

Field crops was a subsector that contributed little to agricultural economic growth during the first quarter of a year, as winter crops have been harvested and the harvesting of summer crops did not start until the second quarter (and extended into the third quarter). Most crops experienced stronger prices, because of international market dynamics, and supply constraints. Again, the Russo-Ukraine War was a factor in driving up prices. The subsector also benefitted from y-o-y increased early deliveries of yellow maize.

Horticulture was further subdivided into different subcategories, including citrus fruits, avocados, deciduous fruits, table grapes, stone fruit, and wine. In Q1 2022, the citrus industry experienced y-o-y GVP growth of 11%, and deciduous fruits recorded a 6% rise. During Q1 2022, and again y-o-y, avocado exports were down, as a result of hail storms in the growing areas, but guava and mango exports were “significantly” higher. Wine exports, y-o-y, were up 26% (but, in quarter-on-quarter terms, 18% lower).

“Despite this positive revenue growth, [horticulture] faces several challenges that have brought profitability under pressure,” cautioned the BFAP. “These include extreme freight cost increases, challenges in both domestic and global ports that continue to hamper trade, as well as drastic increases in production costs. The sub-sector is also hit by the added challenge of fruit earmarked for the Russian market not trading as normal. Changing markets is not as simple as merely loading a container to another port, as consumer trends are country specific and produce earmarked for the Russian market cannot simply be absorbed by another destination.”