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Recent rains bring good news

| Economic factors

South Africa’s agricultural sector is on the road to recovery after the recent rains, according to analysts. Paul Makube, a senior agricultural economist at FNB, said last year was tough for the industry.

“The drought had an impact on the economy with South Africa’s gross domestic product (GDP) decelerating. We anticipate that (food) prices will moderate now in 2017 as the new season production outlook improves with the rains across the producing areas,” he said.

Makube said the maize crop was expected to recover by almost 60 percent to more than 12 million tons for the 2016/17 production year. Sugar and horticulture were also expected to improve.

He said this would boost the availability of exportable produce, particularly fruits. Beef prices were expected to remain high due to collection rebuilding this year, while pork and poultry producer margins would likely improve due to the declining feed prices, especially in the second half of the year. He said wheat had already recovered 6 percent year on year at 1.88 million tons.

 “This together with the abundant global supply outlook, with production and stocks of 749 million tons and stocks of 235 million tons respectively will maintain downward pressure on domestic prices as South Africa remains the net importer of wheat,” Makube said.

He said the sector was slowly stabilising. “The year ahead will still be trying, but the silver lining is that we are starting to see a little relief from the recent rains.”Francois Stofberg, an economist at Efficient group, said food inflation would decrease as a result of recent rains. “The decrease will happen mostly for vegetables and fruits. But meat will remain expensive as farmers are still rebuilding,” he said.

Recovering

Wandile Sihlobo, an agricultural economist at the Agricultural Business Chamber, said on Monday that some prices had already recovered and were 50 percent lower than they were last year.

“This shows food inflation is coming down. We also expect meat prices to come down, because farmers will now go back to normal slaughtering,” Sihlobo said.

But Sihlobo said the real recovery was expected towards the end of this year.

“Maize production will likely be between 11.7 million and 13 million tons and that is likely to improve the GDP,” Sihlobo said.

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