Agriculture dips 2.1% in Q2 2024 after strong Q1

4 Sep 2024

Following a surprisingly robust quarterly growth of 13.5% in Q1, agriculture reversed course as widely expected and fell by 2.1% quarter-on-quarter in Q2 of 2024 with a -0.1 percentage point contribution to overall GDP. South Africa’s GDP remained pedestrian after clocking 0.4% in Q2 from a revised flat growth in Q1.

Source: aleksandarlittlewolf via Freepik

The downbeat activity in the agriculture sector was not a surprise as the severe midsummer drought forced a reduction in harvest estimates for summer crops with South Africa’s biggest staple, maize, cut by 20.5% year-on-year to 13.06 million tonnes and soybeans falling sharply by 35.8% year-on-year to 1.78 million tonnes, according to the National Crop Estimates Committee’s 7th estimate report. The total summer grains and oilseed harvest estimate showed a decline of a whopping 22% year-on-year to 15.69 million tonnes.

Decline in field crop activity

The cumulative total maize delivered to the country’s silos for the 2024/25 season in Q2 showed an almost 6% drop in deliveries relative to the previous year. For winter crops, the total area planted was down by 1.6% year-on-year at 807,250 hectares with the wheat area which accounts for almost 63% of the total declining by 5.9% year-on-year at 506,300 hectares. All these are an indication of reduced activity in the field crop industry.

The seasonal downturn in demand negatively impacted the animal products industry, hence the poor contribution to agriculture GDP outcomes for Q2. The Q2 preliminary data on livestock slaughtering (excluding the June 2024 figures for cattle and sheep) showed an almost 22% quarter-on-quarter drop in the slaughter rate at 2.7 million head, 20% below the same period last year.

Medium-term outlook shows potential rebound

Nonetheless, the medium-term seasonal outlook points to a potential rebound in agriculture fortunes for the year ahead. While the El Niño-Southern Oscillation (ENSO) is currently still in a neutral state, forecasts still indicate that it is dissipating and likely to strongly transition to the La Nina weather pattern at the onset of the summer season. The South African Weather Services’ forecasts further indicate above-normal rainfall for the central parts and the south-eastern coastal areas of the country during the spring and early summer seasons.

Further positive developments are that the fuel price outlook shows a decline after three consecutive months of cuts, the electricity supply remains stable, and potentially an interest rate cut in the next Sarb’s MPC meeting. All this augurs well for renewed confidence in the sector.