Agribusiness confidence index declines further in Q3

4th September 2017

By: Anine Kilian

Contributing Editor Online

     

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The Agbiz/Industrial Development Corporation (IDC) Agribusiness Confidence Index, declined by a further two index points to 54 in the third quarter.

Among the ten subindices making up the index, the quarterly decline was broad based, with the exception of turnover and capital investment.

“Although there are a number of factors driving sentiment of the other subindices, the unfavourable weather conditions in the Western Cape province and relatively lower global demand for maize exports were the key drivers of the decline in sentiment in the third quarter of this year,” Agbiz agricultural economist  Wandile Sihlobo said in a statement issued on Monday.

The net operating income subindex declined by a further five index points to 63 in the third quarter.

In part, this shows an expectation of lower profitability relative to the previous quarters, particularly for agribusinesses operating in the horticulture and wine industries, said Agbiz.

The export volumes subindex deteriorated by eight index points in the third quarter to 50, which is the lowest levels since the third quarter of 2016.

Further, the market share of the business subindex declined by 12 index points to 57 points in the third quarter, while the employment subindex remained unchanged at 59 points.

“Although this is an encouraging print, the weather remains a key deciding factor regarding the outlook [for] South Africa’s agricultural jobs market,” Sihlobo said.

The economic conditions subindex declined by nine points to 40 in the third quarter, reflecting relatively downbeat expectations for overall economic growth performance this year.

After seeing good summer rainfall in 2017 which led to record maize and soybean harvest, the general agricultural conditions subindex declined by 17 index points to 48 in the third quarter. 

This is largely underpinned by unfavourable dry weather conditions in the Western Cape province, which is a key producer of winter grains, horticulture products and wine.
 
The agribusiness survey suggests that the provision for bad debt might have increased in the third quarter, in line with unfavourable weather conditions in winter grains producing regions.

The debtor provision for bad debt subindex increased by five index point to 43.

Notwithstanding the recent interest rate cut, the financing costs subindex increased by 17 index points to 50.

Edited by Chanel de Bruyn
Creamer Media Senior Deputy Editor Online

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