The Agbiz/Industrial Development Corporation (IDC) Agribusiness Confidence Index has improved by four points to 46 in the first quarter of this year.
This follows a decline in the last quarter of 2018 to 42, which was the index’s lowest level since 2009.
“While the improvement in sentiment was a welcome development, the index remained below the neutral 50-point mark, implying that agribusinesses were still downbeat about business conditions in South Africa,” Agbiz said in a statement on Monday.
The index reflected the perceptions of at least 25 agribusiness decision-makers on the ten most important aspects influencing a business in the agricultural sector, with responses recorded between February 28 and March 15.
Agbiz reported that the turnover subindex improved by 13 points to 61 in the first quarter of this year. This optimism stemmed from agribusinesses operating in the horticultural, livestock, agrochemicals and wine subsectors.
The net operating income subindex increased by nine points from the fourth quarter of 2018 to 46 in the first quarter of this year.
In addition, the uptick in agricultural crop futures has, to some extent, also boosted sentiment in this subindex, stated Agbiz.
The market share of the business subindex improved from 60 to 64 points in the first quarter of the year. The observations across the respondents suggested that the optimism was also driven by the horticultural and livestock subsectors, as well as agrochemical entities.
“Encouragingly, capital investments confidence improved further by four points to 62 in the first quarter of this year. This is partly mirrored in the agricultural machinery sales, specifically tractors and combine harvesters, which showed a solid performance in February 2019.
“This was a continuation from 2018’s robust sales, with total tractor sales, which amounted to 6 680 units, up by 4% from 2017. In terms of combine harvesters’ sales, about 200 units were sold, up by 2% from 2017,” noted Agbiz.
Nonetheless, a number of respondents continued to highlight the ongoing land reform policy discussion as a key issue that they were observing closely, and the outcome of which could influence investment decisions going forward.
Confidence regarding the export volumes subindex increased significantly by 19 to 56 index points in the first quarter of 2019. This optimism stemmed from the horticultural and livestock subsectors.
From a horticulture perspective, the Citrus Growers’ Association recently noted that exports could reach a record level of 137-million boxes of citrus fruit this year.
Moreover, South African Wine Industry Information and Systems noted the possibility of a relatively larger harvest of wine grapes this year, which should boost exports.
In terms of livestock, while the outbreak of foot-and-mouth disease earlier this year led to a number of countries placing a temporary ban on South African beef
exports, the Department of Agriculture, Forestry and Fisheries has engaged in discussions to re-open markets for South African beef in the African continent, and also to the Middle East.
Although the sentiment is fairly positive from the horticulture subsector, the general agricultural conditions subindex fell by eight points to 32 in the first quarter.
“This was owing to below-average rainfall at the beginning of this year, particularly in the central and western parts of South Africa. This subsequently delayed the planting activity in these respective areas and also resulted in reduced summer grains and oilseeds area plantings.
“South Africa’s 2018/19 summer grains and oilseeds plantings were estimated at 3.7-million hectares, down 3% year-on-year,” Agbiz stated.
The perception regarding economic conditions improved by three points to 21.
“With that said, this was still well below the long-term average. Moreover, the renewed power outages across the country, and disappointing high-frequency data over the past few months, suggest that South Africa's economic fortunes could remain constrained for the better part of this year,” Agbiz commented.