He also provides more information about the latest developments in the agricultural sector. Here is Sihlobo....

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Sihlobo says that the Australian Bureau of Meteorology once again confirmed its view of a La Niña occurrence from this year until at least February 2021. He says this gives an indication of higher rainfall which may translate to a potentially good agricultural season in South Africa. However, other regions in the world could experience the opposite. When looking at African regions such as East Africa, the La Niña weather event typically correlates with below-average rainfall from December to February. This period is known to be just before the start of the summer grains planting, which is typically in February of each year. “Therefore, the current La Niña event has raised the risk of yet another poor agricultural harvest for countries in this region, such as Kenya, Somalia and Ethiopia. This means that these countries will likely still depend on maize imports in the 2021/22 marketing year,” explains Sihlobo.

Furthermore, the La Niña also poses a risk to South America. The La Niña weather event is characteristically identified with dryness in parts of Argentina and Brazil. Sihlobo says the early effects of this were clear in the 2020/21 planting season, which is still underway, with planting progress in these countries lagging behind the previous years’ pace because of dryness. He says there is also concern that even when planting is completed, the crop yields will likely be much lower because of dryness. This, as the regions of southern Brazil already showed signs of this possibility. Meanwhile, both Brazil and Argentina account for 14% and 50% of global maize and soybeans production, respectively. With that being said, the La Niña may have implications on both global supplies and prices of crops.

Nonetheless, despite the outlook, the United States Department of Agriculture (USDA) remains optimistic about Brazil and Argentina’s soybeans and maize’s production in 2020/21. “The USDA currently forecasts Brazil’s 2020/21 soybean harvest at a record 133 million tonnes (up by 6% year-on-year (y/y), with Argentina’s 2020/21 soybean harvest also set to be up by 4% y/y, estimated at 51 million tonnes. For Argentina, the current harvest estimate is down marginally from the October 2020 estimate which mirrors the nervousness about the yields, while for Brazil, the USDA maintained a similar view as the previous month. Also, the USDA forecasts Brazil’s 2020/21 maize production at 110 million tonnes (up 8% y/y), which is unchanged from the October 2020 estimate. Meanwhile, for Argentina, the 2020/21 maize production estimate is down by 2% y/y, estimated at 50 million tonnes,” he adds.

With that being said, this season’s La Niña weather event has different outcomes for different agricultural regions all over the world. Sihlobo explains that when looking at the effects it will have in South Africa, a higher-than-average rainfall is expected. He says this means that there “is little concern at this stage in terms of maize supplies as the country is expected to harvest over 16 million tonnes of maize in 2020/21 (these are both our estimate and also that of USDA), and remain a net exporter”. However, Sihlobo adds that for soybeans, South Africa remains a net importer of about 500 000 tonnes of soybean meal - a majority of which originates from Argentina. He says this means the risks for the domestic livestock and poultry producers remain. 

Livestock, dairy and poultry sectors should keep an eye on global price movements in the coming months as this will influence commodity prices in South Africa.

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