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

See PODCAST below

In this week’s insert, Sihlobo continues to talk about rising farming input costs.

“At the start of every agricultural production season, one of the major concerns for farmers is weather conditions over the course of the season, and how these will affect yield. But for the 2021/22 season, another important concern that has been on farmers' radars since the start of the season has been the rising input costs, for example, the prices of fertilizers and agrochemicals.

“These are largely driven by supply constraints in key fertiliser-producing countries such as China, India, the US, Russia, and Canada. Rising shipping costs, oil, and gas prices have also been contributing factors, with firmer global demand from an expanding agricultural sector.

“This has been the case for farmers in the Northern Hemisphere for some time but also more recently for farmers in the Southern Hemisphere. On average, the prices of fertilisers were up by over 50% in September 2021, compared to the corresponding period a year ago. Meanwhile, the agrochemicals had risen by over 30% over the same period,” says Sihlobo.

However, he adds that another essential dynamic in the global agricultural market, which plays an offsetting role to some degree, is the sustained higher commodity prices.

“There are unique price-driving factors for each crop, but broadly, the growing demand for grains and oilseeds in China, poor crop yields in South America in 2020/21 production season, and higher shipping costs, have been the primary price drivers.

“Many, including ourselves, had thought higher agricultural commodity prices would be temporary. The producers in the Northern Hemisphere, who incurred high input costs, will somewhat be cushioned by the current commodity prices, which will help overshadow some of the costs. Still, margins will be squeezed compared with the 2020/21 production season in the major agricultural commodities,” he further adds.

“In essence, farmers have incurred inputs at higher prices. Still, the higher commodities prices, which will likely prevail for some time, bring some slight financial cushion as opposed to years where we have seen drastic falls in prices when there are forecasts of harvest improvements,” concludes Sihlobo.

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