OFM News’ Lee Simmons speaks to Agricultural economist, Paul Makube,from FNB about what this means for the agricultural sector.

He says that this survey outcome suggests that while recent input cost escalations are likely to erode producer margins, the relatively higher agriculture commodity prices and another excellent seasonal outlook following the 2020/21 bumper harvests far outweighed these concerns.
 
He added that the latest production estimates point to another bumper crop for the 2021/22 production season with the total maize and soybean expected planted area projected at 2.76 million ha and 827,100 ha respectively. Assuming average yields of 6.22/t and 2.68/t respectively for maize and soybeans achieved during 2020/21, given the bullish weather outlook, South Africa is likely to produce more than 17 million tons of maize and 2.22 million tons of soybeans, says Makube.

Makube notes that the upswing in capital investment is most welcome and indicates long-term industry sustainability through asset replenishment and replacement. The banks have been solid behind agriculture amid the low interest rate environment, and this is reflected in the 9 points drop in the financing costs subindex to 46, asserts Makube.  He says that it is important to recall that farmer finances took a serious knock due to the 2015/16 drought and it generally takes time to recover. "Nonetheless, the past two years have been relatively fantastic, and we look forward to another year of solid performance from the agriculture sector," ends Makube. 

OFM News/ Lee Simmons