Another stellar contribution by agriculture to SA’s GDP outcomes in the 2nd quarter of 2020

By Paul Makube, Senior Agricultural Economist at FNB Agri-Business

08 September 2020– Following a good start to 2020, with first quarter agriculture gross domestic product (GDP) rebounding strongly by 28,6% quarter-on-quarter (q/q) seasonally adjusted annualised, the sector posted another impressive growth of 15% in the second quarter of 2020, which made it the only positive contributor with a 0,3 of a percentage point. Statistics South Africa (StatsSA) further revised the 1^st quarter agriculture GDP reported earlier in the year from 27,8% to 28,6%.

The strong second quarter growth was underpinned by the increased production in field and horticulture crops, as well as animal products. The country’s 2020/2021 total grain and oilseed output was recently pegged at 17,85 million tonnes, which is still one of the largest on record and 34% higher relative to the 2019 levels, as weather turned positive and boosted crop growth.

Maize, which is the biggest staple for South Africa is expected to go up 38% year-on-year (y/y) at 15,84 million tonnes. We saw a similar development with winter crops whose first estimate for 2020 showed a massive 32,4% y/y increase in production at 2,64 million tonnes of which wheat accounted for 74% of the total, followed by barley (19%), canola (5%), and oats (2%).

The higher wheat production is particularly important as South Africa is a net importer and, therefore, will help reduce the import bill. A combination of a good harvest, a relatively weaker exchange rate, and strong export demand boosted horticulture’s contribution to agriculture growth. The animal products defied the seasonal demand pressures during winter, as well as the COVID-19 disruptions and came out stronger as prices were resilient across most categories.

Given the huge harvest outlook for both the summer and winter crops as well and good commodity prices, we expected the agriculture GDP to maintain the current momentum into the remaining quarters of 2020.

ENDS.