AGRICULTURAL NEWS - In the fourth quarter of 2016, the Agbiz/IDC Agribusiness Confidence Index declined by 5 index points to 55.
Despite the decline, the index remains above 50, indicating expansion in South African agribusiness activity and suggesting that agribusinesses are still optimistic regarding business conditions in the country.
Although the quarter-on-quarter survey showed a decline in overall Index, it is important to highlight that this change was only supported by three sub-indices. Seven out of ten sub-indices of the survey showed expansion, with the exception of turnover, net operating income and employment sub-indices, which were the key drivers of this decline. To some extent, the decline in these particular sub-indices mirrors the aftermath of the 2015/16 El Niño induced drought.
Meanwhile, general improvement in other sub-indices is in line with prospects for the 2016/17 production season. Recent data suggest that summer crops producing regions could plant 3.75 million hectares, which is a 15% year-on-year increase. Moreover, winter crops producing regions are set to realise a 15% year-on-year uptick in total output to 2.14 million tons.
Agribusiness perceptions
Confidence regarding the turnover sub-index dropped by 8 points to 67 in the fourth quarter from the previous one, which suggests some agribusinesses may be making losses, particularly the ones operating in grain producing areas. Lower output that was seen in the 2015/16 production season resulted in lower storage and handling income for agribusinesses.
In a similar trend with the turnover sub-index, the net operating income sub-index dropped by 18 index points to 47 in the fourth quarter, as agribusinesses continue to suffer the effects of the 2015/16 El Niño induced drought.
The perception in the market share of the business sub-index improved by 12 index points from the previous quarter to 80. To some extent, this is reflective of the vibrancy ahead of the 2016/17 production season.
The perceptions regarding employment in the agricultural sector deteriorated in the fourth quarter of this year. The sub-index fell from 63 points to 53. It appears that agribusinesses’ perception regarding employment has been influenced by the views expressed on net operation income sub-index.
Despite the growing concerns about South Africa’s political and policy uncertainty, confidence regarding capital investment improved by 9 index points from the third quarter to 69. In part, this is due to positive prospects regarding agricultural conditions. With the winter crops overall production set to improve, combine harvesters sales improved by 29% month-on-month in October 2016 to 18 units.
After dropping by 17 index points to 33 in the third quarter, the export volumes sub-index improved by 31 index points to 64 in the fourth quarter. This was largely driven by increased export activity in the citrus and wine industries.
Meanwhile, general improvement in other sub-indices is in line with prospects for the 2016/17 production season. Recent data suggest that summer crops producing regions could plant 3.75 million hectares, which is a 15% year-on-year increase. Moreover, winter crops producing regions are set to realise a 15% year-on-year uptick in total output to 2.14 million tons.
Agribusiness perceptions
Confidence regarding the turnover sub-index dropped by 8 points to 67 in the fourth quarter from the previous one, which suggests some agribusinesses may be making losses, particularly the ones operating in grain producing areas. Lower output that was seen in the 2015/16 production season resulted in lower storage and handling income for agribusinesses.
In a similar trend with the turnover sub-index, the net operating income sub-index dropped by 18 index points to 47 in the fourth quarter, as agribusinesses continue to suffer the effects of the 2015/16 El Niño induced drought.
The perception in the market share of the business sub-index improved by 12 index points from the previous quarter to 80. To some extent, this is reflective of the vibrancy ahead of the 2016/17 production season.
The perceptions regarding employment in the agricultural sector deteriorated in the fourth quarter of this year. The sub-index fell from 63 points to 53. It appears that agribusinesses’ perception regarding employment has been influenced by the views expressed on net operation income sub-index.
Despite the growing concerns about South Africa’s political and policy uncertainty, confidence regarding capital investment improved by 9 index points from the third quarter to 69. In part, this is due to positive prospects regarding agricultural conditions. With the winter crops overall production set to improve, combine harvesters sales improved by 29% month-on-month in October 2016 to 18 units.
After dropping by 17 index points to 33 in the third quarter, the export volumes sub-index improved by 31 index points to 64 in the fourth quarter. This was largely driven by increased export activity in the citrus and wine industries.
