Lower first quarter agribusiness confidence

Confidence in agribusiness dropped 15% in the first quarter of 2013, compared to the last quarter of 2012 and in comparison to the same period last year.

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Agbiz reported that the recovery in confidence was flattening out, since the all-time low in 2009. “Since the second quarter of 2010, more than half of the agribusiness leaders and decision-makers were positive about business conditions in the agribusiness sector,” Agbiz stated in a report. The Agbiz/IDC Agribusiness Confidence Index is measured quarterly from the responses on a survey amongst agribusiness decision-makers and executives across SA.

According to the index confidence dropped slightly in the third quarter of 2010 and the second quarter of 2012. A significantly drop followed in the fourth quarter of 2011 and again now in the first of 2013. Confidence however remained positive throughout. The main sub-indices that drove the drop in confidence were turnover, net operating income and the respective market shares of the businesses.

“The most prominent reasons therefor are the tumbling international grain prices, with maize prices reaching nine month lows, as the US stock piles were larger than expected. Accordingly, the local soya bean, cotton, groundnuts, potatoes,
beef, mutton and pork prices also dropped in the short term,” the report stated.

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“Even though projections in general seemed more favourable and some industries, such as poultry, already experienced a recovery in prices, the drop in the first quarter of 2013 is reflected in the turnover and net operating incomes of the agribusinesses. The drought in certain parts of the country also drastically contributed to agribusinesses’ responses to their expectations of lower turnover in this period.”

The lower economic growth forecasts were also reflected in the agribusiness perception thereof. The agricultural sector depended on local consumer demand and the economic growth in the country impacts directly thereon. The FNB/BER Consumer Confidence Index has reached a nine year low in the first quarter of 2013.

Labour unrests in the fourth quarter of 2012 also had a negative impact on business confidence in the first quarter of 2013, as the implications of the production losses and the new minimum wages were being incorporated into business planning.
The weakening of the Rand provided for small increases in volumes exported. This coincided with the growth in global trade volumes in the fourth quarter of 2012.