Tito’s recession not all bad news for farmers

Reserve Bank governor Tito Mboweni’s comment that he wouldn’t be surprised if South Africa posted a second consecutive quarter of negative growth – a sign that the country’s in recession – was echoed by the Agricultural Business Chamber (ABC).
“It looks like we’re definitely moving towards a recession,” said ABC manager of economic intelligence, Lindie Botha. “But ‘recession’ is a big word and creates a lot of fear. While the mining and energy sectors have experienced a terrible drop in growth, the agricultural sector is keeping everyone’s heads above water.”
Botha said agriculture will survive the deteriorating economy. “Farmers will always be able to sell what they produce because populations are growing. But there will be less demand for high-quality, high-cost products as people go back to the basics. Demand for export products has decreased in light of the global recession, but it can only decrease up to a point, as foreigners also need to eat.”
Farmers should capitalise on the demand for basics and African staple foods like maize, wheat and cassava for northern Africa. “Production in Kenya has dropped. The Argentinian soya bean crop is 3 million tons less than the previous season. This creates opportunities and we can deliver these demands.”
Botha said the indirect impact of the recession was that farmers couldn’t get the credit they needed to expand while there were several other economic factors holding them back. “But agriculture’s also benefiting from the state’s social grants, which put money into pockets that’s mostly being spent on food.”
Botha confirmed that food spending was up, helped along by the relaxation of the interest rate, which left a bit more money in consumers’ pockets. An indication of this was the beef price, which was higher on the back on good demand. Production figures for March showed the average producer price for beef increased by 8% to 14% for different classes and there was a 63% probability that the price would be higher for April.
“We didn’t expect the beef livestock industry to do as well as it has,” said Botha. “Beef consumption is usually an indication of how well the man in the street is doing, so obviously he’s not doing as badly as we thought.”
The Sake24 and BoE Private Clients provisional barometers for February, which measure activity in the private sector, indicate that pressure on consumers is starting to lift. The retail market is also expected to recover in the coming months. – Robyn Joubert