The Russian invasion of Ukraine has opened a new chapter in international relations, with important implications for the global economic order. The outbreak of large-scale warfare on European soil, with its associated human tragedies, brings back memories of the continent’s darkest times. Within three days of the invasion, the Group of Seven, consisting of Canada, France, Germany, Italy, Japan, the United Kingdom, and the United States, soon followed by other countries, deployed a range of economic sanctions against the aggressor. As discussed in the latest World Economic Outlook, the war and the associated economic sanctions will have a major impact on the world economy, slowing down activity and increasing price pressures. Please click here to peruse the article by Pierre-Olivier Gourinchas, the IMF’s economic counsellor and director of the research department.

Compounding the damage from the Covid-19 pandemic, the Russian invasion of Ukraine has magnified the slowdown in the global economy, which is entering what could become a protracted period of feeble growth and elevated inflation, according to the World Bank’s latest Global Economic Prospects report. This raises the risk of stagflation, with potentially harmful consequences for middle- and low-income economies alike. Global growth is expected to slump from 5.7 per cent in 2021 to 2.9 per cent in 2022— significantly lower than the 4.1 per cent that was anticipated in January. It is expected to hover around that pace over 2023-24, as the war in Ukraine disrupts activity, investment, and trade in the near term, pent-up demand fades, and fiscal and monetary policy accommodation is withdrawn. As a result of the damage from the pandemic and the war, the level of per capita income in developing economies this year will be nearly 5 per cent below its pre-pandemic trend. The June Global Economic Prospects report, published by the World Bank, offers the first systematic assessment of how current global economic conditions compare with the stagflation of the 1970s—with a particular emphasis on how stagflation could affect the emerging market and developing economies. Please click here to peruse.

This week, Agbiz chief economist, Wandile Sihlobo, delivered an address at the SA Large Herds Conference in KwaZulu-Natal. The address focused on the topic "How to broaden farm ownership for successful transformation in South African agriculture". The presentation is based on a paper co-authored with Prof. Johann Kirsten of the Bureau of Economic Research (BER). For background, one of the dominant questions in South Africa's agricultural policy since the dawn of democracy is the need to accelerate land reform to ensure the inclusion of black farmers in the sector. The failures in this attempt prompted some political parties to call for a need to expropriate land without compensation from December 2017 through an amendment in section 25 of the Republic of South Africa constitution. This is a motion that was tabled in the National Assembly and failed. On the margins, some began to ask, "Is farm ownership a requirement for success in the South African context?". Of course, this is a broad question and answers to it would depend on each individual's financial status. But using the principle that farming is a long-term endeavour with intensive capital investment, farm ownership is crucial. For this fundamental reason, South Africa still discusses the subject of land ownership, hence the address focused on this topic, not the historical perspective but the options to accelerate land reform from now on. You can watch the address here. The full paper is available on request.

The Agricultural Business Chamber of South Africa (Agbiz) remains involved in its members' strategic work and events. This week, 06 June 2022, Agbiz chief economist Wandile Sihlobo delivered a talk at the Hortgro Technical Symposium held in Somerset West in the Western Cape. His input focused on the macroeconomic conditions, food price inflation, and the agricultural policy path. The macroeconomic conditions can be summarised as 5i's, recession and climate change. Read more about these macroeconomic conditions in the linked article. (Photo credit: Ivan Meyer)

South Africa has been in an unusually long period of higher-than-average rainfall over the past three seasons. Ordinarily, we would have one or two consecutive years of above-average rainfall, followed by an average rainfall season or even dryness. The rains have been supportive of the agricultural sector. The past three seasons have seen large harvests, which boosted domestic food supplies and agricultural export earnings. With the 2021/2022 summer crop harvest underway across the country, some have begun to ask what the 2022/2023 production season, which starts in October, may look like. In its recently released Seasonal Climate Watch report, the SA Weather Service provides an optimistic outlook. The weather agency notes that “the El Niño-Southern Oscillation is now in a La Niña state, and forecasts indicate that it will likely remain in this state during the coming seasons”. Agbiz chief economist Wandile Sihlobo discusses this subject in the linked article, written for and first published in Business Day.

The numbers released earlier this week by Statistics South Africa show that in the first quarter of 2022, agriculture gross value added grew by 0,8% quarter-on-quarter (seasonally adjusted). We believe that this quarterly growth is on the back of improved activity in the horticulture industry and some field crops such as soybeans and sunflower seeds, among others. While the 2021/22 agricultural production season started on a downbeat footing, with excessive rains damaging some crop and vegetable fields, a breather from mid-January allowed for replanting and recovery in some fields. In addition to these improvements, we have had a decent deciduous fruit harvest. Moreover, there are expectations of a large citrus harvest. In the linked article, Wandile Sihlobo analyses the latest data.

We continue to be surprised by the solid agricultural machinery sales, which have remained robust in the first five months of 2022. The data released by the South African Agricultural Machinery Association this week show that in May 2022, tractor and combine harvester sales were up by 36% year-on-year (y/y) and 51% y/y, with 662 units and 53 units sold, respectively. The generally healthy sales are welcome developments, as they indicate a primary agricultural sector that is still in a better financial condition and continues to invest in movable assets. We, however, believe that the second half of the year could show a decline, which will be a break from the two years of a positive trend. Wandile Sihlobo discusses the latest data in the linked article.

The impact of the recent floods in Durban, which have destroyed the infrastructure and interrupted trade activity, will likely appear in the second quarter trade figures. The first quarter of the year faced similar constraints to the past quarters such as delays at the ports and rail, and deteriorating road infrastructure. This is true for exporting sectors of the economy, including the agricultural sector. In the first quarter of the year, the approach for agriculture was to engage in more coordination with Transnet, agriculture industry groups, and transport organisations, which helped improve the flow of information about various challenges and functions at the ports. This was specifically true for the Port of Cape Town, where there were long delays at the start of the year due to numerous infrastructure constraints and weather-related difficulties. The primary external event in the first quarter was the invasion of Ukraine by Russia, which disrupted trade with the Black Sea region. For South Africa, this is important, especially for the horticulture subsector. Russia accounts, on average, for 7% of South Africa's citrus exports in value terms. And it accounts for 12% of South Africa's apples and pears exports. Hence, we feared that the impact of the war would instantly show in the trade figures. Read more in the linked article by Wandile Sihlobo.

South Africa’s agricultural sector faces various challenges, including uncertainty in domestic agricultural policy, logistics, biosecurity, geopolitics, and rising input costs. Therefore, it is essential to analyse and determine the confidence levels in the agricultural and agribusiness sectors. As you know, we do this through the Agbiz/IDC Agribusiness Confidence Index. Decision-makers from within the agricultural community, Stats SA, SA Reserve Bank, and the National Treasury, among others, are close observers of this index. Kindly respond to the Agbiz/IDC Agribusiness Confidence Index Survey for the second quarter of 2022 and submit your response on/or before Friday, June 10, 2022, either electronically (by clicking on this link or by completing the printable version (available here) and sending it back to wandile@agbiz.co.za.  

Economic prospects changed significantly in the three months since Russia invaded Ukraine. Not everything can be attributed to the invasion, but everyone will agree that it made the biggest contribution to the weaker economic outlook. Economists are worried that the world is facing a recession. Agbiz Grain general manager Wessel Lemmer discusses this subject in the linked article, written for and first published in Landbouweekblad.

South Africa’s Minister of Trade, Industry and Competition (dtic) Ebrahim Patel and the Ambassador of Japan to South Africa Maruyama Norio launched the Japan-South Africa Business Forum on 6 June at an event attended by investors and government officials from both countries. Agbiz was invited to attend to articulate and promote the interests of South African agriculture. The Citrus Growers' Association of Southern Africa was invited to give a presentation due to their participation in a business delegation led by President Ramaphosa and dtic Minister Patel to Japan in 2019. The business forum will promote trade, investment and commercial relations between Japan and South Africa and address barriers to doing business in Japan and South Africa. Japan is currently South Africa’s fourth-largest market for exports (7.4% of total shipments) after China, the US and Germany. South Africa has for a number of years enjoyed a healthy trade surplus in trade with Japan in mostly metals, minerals, vehicles, agricultural products, and some chemicals and machinery. The market is seen as a priority growth market for South African agricultural exports, with fruits playing a key role as highlighted by Minister Patel. The minister proposed a structured series of engagements for the forum, including at ministerial level, to ensure the many areas of trade and commercial engagement between the countries would be expanded and enhanced. Please click here to read more.

The Cairns Group Farm Leaders, a grouping of national farm representative groups from Cairns Group countries, met in May 2022, to draft a statement that seeks a commitment to agricultural trade reform through the upcoming World Trade Organization's (WTO) Twelfth Ministerial Conference (MC12), which will be held in mid-June 2022. Agbiz is the South African organisation representing South African agribusiness association interests on the platform. Cairns Group members include organisations from a range of agricultural exporting countries such as Argentina, Australia, Brazil, Canada, Colombia Chile, Guatemala, and New Zealand among others. The group works towards a world with an equitable and enforceable rules-based trading system in agriculture. Agriculture has for decades now remained one of the outstanding sectors from the Doha Round of trade liberalisation negotiations. Analysts believe that these upcoming negotiations offer a real possibility for progress finally on agriculture. In preparation, the group released a statement focusing on tariff and non-tariff barriers, export restrictions, the intersection of trade, sustainability, and food security, climate change, and evidence-based approaches to agricultural regulations. Please click here to peruse.

Reuters writers Simon Lewis and Daphne Psaledakis reported yesterday that, “U.S. Secretary of State Antony Blinken said on Monday there are ‘credible reports' that Russia is ‘pilfering’ Ukraine’s grain exports to sell for profit. “Speaking during a virtual roundtable with philanthropies, non-governmental organizations and private sector entities, Blinken said the alleged theft was part of broader Russian actions during its war in Ukraine that have hit Ukraine’s ability to export its wheat crop and worsened a global food security crisis. “There are credible reports, as we saw in one of our leading newspapers today, that Russia is pilfering Ukraine’s grain exports… to sell for its own profit,’ Blinken said, an apparent reference to a New York Times story that said Washington last month warned 14 countries, mostly in Africa, that Russia was trying to ship stolen Ukrainian grain to buyers overseas.” Read more in the linked article, first published on Farm Policy News.

Governments confront difficult policy choices as they try to shield their people from record food prices and soaring energy costs driven higher by the war in Ukraine. Countries introduced a variety of policy measures in response to this unprecedented surge in prices of the most crucial commodities. Our survey of these announced measures by member nations shows that many governments tried to limit the rise in domestic prices as international prices increased, either by cutting taxes or providing direct price subsidies. But such support measures in turn create new pressures on budgets already strained by the pandemic. Read more in the linked IMF blog post.

The Food and Agriculture Organization of the United Nations (FAO) and the World Food Programme (WFP) warn that acute food insecurity is likely to deteriorate further in 20 countries or situations (including two regional clusters) – called hunger hotspots – during the outlook period from June to September 2022. Acute food insecurity globally continues to escalate. The recently published 2022 Global Report on Food Crises alerts that 193 million people were facing Crisis or worse (Integrated Food Security Phase Classification [IPC]/Cadre Harmonisé [CH] Phase 3 or above) across 53 countries or territories in 2021. This increase must be interpreted with care, given that it can be attributed to both a worsening acute food insecurity situation and a substantial (22 per cent) expansion in the population analysed between 2020 and 2021. In addition, an all-time high of up to 49 million people in 46 countries could now be at risk of falling into famine or famine-like conditions, unless they receive immediate life and livelihoods-saving assistance. This includes 750 000 people already in Catastrophe (IPC/CH Phase 5). Please click here to peruse.

Business Unity South Africa (BUSA) welcomes recent developments regarding NERSA registering new generation facilities, which use the licence exemptions for generators under 100 MW. The fact that registration processes for the 16 new generation facilities were processed within 19 days is very encouraging for businesses ready to generate energy and is an indication that Business engagements with NERSA are bearing results. It has been a long time coming since the announcement by President Ramaphosa that the licencing exemption threshold under schedule two of the ERA is lifted to 100 MW. This amendment goes a long way to unlocking embedded generation contributing to the security of supply, attracting investment, and generating growth. Please click here to read the full BUSA statement.

"It is very encouraging that the latest much better-than-expected GDP figures for 1Q 2022 show a further strong recovery in the economy following the economic setbacks of the Covid-19 lockdowns and the widespread civil unrest of July 2021. They reinforce the 4.9% GDP growth recorded for 2021 as a whole after the negative -6.4% growth experienced the previous year,", says Prof. Raymond Parsons, North-West University Business School economist. "Economic production is now virtually back to pre-pandemic levels, which no doubt has also been supported by the continued global commodity boom. Particularly reassuring is the rise of 3.6% in Gross Fixed Capital Investment (GFCI), which is a major accelerator of growth and employment. GFCI in 2021 was still at the low ratio of only 13% to GDP, which is about half of what is required for much higher economic growth and job creation if the goals of the Economic Reconstruction and Recovery Plan are to be met. The latest improvement in fixed capital spending will therefore be another step towards strengthening that key economic ratio." Read more in the linked media statement.

Port operations this past week took place within generally good weather conditions, with the somewhat lower than usual volumes starting to pick up. The long-awaited LC8 crane is back in operation at Cape Town Container Terminal, and one of Durban's cranes has also been returned to operation. Overall, there were a few days of low volumes and a decrease in reports of congestion as a result. Intermittent equipment breakdowns continue to plague our ports, but lower volumes have hopefully created an opportunity for some much-needed equipment maintenance throughout the week. On the international shipping side, international metrics such as throughput numbers and schedule reliability worsened in April after some optimism that significant momentum had been gained in March. The primary determinant on both counts appears to be the lockdowns in China, which are finally coming to an end. Read more in the latest BUSA Cargo Movement Update.

Losses in the export of South African table grapes have increased five-fold because of bottlenecks in the country’s ports, taking a toll on insurers still willing to underwrite risk in this sector of perishable cargo. That’s according to Samantha Boyd, the chief executive for Specialty Insurance at Old Mutual Insure. Quoting the Bureau for Food and Agriculture Policy, Boyd says it’s become a struggle to get grapes destined for markets abroad out through ports like Durban in under 21 days. “Currently it takes 50 days.” The Marine Insurance Forum, she says, has noted the impact this is having on the industry, with many opting out of insuring the freight-related risk. Read more in the linked article, first published on FreightNews.

During the final two months of the 2021/22 season, the International Cotton Advisory Committee (ICAC) officially inverted the production and consumption ratios. For the entire season, the production and consumption have been closely matched, with production only slightly outpacing consumption by a few thousand tons. However, due to reductions in the Indian crop by 425 000 tons, this reduction caused global consumption to now exceed production. Consumption in the 2021/22 season remains unchanged at 26.16 million tons and production is now reported at 25.89 million tons. Global ending stocks have fallen to 20.34 million tons, the lowest in the past three seasons. Read more in the linked report by Cotton SA.

McCain Foods Limited has unveiled plans for its second Farms of the Future, which will be located near Lichtenburg in South Africa, and will form part of its ambitions to advance, showcase and roll out regenerative farming practices. Regenerative agriculture seeks to rehabilitate and enhance entire farm ecosystems through soil health enhancement and effective water management, amongst other activities. The announcement follows the launch of the company’s pilot farm project in Canada, in 2020. Read more in the linked McCain Foods media statement.

The Embassy of the Republic of Panama in the Republic of South Africa invites the Agbiz and its members to the webinar "Connecting Panama-South Africa, Opportunities in Logistics and Agro", which will take place on 15 June 2022. Participants can register at this link.

Senwes breaks new ground through the acquisition of three John Deere agencies in East Germany namely Schlieper für Landmaschinen GmbH (Schlieper), Landmaschinen Vertrieb Deuben GmbH (LVD) and Bartling Landtechnik GmbH Hohenseefeld (Bartling Hohenseefeld). These three agencies will be merged into one and rebranded as S&L Connect to bring together the best of Shlieper, LVD and Bartling Hohenseefeld. S&L Connect stands for growth and connects people and machines. The company will be managed by a highly experienced German team headed by Ricarda Schlieper as managing director and Cathleen Powell as financial director. The merged business is essentially similar to Senwes Equipment in terms of the business model, the way it is structured, the industry and the product offering. Senwes Equipment, a 100% owned subsidiary of Senwes, will be responsible for the acquisition. Read more in the linked Senwes media statement.

Keeping it Fresh, the newsletter of the Fresh Produce Exporters Forum (FPEF) contains all the recent relevant news and developments. Please click here for the latest edition.

The Citrus Growers' Association of Southern Africa, shares the latest news in the citrus industry in its weekly update - From the desk of the CEO. Please click here to peruse.

We are looking forward to welcoming you to the Agbiz Congress 2022 that will take place from 22 to 24 June 2022 at Sun City. Our congress marks the gathering of more than 400 stakeholders in the Southern African agricultural and agri-food industry. As in the past, we are planning to bring together CEOs, senior management and board members, as well as key delegates from government, producer organisations, processors, academia and various other major role players for the Agbiz Congress 2022.

With the continued support from our sponsors, we will bring you a cutting-edge congress with world-class speakers. With the renewed possibility of hosting a face-to-face congress, we can assure you that the Agbiz Congress 2022 will be bigger and better than before and promises to be an event not to be missed.

Delegates can now register for the Agbiz Congress 2022. In line with government regulations, delegates will be required to be fully vaccinated or submit a negative PCR test 72 hours before the event. If you have already registered, our organisers will be in contact with you to verify your vaccination status. If you haven’t registered yet, please don’t hesitate to sign up as soon as possible. Please click here for more information.