According to Wandile Sihlobo, the chief economist of the Agricultural Business Chamber (Agbiz), if South Africa is not severely affected by El Niño, the country’s domestic harvest will benefit from potentially lower global grain and soybean prices during the upcoming 2023/24 summer season. This is good news for the livestock and poultry industries, which have faced challenges in recent years due to factors such as animal diseases and rising input costs.
Sihlobo explains that in previous seasons, a large domestic harvest would have resulted in significant reductions in feed prices. However, this did not happen in the past two years due to higher global maize and soybean prices caused by a drought in South America, increased demand in China, disruptions in the supply chain due to COVID-19, and the conflict between Russia and Ukraine.
As a small open economy, South Africa is closely connected to the global grains and oilseeds market, and domestic prices tend to follow global price movements. However, since the beginning of this year, global maize and soybean prices have notably declined, leading to a similar trend in South African prices, which are now approximately 15% lower than last year’s levels.
The decrease in prices benefits the struggling livestock and poultry industry, which is dealing with additional domestic-related costs such as load shedding and failing municipalities. The ample supply of grains and oilseeds in the market also contributes to the downward pressure on animal feed prices.
Sihlobo mentions that two risks need to be monitored closely: the exchange rate between the rand and the dollar and the severity of El Niño. A weak rand could lead to higher domestic maize and oilseeds prices, affecting local livestock and poultry producers, especially if feed imports become necessary. Additionally, if El Niño turns out to be severe, crop yields would suffer, which could have further price implications. However, Sihlobo remains generally positive about the outlook for the livestock and poultry industries in terms of feed prices, with more clarity expected towards the end of the year when the 2023/24 season begins.
Sihlobo said the recent crop estimates from the International Grains Council also painted a good picture of global grains and oilseed supplies in the upcoming 2023/24 season, which pointed to moderate price movements.
Meanwhile, on Friday the Food and Agriculture Organization(FAO) of the United Nations reported that the benchmark index of international food commodity prices declined again in June, led by price decreases for all major cereals and most types of vegetable oils.
