Reference Date: 26-August-2022

Cereal production well above‑average in 2022

Harvesting of the 2022 summer coarse grain crops concluded in July, while winter wheat and barley crops are expected to be harvested from October onwards. Total cereal production in 2022 is forecast at 18.4 million tonnes, 7 percent higher than the previous five‑year average, but below the all‑time high in 2021.

The large output in 2022 is mostly underpinned by a sizeable maize outturn, the primary cereal produced in the country, estimated at 15.5 million tonnes. The higher‑than‑average harvest results from an above‑average maize acreage, as farmers responded positively to remunerative prices during the planting period in late 2021. Yields declined marginally compared to the average, which in part reflects the adverse effects of excessive rains during the early stages of the cropping season; weather conditions in the subsequent months were generally conducive for crops. Sorghum production, the secondary summer cereal crop, was estimated at a marginally below‑average level in 2022, owing to a reduction in the area planted. Production of wheat, which is grown during the winter months, is forecast at 2.3 million tonnes in 2022, nearly 23 percent above the recent average. A large acreage, spurred by attractive producer prices, underlies this year’s favourable production outlook. However, moderate rainfall deficits since the start of the planting in May in Western Cape, the largest wheat‑producing province, may curb yields relative to the current good prospects.

Outbreaks of foot and mouth disease (FMD) in 2022 are affecting the livestock industry, with 56 outbreak cases confirmed by April. To combat the spread of the disease, the government suspended the movement of all cattle across the country for 21 days, from 16 August 2022.

For the subsequent 2023 cropping season, planting of cereal crops will begin from October. The current high cost of inputs, domestic prices of the main fertilizers had more than doubled in the 12 months to May 2022, are influencing profit expectations, and despite the elevated grain prices, the increased production costs could result in a modest cutback in the area planted with maize in 2023. Estimates on farmers’ planting intentions will be available in October.

Ample supplies and large maize exports in 2022/23

Reflecting the large output in 2022, the country is expected to maintain its net exporting status for maize in the 2022/23 marketing year (May/April). Exports of maize are forecast to reach an above‑average level of 3 million tonnes, albeit down by 0.7 million tonnes from the record quantity exported in 2021/22. In the first four months of 2022/23, an estimated 1.23 million tonnes had been shipped, mostly yellow maize (generally used as animal feed) to Asian countries. About 220 000 tonnes of white maize were exported to neighbouring Southern African countries, where import needs this year have risen on account of weather‑reduced harvests in 2022. Despite the lower total export forecast in 2022/23, the average weekly pace of exports is quicker than the rate in the previous year.

Regarding wheat, the country is a net importer. In 2022/23, imports are foreseen to remain at a similar level to the previous year’s below‑average quantity, amid the high global prices and expectations of a large domestic harvest in October that would curb import needs.

Prices of cereals eased slightly, but remain at high levels

Wholesale prices of maize and wheat eased in recent weeks following the record and near‑record highs reached in May. However, as of August 2022, the monthly values were still between 27 and 43 percent higher on a yearly basis. The elevated levels this year are largely attributable to the price trends in the international market, as well as domestic exchange rate movements; the national currency, South African rand, had weakened since April 2022, amplifying the spill‑over effects of the high global prices. Countering some of these upward pressures are the large domestic grain supplies, and this is evidenced by the domestic maize prices trading below the export parity levels for much of 2022.

Reflecting the dynamics in the wholesale market, retail prices are also at elevated levels. The annual food inflation rate was estimated at 9 percent in July 2022, up from 7 percent in July 2021. Cereal products, together with oils and fats, registered the highest annual rates of increase. The overall headline inflation rate was estimated at 7.8 percent in July 2022, a 13‑year high and above the South African Reserve Bank’s upper bound inflation target of 6 percent. This prompted the Reserve Bank to make the largest upward revision to the benchmark interest rate in 20 years (75 basis points to 5.5 percent) to curb the inflationary pressure and maintain a positive interest rate differential with the United States of America, which is hoped will stem financial outflows and currency depreciation.

These elevated prices are eroding households’ purchasing power and combined with a slowdown in economic growth in 2022 that will constrain income‑generating opportunities, as well as a higher year on year unemployment rate, could worsen food insecurity in 2022.

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