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January to March 2010

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The real Gross Domestic Product (GDP) at market prices increased in the first quarter of 2010 at an accelerated rate of 4.6%. The share of total value added by the sector to real GDP (as a percentage of GDP) has gradually decreased and reached 2.1% in the first quarter of 2010. The annual producer price index (PPI) inflation for domestic production averaged 9.3% in the first quarter of 2010.

Intermediate expenditure on goods and services in agriculture increased from R14.4 billion in the first quarter of 2009 to R16.1 billion in the first quarter of 2010, meaning that the number of people employed in South Africa decreased from 13.64 million in in the first quarter of 2009 to 12.8 million in the first quarter of 2010. The total value of agricultural exports decreased from 11.9 billion ran in the first quarter of 2009 to 10.1 billion ran in the first quarter of 2010.

Employment in the agriculture, forestry and fisheries sectors is likely to increase year-on-year in the third and fourth quarters of 2010. However, signs in the first quarter of 2010 indicate that the industry is likely to fully recover from 2010 in subsequent quarters.

Global overview of agricultural economy

Global prices of staple foods have generally declined from their peak in 2008, but remain significantly above pre-2008 food crisis levels in several countries. According to the FAO, the food price index, a measure of the monthly change in international prices of a food basket consisting of grains, oilseeds, dairy products, meat and sugar, has risen steadily since August 2009.

The state of the domestic economy in agriculture, forestry and fisheries

  • Growth
  • Inflation
  • Expenditure on intermediate goods and services by the agricultural sector…
  • Employment
  • Nominal gross farm income and net farm income from agricultural products… 6
  • Private consumption expenditure on agricultural products
  • Trade of agricultural, forestry and fisheries products
  • Review of agricultural markets

PPI inflation for the agriculture and fisheries subsector remained in the negative zone in the first quarter of 2010. In the first quarter of 2010, food and non-alcoholic beverage inflation averaged 1.8%, with food inflation alone averaging 0.1%. The rate of increase accelerated to 12% between the first quarter of 2009 and the first quarter of 2010.

In value terms, total spending on intermediate goods and services by agriculture amounted to R16.1 billion in the first quarter of 2010, up from R14.4 billion reported for the first quarter of 2009. Therefore, the agriculture, forestry, fisheries and hunting subsectors experienced the highest rate of quarter-to-quarter job recovery in the first quarter of 2010. Between the first quarter of 2009 and the first quarter of 2010, provinces such as the Northern Cape and the Western Cape jobs created in the agriculture, forestry, fisheries and hunting sub-sectors, i.e.

According to the data, the total export value of agricultural products fell from R11.9 billion in the first quarter of 2009 to R10.1 billion in the first quarter of 2010. During the first quarter of 2010, South Africa gained most of its export earnings agricultural products from the Netherlands, i.e. According to the data of the first quarter of 2010, the largest share of the total import value of agricultural products (67%) was accounted for by countries such as Argentina, Brazil, Thailand, Germany, China, the Netherlands, the UK, Indonesia, Malaysia and the US, with Argentina as the largest contributor (15%).

According to Table A.10, the total import value of fish and seafood decreased from R190 million in the first quarter of 2009 to R185 million in the first quarter of 2010. Export destinations of timber during the first quarter of 2010 included Japan, the UK, Mozambique, Netherlands, Australia, Zimbabwe, Zambia, Seychelles, Tanzania and South Korea. The trade balance of fish and seafood remained in positive territory (more than R250 million) from the first quarter of 2005.

In the first quarter of 2010, the trade balance for timber reached a negative value of R17 million. Average opening stocks for white maize increased to 2.75 million tonnes in the first quarter of 2010, while yellow maize decreased to 1.66 million tonnes. Consumption decreased to 2.09 million tonnes in the first quarter of 2010, when consumption of the two maize varieties reached 1.15 million tonnes and 940,000 tonnes respectively.

The average opening stocks of wheat for human consumption and for animal feed in the first quarter of 2009 were 1.85 million tonnes and 19 000 tonnes respectively. The price of white and yellow maize in the first quarter of 2009 averaged R1 749/tonne and R1 619/tonne respectively.

Figure 2: Trends in the real GDP and real  value added by the agriculture, forestry  and fisheries sector
Figure 2: Trends in the real GDP and real value added by the agriculture, forestry and fisheries sector

Outlook of the agricultural economy

  • Employment
  • Inflation
  • Agricultural trade
  • Farm debt
  • Production

During the same period, the price of oranges increased dramatically by 43%, while the price of mangoes and grapes increased by 12% and 1% respectively. Between the first quarters of 2009 and 2010, most fruits experienced an increase in volumes traded through the FPMs, with volumes of apples, pears, mangoes and grapes increasing by 1% respectively. On the other hand, avocados and oranges saw declines of 8% and 36%, while bananas saw no change in the quantities sold through the FPMs.

It remains to be seen to what extent this recovery can be sustained in the next three quarters of 2010. In line with the decline in prices of agricultural commodities (particularly grains) in domestic markets, PPI inflation for agriculture remained in negative territory in the first quarter of 2010 and there remained until May 2010. Given the good production of cereals in the country and the consequent reduction in prices, we expect PPI inflation for cereals (maize) to remain in negative territory.

This could lead to lower (less than 5%) CPI inflation for agriculture during the third quarter of 2010. Given these recent figures on food inflation and negative PPI inflation for agriculture, both and lower prices of grain products, it will not be surprising to see food inflation remain below 3% or even enter negative territory during the second half of 2010. Rad depreciation during the quarters of third and fourth of 2010 will make imports much more expensive.

Importers of agricultural inputs and products are likely to pay more during the periods under review. The Monetary Policy Committee (MPC) decided to cut the repo rate by 50 basis points to 6.5% in March 2010 from 7% in August 2009, following a positive outlook for inflation and the fact that the pace of recovery is expected to remain slow. . According to Table 1, the repo rate and the prime rate will remain at the same levels throughout the quarters presented, i.e.

Therefore, farm debt will most likely increase further during the second semester of 2010 as net farm income continues to decline. Oil will be sold at R82/barrel in the second quarter of 2010 and the forecast is not expected to change in the third quarter.

Conclusion

The consumer price inflation for agricultural products is now lower than the SARB requires, while the producer price inflation for agricultural and fishery commodities is negative. However, the signs in the first quarter of 2010 are that the sector is likely to experience a full recovery in the remaining quarters of 2010. Quarter 1st 2nd 3rd 4th 1st 2nd 3rd 4th 1st Nominal gross income from agricultural products (R million).

Table A.1: Intermediate expenditure on goods and services by agriculture
Table A.1: Intermediate expenditure on goods and services by agriculture

Figure

Figure 1: Trends in the real GDP growth  and the real value added by the  agriculture, forestry and fisheries sector
Figure 2: Trends in the real GDP and real  value added by the agriculture, forestry  and fisheries sector
Figure 3: Trend in value added by the  agricultural sector as % of real GDP
Figure 4: Trends in the PPI Inflation
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References

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