SA farmers and agribusinesses are in a pensive mood

The mood among South African farmers and agribusinesses remains downbeat. To some, this may come as a surprise, as the sector recently posted positive economic performance.

For example, in the first quarter of 2026, South Africa’s agricultural exports totalled $3.7-billion, up 11% from the same period a year ago. Better exports were a function of both higher export volumes across various products and higher commodity prices.

We have had favourable production conditions for field crops. For example, in the current 2025-26 production season, South Africa expects a record summer grain and oilseed harvest of 21.1 million tonnes, up 3% year on year. This production figure comprises maize, sunflower seed, soybean, groundnuts, sorghum and dry beans.

The poultry industry is also performing well and benefiting from affordable feed (maize and soybean prices are down by 10%-30% from a year ago).

We also see robust volumes in fruits and vegetables, although in the second quarter of the year, we saw a slight impact of the recent floods on the sector.

Most notably, the GDP data continue to show strong performance in agriculture. The agricultural gross value-added expanded by 3.9% quarter-on-quarter (seasonally adjusted) in the first quarter of 2026, up from 0.4% in the last quarter of 2025.

The positive economic data also extended to the labour market. For example, in the first quarter of 2026, farm jobs increased by 3% from the same period a year earlier to 960,000 jobs (up by 1% from the last quarter of 2025). This uptick in agricultural employment is unsurprising as the sector has generally enjoyed favourable production conditions in 2025 through to the start of this year.

Change in the mood

Still, despite these positive economic developments across various agricultural subsectors, the sector’s mood has not improved. We measure sentiment in the sector through the Agricultural Business Chamber of South Africa’s (Agbiz) and the Industrial Development Corporation of South Africa (IDC)’s Agribusiness Confidence Index.

The Agbiz/IDC Agribusiness Confidence Index (ACI) is not only a sentiment indicator in the sector, but also a key gauge of investment direction over time. Indeed, for investment direction, one needs to observe more than just a quarterly reading for a clearer picture of developments.

The recent release of the ACI shows that it fell by a further four points to 45 in the second quarter of 2026, its lowest level since the second quarter of 2024. This index ranges from 0 to 100, with 50 points being the neutral mark. Any figure below 50 indicates pessimism; above that, we observe optimism.

The factors underpinning the subdued sentiment in the second quarter of this year were broad. The survey respondents cited the impact of the Middle East conflict on energy and fertiliser prices as a major concern (the second-quarter survey was conducted before the announcement of the US-Iran agreement and therefore reflected the concerns stemming from the instability in the Middle East).

More domestically focused, the lingering impact of foot-and-mouth disease, which continues to impose immense financial pressure on the cattle industry, remains a major challenge despite accelerated vaccine imports. There remains a lot of work to be done to ensure that the imported vaccine reaches farmers across South Africa’s regions.

Moreover, lower global prices in the sugar and wheat industries are among the key constraints that some respondents highlighted as major risks weighing on sentiment, as is the slow domestic import tariff response, which should ordinarily have provided some level of cushion.

The farmers in these industries, wheat and sugar, remain in challenging financial conditions, partly because of cheaper imports. This is becoming a more challenging issue now, with high input costs, mainly fertiliser and fuel.

Indeed, the recent US-Iran deal to reopen the Strait of Hormuz will help ease fertiliser and fuel prices. Still, the challenge of poor profitability remains for these industries, an issue that came out in the surveys.

Also worth noting is that the reports that El Niño weather conditions may characterise the 2026-27 production season have added to concerns about the outlook.

Overall, while near-term agricultural economic data had painted a somewhat positive picture of the agricultural sector’s performance, the mood among stakeholders hasn’t improved. The ACI results for the second quarter essentially show us that all is not well in South Africa’s agriculture. A shift in mood toward optimism is essential for the long-term growth of the sector. For now, we remain on a worrying path. DM