Agribusiness Confidence

Following an 18-point decline in Q1 2026, the Agbiz/IDC Agribusiness Confidence Index (ACI) fell further by 4 points to 45 in Q2, its lowest level since Q2 2024. The factors underpinning the subdued sentiment were broad.

Survey respondents cited the impact of the Middle East conflict on energy and fertiliser prices as a major concern (the Q2 survey was conducted before the announcement of the US-Iran agreement). 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.

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. Meanwhile, reports that El Niño weather conditions may characterise the 2026/27 production season have added to concerns about the outlook.

The current ACI level of 45 is below the 50-neutral mark, indicating that South African agribusinesses remain pessimistic about business conditions. This survey was conducted in the second week of June and covered businesses across agricultural subsectors nationwide.

The ACI comprises 10 subindices, and some declined further in Q2 2026. Here is the detailed view of the subindices.

• The capital investments subindex dropped by 20 points from Q1 2026 to 33, which is the lowest level since 2006. This sharp decline mirrors the sector's general mood, driven by the factors we highlighted above, rather than overall activity. For example, farmers have continued to invest in tractors and combine harvesters, amongst other infrastructure and expansion.

• The sub-index measuring export volumes deteriorated by 13 points from Q1 2026 to 38 in Q2. Concerns about the impact of the Middle East conflict on logistics, along with rising shipping costs, are the primary challenges here. Still, the actual activity points in a different direction, as exports have remained fairly strong. For example, in Q1 2026, South Africa's agricultural exports totalled US$3.7 billion, up 11% from the same period a year ago.

• The general economic conditions subindex fell by 33 points to 28 in Q2 2026, the lowest level since Q3 2023. This is unsurprising, as the war in the Middle East has added uncertainty to macroeconomic conditions.

• On the positive side, the turnover subindex confidence increased by 17 points from Q1 2026 to 67. This was primarily driven by the maple harvest in grains, oilseeds and the various fruits and vegetables. Similarly, the net operating income subindex increased by 7 points to 50 in Q2 2026.

• The market share subindex lifted by 8 points to 61 in Q2 2026. This improvement in mood mirrors the ample harvest in horticulture and field crops, and the excellent export performance so far this year.

• The employment subindex increased by 16 points to 56 in Q2 2026. This is also unsurprising as the South African agricultural sector continues to create more jobs. In Q1 2026, farm jobs increased by 3% from the same period a year earlier to 960k 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.

• The general agricultural conditions subindex increased 22 points to 61 in Q2 2026. This improvement is primarily driven by the field crops and horticulture subsectors, which benefited from the La Niña rains. Meanwhile, the cattle industry and the pork producers remain constrained by animal diseases. The sector's broadly improved operating conditions were also reflected in the recent GDP figures, with agricultural gross value-added expanding 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 subindices of the debtor provision for bad debt and financing costs are interpreted differently from the abovementioned indices. A decline is viewed as a favourable development, while an increase signals growing financial strain.

• In Q2 2026, the debtor provision for bad debts indices fell by 6 points to 33, reflecting gains from the favourable harvest in field crops and horticulture. The financing costs index declined by 45 points to 17. This came as a surprise, as the recent uptick in interest rates has slightly increased borrowing costs.

Similar to the start of the year, the ACI results for Q2 2026 show that all is not well in South Africa's agriculture. "While the pace of importing vaccines has been encouraging, the challenge of the foot and mouth disease continues to linger. The livestock and pig industries are under immense financial pressure due to the disease, and these results reflect the challenge at hand. What remains key is a speedy vaccination process that will get us off the current worrying path. The cost pressures of the Middle East conflict and the increased likelihood of unfavourable weather conditions over the coming production season are top-of-mind concerns for agribusinesses," said Wandile Sihlobo, chief economist of the Agricultural Business Chamber of South Africa (Agbiz).

ISSUED BY:

Wandile Sihlobo

Chief Economist, Agricultural Business Chamber of South Africa (Agbiz)

E-mail: wandile@agbiz.co.za