As widely expected for an upward adjustment to the country’s agriculture GDP, today’s update did not disappoint with sector performance lifting 17.2% quarter-on-quarter (q/q) (seasonally adjusted) in Q4 of 2024. This follows two consecutive quarter declines of the revised -19.7% (previously ‑28%) and 3.4% in Q3 and Q2, respectively. The overall 2024 agriculture sector GDP however fell for the second consecutive year by -8% year-on-year (y/y) which reflects the massive El Nino-induced downturn in production particularly for summer crops. The decline was unavoidable given a massive contraction of 9.1% y/y in total summer crops output to 15.53 million tons with the country’s major staple, maize, falling sharply by 22% y/y to 12.85 million tons.
Nonetheless, the Q4 sector rebound reflects the resilience of the sector despite the challenging operating conditions. We saw total agriculture exports jumping 3% y/y to US$13.7 billion for 2024 on the back of strong demand and better prices. The Agribusiness Confidence Index (ACI), considered the leading indicator for agriculture GDP, already signalled the turnaround in agriculture fortunes after rising by 10 points in Q4 and way above the 50 points breakeven level at 58 points in the quarterly update during December.
Following a disease onslaught in the previous years, the livestock subsector recovered modestly in Q4 while the horticulture subsector again posted good performance with limited production disruption due to the relatively higher dam levels and the sustained electricity supply for irrigation.
The return of La Nina weather conditions boosted confidence, and the sector is now set for recovery in 2025 as early indications are that total summer crops might yield a 17.23-million-ton crops, a 10.9% increase from the 2024 levels. Consequently, grain prices eased from the 2024 highs recently which augurs well to improved margins in the intensive livestock production systems as feed costs decline. Further, this is positive from a food inflation perspective as upward pressure dissipates into the second half of 2025.
