South Africa’s agricultural sector is entering its next cycle amid exceptionally high levels of global uncertainty. Although the industry has shown resilience in recent years, performing strongly despite logistical challenges and biological threats which is a combination of geopolitical instability, escalating energy costs and mounting climate risks is reshaping the environment for farmers, exporters and agribusinesses alike.
During a recent Coface webinar, Aroni Chaudhuri, Chief Africa Economist, explained how global developments are increasingly influencing the agricultural sector. He noted that these pressures are expected to intensify toward the latter part of 2026 and extend into 2027.
Global geopolitics: indirect but inescapable pressures
While agriculture is not typically the first sector to absorb the immediate impact of conflict in the Middle East, the current situation is creating conditions that are likely to weigh on global agri‑food systems over time. Energy and fertilizer markets represent the most direct channels through which these effects are transmitted.
Interruptions to oil flows have disrupted the balance between global supply and demand, driving prices higher and sustaining them at elevated levels. Unlike previous oil price shocks, which were largely driven by market sentiment, today’s environment reflects real physical shortages. This distinction is particularly important for agriculture, a sector that depends heavily on fuel for production and transport.
Elevated oil prices increase farming costs directly through mechanisation and logistics, and indirectly by fuelling broader inflationary pressures. For emerging markets such as South Africa, the impact of these cost increases is especially pronounced.
Higher input costs and fertilizer risk
Beyond energy markets, disruptions across chemical supply chains are adding further uncertainty. Fertilizer markets remain supported by existing inventories for now, but prices are already edging upward. The greater concern lies not in immediate shortages, but in future access and affordability, especially once major importing countries re‑enter the market to rebuild reserves.
For South African buyers, this creates uncertainty around input costs at a time when profit margins are already tight. Even relatively small increases in fertilizer prices can place considerable strain on cash flows, particularly for small and medium‑sized participants in the agricultural value chain.
Vulnerable to price shocks, but unlikely to face supply collapse
South Africa’s exposure to global volatility is largely price‑driven. As a net importer of refined petroleum products, the country remains highly sensitive to prolonged periods of high oil prices. However, its income levels and access to international markets should enable it to secure supplies, albeit at a higher cost.
The broader consequences are macroeconomic. Rising fuel prices feed into inflation, particularly through transportation costs, which in turn limits the scope for monetary easing. Low inflation had supported recent growth momentum, and renewed price pressures reduce the Reserve Bank’s ability to stimulate demand through interest rate adjustments.
Under tighter financial conditions, borrowing costs are likely to stay elevated and access to credit may remain constrained, affecting both investment decisions and working capital availability across the agricultural sector.
Climate risk intensifies as El Niño looms
Adding to geopolitical and economic pressures is a recurring but significant climate threat: El Niño. Forecasts suggest a high likelihood of El Niño conditions returning later in 2026, bringing warmer and drier weather patterns to Southern Africa.
Historically, El Niño events have been associated with weaker agricultural output in South Africa, particularly during the summer planting season. While production expectations for 2026 remain positive following sufficient rainfall, conditions beyond that period appear more challenging.
The greatest risk is a prolonged or unusually intense El Niño episode, which would increase stress on water resources, reduce crop yields and lower overall production levels as the sector moves into 2027.
Sources: WMO, IRI Columbia University, Coface
Uneven impacts across agricultural subsectors
The effects of these pressures vary across subsectors. Crop production has benefited from strong harvests in recent years, ensuring adequate cereal supplies and keeping prices relatively contained. Demand for cereals remains stable, driven mainly by demographic growth rather than economic cycles.
By contrast, the livestock sector continues to face challenges from disease outbreaks, biosecurity risks and rising feed costs. Together with higher input prices, these pressures underscore the uneven distribution of risk within the agricultural economy.
Producer price inflation, which had moderated prior to recent geopolitical developments, is now expected to rise again. Increases in fertilizer, fuel and intermediate input costs are likely to place renewed pressure on farm profitability and margins.
Resilient foundations, but rising headwinds
Despite these obstacles, South African agriculture remains structurally resilient. Strong institutions, gradual improvements in productivity, and access to capital among larger producers provide important buffers against external shocks.
Nevertheless, the overall risk profile has shifted. The combination of geopolitical instability, tighter financial conditions and climate uncertainty is creating a more demanding operating environment, particularly toward the end of 2026 and into 2027.
Looking ahead, the sector’s central challenge is no longer simply expanding output, but managing volatility, safeguarding cash flow and navigating risk across increasingly complex value chains. In this setting, robust economic analysis, scenario planning and proactive credit risk management will be critical to sustaining performance in a highly uncertain global context.
