Following an 18-point decline in the first quarter, the Agricultural Business Chamber of South Africa (Agbiz) and Industrial Development Corporation’s Agribusiness Confidence Index (ACI) fell further by four points to 45 in the second quarter.

This marks the ACI’s lowest level since the second quarter of 2024.

Agbiz chief economist Wandile Sihlobo says the factors underpinning the subdued sentiment sre broad, with survey respondents having cited the impact of the Middle East conflict on energy and fertiliser prices as a major concern, but also the lingering impact of Foot-and-Mouth Disease (FMD) outbreaks which continues to impose financial pressure on the cattle industry.

The survey was undertaken prior to the US and Iran having announced a preliminary peace deal.

Sihlobo explains that 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 for the months ahead.

The current ACI level of 45 is below the 50-point neutral mark, indicating that South African agribusinesses remain pessimistic about business conditions.          

Of the ACI’s ten subindices, the capital investments subindex dropped by 20 points to 33 in the second quarter, which is the lowest level since 2006. This sharp decline mirrors the sector's general mood, driven by the factors Sihlobo 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 to 38 in the second quarter. Here, concerns about the impact of the Middle East conflict on logistics, along with rising shipping costs, are the primary challenges. Still, the actual activity points in a different direction, as exports have remained fairly strong.

For example, South Africa's agriculture exports totalled $3.7-billion in the first quarter, which was an 11% increase compared with the same quarter last year.

The general economic conditions subindex decreased by 33 points to 28 in the second quarter – the lowest level since the third quarter of 2023. This is unsurprising for Sihlobo, as the war in the Middle East added uncertainty to macroeconomic conditions.

On the positive side, the turnover subindex confidence increased by 17 points to 67 in the second quarter. This was primarily driven by the ample harvest in grains, oilseeds and the various fruits and vegetables. Similarly, the net operating income subindex increased by seven points to 50 in the second quarter.

Further, the market share subindex increased by eight points to 61 in the second quarter, which Sihlobo says mirrors the improvement in mood following ample harvests in horticulture and field crops, as well as the excellent export performance for agriculture so far this year.  

The employment subindex grew by 16 points to 56 in the second quarter, which is also unsurprising for Sihlobo given that the South African agriculture sector continues to create more jobs.

In the first quarter of the year, farm jobs increased by 3% from the same period a year earlier to 960 000 jobs. This uptick in agriculture employment is aligned with the favourable production conditions having been experienced in 2025 through to the start of this year.

The general agricultural conditions subindex increased by 22 points to 61 in the second quarter. Sihlobo says this improvement is primarily driven by the field crops and horticulture subsectors, which benefited from the La Niña rains.

Sihlobo explains that 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 the second quarter, the debtor provision for bad debts indices decreased by six 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 the second quarter ultimately show that all is not well in South Africa's agriculture sector.

"While the pace of importing vaccines has been encouraging, the challenge of FMD continues to linger. The livestock and pig industries are under immense financial pressure owing 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," Sihlobo concludes.