The Agricultural Business Chamber of South Africa's (Agbiz's) and Industrial Development Corporation's Agribusiness Confidence Index (ACI) has increased by eight points in the third quarter to a level of 53, breaching the neutral 50-level mark.

The current ACI level indicates South African agribusinesses are more optimistic about business conditions compared with the second quarter, particularly among grain traders, input suppliers, feed suppliers and the financial services sector.

While the overall reading of the ACI for the third quarter is "encouraging", Agbiz says concerns remain about a likely El Niño-driven drought in the upcoming 2026/27 season, and ongoing geopolitical tensions and their impact on input costs and trade disruptions.

Other respondents to the ACI also express concerns about the slow process of opening up more export markets to support the long-term growth of agriculture, the lingering impacts of Foot-and-Mouth Disease outbreaks in the cattle industry and port inefficiencies.

Nonetheless, most of the ACI's ten subindices showed improvement in the third quarter.

The market share subindex rose by six points to 67 in the third quarter. This improvement in mood mirrors the ample harvest in horticulture and field crops, and the generally better export performance so far this year.

The capital investments subindex rose by 29 points to 63, which Agbiz finds surprising as high-frequency data shows that tractor and combine harvester sales remain weak, with farmers anticipating a challenging drought season in the 2026/27 production year.

The subindex measuring export volumes increased by 21 points to 58 in the third quarter, which aligned with strong agriculture exports. For example, in the first half of this year, South Africa’s agricultural exports amounted to $7.8-billion, up 11% from the first half of 2025.

The general economic conditions subindex grew by ten points to 38 in the third quarter. While this is a welcome change in mood, it remains unclear whether the economic data support it. The GDP data for the second quarter is yet to be released on September 8.

On the neutral side, Agbiz says the turnover subindex confidence remained unchanged from the second quarter at 67. The ample harvests of grains, oilseeds and various fruits and vegetables primarily support these favourable index levels. Similarly, the net operating income subindex stabilised at 50 points in the third quarter.

On the negative side, the employment subindex decreased by ten points to 46 in the third quarter, which Agbiz deems unsurprising as data on South African agriculture jobs has shown a slight decline since the start of the year.

For example, the Quarterly Labour Force Survey data for the second quarter show that the farming sector employed 944 000 people, which marked a 2% quarter-on-quarter decrease but 4% year-on-year increase.

The general agricultural conditions subindex declined by 25 points to 36 in the third quarter, which was mainly owing to the expected El Niño drought and the likely negative impact on agricultural production in the 2026/27 season.

The debtor provision for bad debts subindex increased by 13 points to 46, reflecting likely challenging financial conditions in the sector owing to higher input costs, animal diseases and the fears of the likely drought. The financing costs subindex increased by 42 points to 58, reflecting likely higher future financing costs and an expected rise in interest rates.