Wandile Sihlobo, head of economic and agribusiness intelligence at Agbiz, shares highlights in his update on agricultural commodity markets.
Weather forecasts for the week ahead show a possibility of light showers across Limpopo, Gauteng, Mpumalanga, Kwa-Zulu Natal and the Eastern Cape province. These expected showers vary between 10 and 25 millimetres. Meanwhile, other provinces could remain dry and warm. Overall, these weather developments will not have much effect on summer crops as they are already in the maturing stage. For the Western Cape, however, this is concerning as dam levels are already critically low.
The South African maize crop is currently in good condition. That supports the National Crop Estimate Committee’s view of a possible bumper crop this season. Warm weather conditions continue to support the crop in the maturation processes.
The forecast rainfall in the eastern parts of South Africa will not have much impact on the crop as it is already in maturation stages. With that said, the western parts of the North-West province planted late, therefore rainfall is still essential for maize crops in those regions.
On the global front, this morning (20 March 2017) the Chicago maize price was up by 1.37% from the level seen at midday Friday (17 March 2017), still getting support from higher US weekly maize export sales, which reached 1.26 million tonnes, well above market expectations.
Elsewhere, wet weather conditions in Brazil have raised mixed feelings. On the one hand, these could negatively affect the quality of the maize crop. On the other, these wet conditions could be beneficial for the Safrinha (second) maize crop which is still at early growing stages (second season maize crop). The IGC forecasts Brazil’s 2016/2017 total maize crop at 87.4 million tonnes, which is 31% higher than the previous season.
Of minimal impact to the market, but of interest is Germany’s 2017/2018 maize production forecast of 4.5 million tonnes, up by 22% from the previous season due to an expected increase in area plantings and higher yields.
On the global front, this morning (20 March 2017) the Chicago wheat price was up by 1.15% from the level seen at midday Friday (17 March 2017), mainly supported by lingering concerns over a lack of moisture for the US winter wheat crop. Moreover, the weather forecast for this week shows a possibility of persistent dryness across the US Plains and that might worsen the conditions.
Last week, the US weekly wheat export sales were reported at 264 000 tonnes, which is the bottom of market expectations. Small exports in the US were not a factor of low global demand, but strong competition from other markets such as the Black Sea region and the EU. Key wheat buyers like Egypt are still in the market, consistently making purchases. Last week, Egypt bought 420 000 tonnes of wheat, with 71% of this from Russia and the remainder from France and Ukraine.
The South African soya bean market gained ground during Friday’s (17 March 2017) trade session, with support emanating from higher the Chicago soya bean prices, as well as strong domestic buying interest.
- However, the fundamental market factors remain quite bearish. As a result, we suspect that these gains could be short lived.
- The domestic currency remains progressively strong against the US Dollar.
There are positive prospects that this season’s soya bean crop could be a record high. In global markets, this morning (20 March 2017) the Chicago soya bean price was up by 0.40% from the level seen at midday Friday (17 March 2017), owing to spill-over support from the maize market. Last week, the US soya bean weekly export sales were reported at 472 000 tonnes, in line with market expectations. This too was supportive of the market.
In South America, of late, most parts of Brazil have been fairly rainy, which does not bode well with the harvest process and logistical activities. On 17 March 2017, Brazil harvested 63% of its soya bean crop, still ahead of the corresponding period last year. The United States Department of Agriculture (USDA) placed Brazil’s 2016/2017 soya bean production at 108 million tonnes, which is 12% higher than the previous season due to an uptick in area plantings and yields, on the back of favourable weather conditions.
The sunflower seed crop is in fairly good condition across South Africa. Although warm weather conditions over past few weeks have generally been favourable for the crops, rainfall within the next two weeks would be essential in the western parts of the North-West province (with crops that were planted late). Some areas of the province received light showers over the weekend, which is favourable for the crop that is still at early growing stages.
On the negative side, there are reports of sclerotinia disease in some sunflower seed fields around Lichtenburg town of the North-West province. This disease could lead to lower yields if it is not controlled effectively. The North-West province’s 2016/2017 sunflower seed production at 304 500 tonnes, which is 33% of the national production forecast.
The SAFEX beef market has been a quiet path for some time and Friday (17 March 2017) was no different, the spot price remained unchanged from the previous day’s (16 March 2017) level, closing at R44.00 per kilogram. This was largely on the back of reduced activity at the stock exchange.
The Johannesburg Fresh Produce Market ended during Friday’s (17 March 2017) trade session. The apple market down by 0.65% from the previous day’s (16 March 2017) level, closing at R7.59 per kilogramme due to relatively large stock levels. The orange market lost 33.28% from the previous day, closing at R4.03 per kilogramme, mainly pressured by weak buying interest and relatively large supplies of 63 422 tonnes. Meanwhile, the banana market managed to gain 5.31% from the previous day’s level, closing at R9.13 per kilogramme, due to a 45% daily decline in stock levels to 93 600 tonnes.