Wandile Sihlobo, head of economic and agribusiness intelligence at Agbiz, shares highlights in his update on agricultural commodity markets.
The recent rainfall brought relief in the western areas of the Free State and North West provinces. The most recent report from World Weather Inc. indicates that soil moisture has improved significantly in these regions after extreme dry conditions were experienced at the beginning of 2018.
Although it is too late for additional planting, the improvements in soil moisture bode well for the crop in areas that managed to plant on time. The forecast rainfall this week (ending 23 February 2018) could further improve soil moisture and the outlook for maize crops. As highlighted in our previous notes, the South African Weather Service forecasts good rainfall across summer crop growing areas of the country until April 2018.
These positive weather developments increase the possibility of yet another good crop, albeit lower than the 2016/2017 production season due to a decline in area planted. We estimate that South Africa’s 2017/2018 maize production could reach at least 11.2 million tonnes, which is well above the annual consumption of 10.5 million tonnes. The official production estimates will be released by the National Crop Estimates Committee at the end of February.
With wheat imports set to reach the second highest level on record in the 2017/2018 marketing year, import tariff matters will continue to dominate the market. On 12 February 2018, we indicated that the wheat import tariff could remain unchanged at the current level of R716.33 for some time. This view was based on expectations that the Chicago wheat prices could decline slightly after the United States Department of Agriculture’s (USDA) monthly report indicated that there are large global wheat supplies in the market.
At the time, the international wheat prices had consistently traded higher than the base price of US$218.00 per tonne by more than US$10 per tonne and our belief was that this price trend would be broken.
However, the unfavourable weather conditions in the Southern Plains of the United States (US) kept Chicago wheat prices at relatively higher levels for a third consecutive week, thus triggering a new wheat import tariff rate of R394.85, which is 45% lower than the current rate.
The new rate of R394.85 has not yet been published in the Government Gazette and will only be applicable after its publication. The timeframe for this process is unclear, but previous adjustments took more than three weeks.
South Africa’s soya bean crop is in good condition owing to favourable weather conditions throughout the season. In addition, the expected rainfall this week and during the next two months will further improve soil moisture in soya bean growing areas. This increases the possibility of yet another good crop.
As highlighted in previous notes, we forecast South Africa’s 2017/2018 soya bean production at 1.2 million tonnes, down from 1.3 million tonnes in the previous season. The official estimates by the National Crop Estimates Committee will be released on 27 February 2018.
Apart from production developments, the 2017/2018 soya bean marketing year will end on 28 February 2018, but will be in better shape than the previous year 2016/2017. The ending stock is estimated at 340 862 tonnes, which is treble the volume seen in the 2016/2017 marketing year. This will boost South Africa’s soya bean supplies in the 2018/2019 marketing year, which starts on 1 March 2018.
After a warm and drier start to the 2017/2018 production season, the sunflower seed growing areas of South Africa received a fair amount of rainfall at the end of January 2018 and the beginning of February. As a result, the crop is currently in good condition across the country.
Additional planting that started at the end of January in the western areas of the Free State and the North West provinces has been completed in most areas. Therefore, the improved soil moisture should support the germination process of the crops. The National Crop Estimates Committee will possibly lift its sunflower seed planting estimate from the current level of 560 100 hectares.
This week could bring further improvements in soil moisture and the weather forecasts show a possibility of over 50 millimetres of rainfall in most sunflower seed growing areas. As indicated in our previous notes, the long-term outlook also promises good rainfall until April 2018. This will potentially support the newly planted crop from germination to pollination stages of development.
The South African potato market lost ground in Friday’s (16 February 2018) trade session owing to a higher stock of 1.2 million pockets of 10kg bags at the start of the trade session. The price was down by 4% from the previous day (15 February 2018), closing at R32.71 per pocket.
During Friday’s session, the market experienced an increase in commercial buying interest, coupled with relatively lower deliveries on the back of slow harvest activity in some parts of the country. This subsequently led to an 8% decline in daily stock to 1.1 million pockets.
The fruit market will start today’s (19 February 2018) trade session on a mixed footing following a volatile session on Friday (16 February 2018). The prices of apples and oranges were under pressure in Friday’s trade session due to large stocks, as well as commercial selling in the case of oranges.
The price of bananas was up by 6% from the previous day (15 February 2018), closing at R6.24 per kilogramme due to a decline in daily stocks. The bananas stocks fell by 16% in Friday’s trade session and settled at 226 000 tonnes owing to strong commercial buying interest.