Wandile Sihlobo, head of economic and agribusiness intelligence at Agbiz, shares highlights in his update on agricultural commodity markets.
The weather is currently of less importance in the winter wheat growing areas of South Africa as the harvest process is totally over. However, the recent developments in the major wheat production province, Western Cape, are worth mentioning. The weather charts have cleared and currently show a possibility of continuous dry conditions during the next two weeks.
This implies that dam levels could remain critically low in the near term. The most recent data from the Department of Water and Sanitation shows that on 26 February 2018, the province’s dam levels averaged 21%, down by two percentage points from the previous week (ending 19 February 2018) and 11 percentage points from the corresponding period last year (2017).
Apart from the weather aspects, the volumes of wheat recently delivered to commercial silos showed a decline from levels seen the previous weeks, which mirrors the reduction in activity in the farms after the completion of the harvest process.
About 7 532 tons of wheat were delivered to commercial silos in the week ending 23 February 2018, well below the volumes delivered when the harvest process was at its peak. Overall, this placed South Africa’s winter wheat producer deliveries for weeks 1 to 21 of the 2017/2018 marketing year at 1.44 million tons.
The expected harvest of 12.2 million tons of maize this season is well below last season’s harvest of the 16.8 million tons. But, South Africa’s maize supplies are in good shape as this is above the annual maize consumption of 10.5 million tons. The expected ending stock of 4.2 million tons by the end of the current marketing year will further boost maize supplies in the 2018/2019 marketing year which starts in May 2018.
The aforementioned production estimates are largely based on expectations of higher yields, which can only be possible if weather conditions are favourable for the rest of the season. Fortunately, the near- and medium-term outlook shows a possibility of good rainfall over the maize growing areas of the country.
While the focus is on the new production season, some farmers continue to deliver old season maize to commercial silos. The total maize deliveries were reported at 13 363 tons in the week ending 23 February 2018, up by 42% from the previous week (ending 16 February 2018). About 64% of this was yellow maize, with 36% being white maize.
Overall, South Africa’s 2017/2018 marketing year’s total maize deliveries for weeks 1 to 43 currently stand at 15.3 million tons. Of this total, 60% is white maize with 40% being yellow maize.
South Africa’s soya bean market is well supplied. The 2018/2019 marketing year commences on better footing than the previous year, 2017/2018, thanks to a large harvest in the 2016/2017 production season. The opening stock is estimated at 340 862 tons, which is treble the volume seen at the beginning of the 2017/2018 marketing year.
In addition, the expected large harvest will further boost the supplies. As highlighted in our previous notes, the National Crop Estimates Committee placed its first production estimates at 1.4 million tons, up by 5% from the previous season. This is driven by both an increase in area planted, as well as expected higher yields. The area planted is estimated at 775 300 hectares, up by 31% from the previous season and also a record level in a dataset dating back to the 1970/1971 production season. The leading producing provinces are Mpumalanga and Free State, with a combined share of 78%.
Above all, the aforementioned increase in area planted is underpinned by favourable weather conditions in the eastern parts of South Africa and competitive prices. In fact, the soya bean growing areas experienced good weather conditions since the start of the season, while the western sections of the country experienced dry conditions.
Looking ahead, the next two weeks could bring good showers over soya bean growing areas. The medium-term outlook also promises rainfall until the end of April 2018. This should further boost soil moisture and therefore improve crop conditions.
The domestic potato market had a good run in yesterday’s (28 February 2018) trade session owing to a lower stock of 759 950 pockets of 10kg bags at the start of the session. The price was up by 0.83% from the previous day (27 February 2018), closing at R35.41 per pocket.
However, during the session, the market saw an uptick in deliveries as harvest activity picks up after a quiet period during the weekend (ending 25 February 2018). This led to a 9% increase in daily stocks to 824 901 pockets.
The fruit market ended yesterday’s (28 February 2018) trade session on a mixed footing. The price of apples was up by 5% from the previous day (27 February 2018), closing at R8.87 per kilogramme. This followed an increase in commercial buying which subsequently led to a 5% decline in daily stock to 181 000 tons.
Bananas and oranges prices were down by 7% and 2% from the previous day (27 February 2018), closing at R6.14 and R10.45 per kilogramme, respectively. This could, however, soon be reversed due to large stocks of 299 000 tons of bananas and 22 000 tons of oranges.