Wandile Sihlobo, head of economic and agribusiness intelligence at Agbiz, shares highlights in his update on agricultural commodity markets.
This is a data-packed week with the National Crop Estimates Committee’s intention-to-plant data for the 2017/2018 maize production season, SAGIS producer deliveries and trade data due for release. Any major changes in these particular data points could lead to notable movements in the domestic maize markets.
In the 2016/2017 production season, South African farmers planted 2.6 million hectares of land to maize, which is in line with the long-term average. This led to a record harvest of 17.5 million tonnes (commercial and non-commercial maize), thanks to good summer rainfall.
The large harvest has led to lower commodity prices, particularly the white maize. As a consequence, there are talks in the market that some farmers could reduce the area planted to white maize and switch to other crops such as oilseeds and yellow maize due to price competitiveness. More clarity will transpire from the National Crop Estimate Committee’s report.
The winter wheat harvest process will soon begin in areas that planted early in the season, particularly the Swartland and Overberg regions. Areas that planted late in the season, the southern Cape and Mossel Bay, could still benefit from rainfall as the crop is at the grain filling stages of development.
Unfortunately, the weather forecast for the next two weeks shows a possibility of persistent dry conditions across the Western Cape. This is with the exception of the coastal areas which could receive light showers of between 10 and 16 millimetres.
In terms of dam levels, the recent update for the week ending 16 October 2017 shows that dams averaged 36% in the Western Cape, fairly unchanged from the previous week, but 26 points lower than the corresponding period last year.
The implications of unfavourable weather conditions on South Africa’s winter wheat crop will be clear when the National Crop Estimate Committee releases its third production estimates on Thursday, 26 October 2017. At the moment, production is estimated at 1.7 million tonnes, which is 11% lower than the previous season.
This week (ending 27 October 2017), the National Crop Estimate Committee will give an indication of the potential size of the hectares to be planted in the upcoming season. In the 2016/2017 production season, South African farmers planted 573 950 hectares of land to soya beans, led to a record harvest of 1.32 million tonnes, following good summer rainfall.
There is generally positive sentiment in the market regarding the 2017/2018 summer crop production due to expected widespread rainfall until early 2018. Although the forecast rainfall during the next two weeks could improve soil moisture, it will slow planting activity. However, this is not much of a concern as there is enough time for farmers to plant. The optimal soya bean planting window only closes at the beginning of December.
In global markets, the expected rainfall in the eastern parts of the United States (US) Midwest could slow the harvest and maturation process of the soya bean crop. At the beginning of last week, about 49% of the US soya bean crop had already been harvested, which is 10 points behind the corresponding period last year. An update will be released this evening as part of the United States Department of Agriculture (USDA’s) weekly crop progress report.
This week the National Crop Estimates Committee will release its intention-to-plant data for the 2017/2018 production season. Last season, South African farmers planted 635 750 hectares of sunflower seed, with the Free State and the North West provinces being the leading producers.
There are talks in the market that this season’s area plantings could increase, particularly in the North West province, where the white maize area is expected to shrink due to price competitiveness. The weather forecast presents a favourable outlook for the upcoming season with expectations of good rainfall until the end of February 2018.
In global markets, the harvest process is underway across the Black Sea region. The most recent data from UkrAgroConsult shows that on 18 October 2017, Ukraine had already harvested an area of 5.2 million hectares of sunflower seed with 10.2 million tonnes collected thus far. This is slightly lower than the country’s overall crop production estimate of 14.0 million tonnes.
The South African potato market lost ground in Friday’s (20 October 2017) trade session with the price down by 2% from the previous day (19 October 2017), closing at R39.12 per pocket (10kg). These losses were on the back of large stocks of 937 285 pockets (10kg) at the start of the trading session.
During the session, the market saw an uptick in deliveries due to ongoing harvest process. This led to a 10% increase in daily stocks to 1.03 million pockets (10kg).
On Friday (20 October 2017), the fruit market saw widespread losses due to strong commercial selling. The prices of apples and oranges were down by 0.6% and 11.1% from the previous trading day (19 October 2017), closing at R7.02 and R6.01 per kilogramme, respectively.
The banana market lost 0.3% from the previous day, closing at R6.72 per kilogramme due to strong commercial selling, as well as the relatively large stock of 237 363 tonnes. This is 13% higher than the previous day’s stock, due to good producer deliveries.