Wandile Sihlobo, head of economic and agribusiness intelligence at Agbiz, shares highlights in his update on agricultural commodity markets.
The United States Department of Agriculture (USDA) left its estimate for South Africa’s 2017/2018 total maize production unchanged from last month’s, at 12.5 million tonnes, vs 17.4 million tonnes in the 2016/2017 production season. This is roughly in line with the long term production trend, discounting the drought years, 2015 – 2016. More importantly, this is well above South Africa’s annual maize consumption of 10.5 million tonnes, and there will be over 4.0 million tonnes of carry-over stock from the current marketing year.
With that said, it is still early to be certain about the potential size of the crop. The planting process is still underway across the country. The eastern parts have made notable progress, whereas the western areas have experienced delays due to dry conditions.
The weather forecast paints a positive picture of above average rainfall throughout the production season. This increases the chance of achieving the USDA’s estimate. Overall, these developments suggest that maize prices could remain at relatively lower levels for some time.
From a trade perspective, South Africa exported 48 601 tonnes of maize in the week ending 8 December 2017, down by 24% from the volume exported the previous week (ending 1 December 2017). About 88% of these exports were yellow maize, with 12% being white maize.
The leading buyer was Japan with a share of 81%, all yellow maize. This placed South Africa’s 2017/2018 total maize export volume at 1.7 million tonnes, which equates to 77% of the season’s export forecast of 2.2 million tonnes. About 68% of the exported 1.7 million tonnes is yellow maize, with 32% being white maize.
The winter wheat harvest process should gain momentum during the next two weeks as weather forecasts show a possibility of drier conditions across the Northern Cape. The areas that have harvested thus far within the province received above average yields, thanks to good water levels in dams for irrigation.
The expected rainfall in parts of the Free State province could slow the winter wheat harvest process. The yields are set to vary between average and below average.
In terms of trade, South Africa imported 1 724 tonnes of wheat in the week ending 8 December 2017, all from Argentina. This is well below the previous week’s (ending 1 December 2017) imports of 56 189 tonnes. Overall, this placed the 2017/2018 marketing year’s wheat imports at 577 580 tonnes, which equates to 32% of the seasonal import forecast of 1.8 million tonnes. This is under the assumption that domestic production will reach 1.58 million tonnes.
On the global front this morning (13 December 2017), the Chicago wheat price was down by 0.26% from levels seen at midday yesterday (12 December 2017) owing to large global production of 755 million tonnes, up by 0.2% from the previous season.
The soya bean planting process is underway in most provinces. The only provinces that have made notable progress so far are Mpumalanga and KwaZulu-Natal because of favourable rainfall. These provinces make up a combined share of 43% of the intended area of 720 000 hectares.
In global markets, the United States (US) soya bean market is well supplied this season. The USDA forecasts the country’s 2017/2018 soya bean production at 120 million tonnes, unchanged from the previous month but up by 3% from the previous season. This uptick is mainly on the back of an increase in acreage, as well as higher yields.
Weather forecasts have improved in South America and currently show a possibility of rainfall, which should benefit the new season soya bean crop. The USDA left its production estimate for Brazil’s 2017/2018 soya bean crop unchanged from last month, at 108 million tonnes. This is 5% lower than the previous season’s harvest. Argentina’s crop estimate was also left unchanged at 57 million tonnes, down by 2% year-on-year (y/y).
Yesterday (12 December 2017) the South African potato market managed to claw back some of its recent losses, with the price up by 5% from the previous day (11 December 2017), closing at R47.36 per pocket (10kg). These gains were on the back of relatively lower stocks of 763 296 pockets (10kg) at the beginning of the session.
However, during the session, the market saw an uptick in deliveries following increased activity in the fields after a weekend. This led to a 7% increase in daily stocks to 820 395 pockets (10kg).
Yesterday (12 December 2017) the fruit market saw widespread gains underpinned by relatively lower stocks. The price of apples was up by 4% from the previous day (11 December 2017), closing at R8.83 per kilogramme. This followed a 2% decline in daily stocks to 171 000 tonnes.
The prices of bananas and oranges were up by 6% and 32% from the previous day, closing at R6.73 and R8.39 per kilogramme, respectively. These gains were on the back of strong commercial buying, as well as relatively lower stocks of 275 000 tonnes of bananas and 46 000 tonnes of oranges.