Wandile Sihlobo, head of economic and agribusiness intelligence at Agbiz, shares highlights in his update on agricultural commodity markets.
Today (8 February 2018), the United States Department of Agriculture (USDA) will release a monthly update of its World Agricultural Supply and Demand Estimates report, which covers all major grains and oilseeds. In January 2018, the agency estimated South Africa’s 2017/2018 maize production at 12.5 million tonnes, down by 29% from the previous season. This estimate is somewhat in line with the long-term average production and well above South Africa’s annual maize consumption.
However, we believe that the agency could revise its estimate down this month due to reduced area plantings in the western parts of South Africa. At Agbiz, we estimate that South Africa’s 2017/2018 total maize production could decline to 11.2 million tonnes (see Agbiz Morning Market Viewpoint on Agri-commodities, 05/02/18). With that said, the weather forecasts promise good rainfall throughout the summer season, which bodes well for the new season crop.
Under the aforementioned production estimates, South Africa will have sufficient maize supplies for the 2018/2019 marketing year, as both are above annual consumption of 10.5 million tonnes and there will also be a carryover stock of roughly 4.2 million tonnes in the 2017/2018 marketing year.
Malawi has imposed a ban on maize exports after drought and fall army worms caused damages in the new season crop. Reports from the country’s Ministry of Agriculture indicate that crop potential could be reduced by 40%. Malawi typically exports maize to countries such as Zimbabwe, Mozambique, Tanzania and Cameroon, amongst others. Going forward, we will closely monitor the developments there in order to ascertain its impact on Southern Africa’s maize supplies.
Winter wheat harvesting in South Africa is totally over and the yields received in the Western Cape and Free State provinces were well below average due to unfavourable weather conditions earlier in the season. The volumes of wheat recently delivered to commercial silos showed a decline from the previous weeks, which mirrors the reduction in activity on the farms after the completion of the harvest process.
About 4 037 tonnes of wheat were delivered in the week ending 2 February 2018, which is well below the previous week’s (ending 26 January 2018) deliveries of 16 721 tonnes. This placed South Africa’s winter wheat producer deliveries for weeks 1 to 18 of the 2017/2018 marketing year at 1.38 million tonnes.
The Ethiopian government has issued a tender to buy 400 000 tonnes of milling wheat from the optional origin. The International Grains Council forecasts Ethiopia’s 2017/2018 wheat imports at 1.3 million tonnes, up by 44% from the previous season due to a decline in domestic production, as well as an uptick in consumption.
Some farmers in the western parts of the Free State and North West provinces returned to the fields for additional planting after recent showers improved soil moisture. As highlighted in our previous notes, there is uncertainty about the yield potential given that the optimal planting window closed on 20 January 2018.
Planting outside the optimal window implies that crops could be negatively affected by frost later in the season, which then possibly lowers the yields. If the shifts in weather patterns delay the cold conditions later in the season, the late planted crops could present a better harvest.
On the weather front, recent developments have been positive and the outlook paints a promising picture of good rainfall. On Tuesday, most sunflower seed growing areas received scattered light showers which are good for crops, but not sufficient to significantly improve soil moisture.
The forecast for the next two weeks continues to show a possibility of rainfall of over 50 millimetres across the sunflower seed growing areas of the country. This supports the South African Weather Service’s view of above normal rainfall across summer rainfall areas between this month and April 2018.
Following a good run at the start of the week (ending 9 February 2018), the South African potato market took a breather in yesterday’s (7 February 2018) session with the price down by 4% from the previous day (6 February 2018), closing at R41.51 per pocket of 10kg bags. This was partially on the back of a large stock of 687 797 pockets at the start of the trade session.
During the session, the market saw an uptick in deliveries as harvest activity continues across the country. This subsequently led to a 19% increase in daily stocks to 816 903 pockets.
Yesterday (7 February 2018), the fruit market experienced a fairly quiet session with fewer producer deliveries at the fresh produce market. The price of apples was down by 1% from the previous day (6 February 2018), closing at R9.27 per kilogramme due to a large stock of 202 000 tonnes.
The prices of bananas and oranges remained flat from the previous day (6 February 2018), settling at R5.31 and R5.84 per kilogramme, respectively.
The stocks of these fruits paint a mixed picture. The bananas stocks are estimated at 416 000 tonne, which is double the levels seen in the past few weeks. This could add pressure on prices. Oranges stock remains fairly low, at 17 000 tonnes, which is supportive of prices.