Wandile Sihlobo, head of economic and agribusiness intelligence at Agbiz, shares highlights in his update on agricultural commodity markets.
The recent rainfall has brought brief relief from the dry conditions in the western sections of the Free State and North West provinces. The most recent report from World Weather Inc. shows that soil moisture has slightly improved in these regions. While it is too late for additional planting, the improvement in soil moisture bodes well for the crops in areas that managed to plant on time. The forecast rainfall during the next two weeks could further improve soil moisture and the outlook for maize crops. As previously highlighted, the South African Weather Service forecasts good rainfall across summer crop growing areas of the country until April 2018.
We estimate that South Africa’s 2017/2018 maize production could reach 11.2 million tonnes, which would be a 33% year-on-year (y/y) decline, but still above the annual consumption of 10.5 million tonnes. The United States Department of Agriculture’s (USDA) estimate is almost in line with ours.
The agency left its 2017/2018 maize production estimate for South Africa unchanged from last month, at 12.5 million tonnes. This includes both commercial and non-commercial maize production. The Agbiz estimate of 11.2 million tonnes only focuses on commercial production. Official production estimates will be released by the National Crop Estimates Committee on 27 February 2018.
One of the key variables that determine the wheat import tariff level is the international wheat price (US No2 HRW). Over the past two weeks, the international wheat prices consistently traded higher than the base price of US$218.00 per tonne by more than US$10 per tonne. If this trend continues for another week, a new wheat import tariff, which would be less than the current rate of R716.30 per tonne, could be triggered.
The recent uptick in international prices was largely due to dry conditions in the southern plains of the United States (US). However, the recent USDA’s monthly report eased the fears of possible crop damage. The agency left its 2017/2018 US wheat production estimate unchanged from last month at 47 million tonnes.
The agency revised its 2017/2018 global wheat production estimate up by 0.2% from January 2018 to 758 million tonnes. This is 1% higher than the 2016/2017 production season. In the same season, the global wheat ending stocks are estimated at 266 million tonnes, which is 5% higher than the previous season.
These developments suggest that the international wheat prices could slightly decline from levels seen in the past few weeks as the market is well supplied. Such a scenario would break the price trend observed in the past two weeks, and the prospects of a change in wheat import tariff.
South Africa’s 2017/2018 marketing year wheat import estimate is the second largest on record, estimated at 1.9 million tonnes. The country has thus far imported 40% of the seasonal import forecast, which makes trade matters important as a large share of wheat is yet to be imported.
Some soya bean growing regions received light showers over the weekend (ending 11 February 2018). This bodes well for the new season crop which still needs moisture at its current stage of development. The weather forecast for the week (ending 16 February 2018) shows a possibility of continuous rainfall which should further improve crop conditions.
The medium-term weather forecasts from the South African Weather Service indicate a possibility of above-average rainfall across soya bean growing regions throughout the summer season. This means that there is a possibility that the country could produce another big crop.
We forecast the 2017/2018 soya bean production at 1.2 million tonnes, which is an 8% decline from the previous season. The official soya bean production estimates will be released by the National Crop Estimates Committee on 27 February 2018.
The past weekend was fairly dry and cool across the sunflower seed growing areas of the country. However, the rainfall received in the past few weeks across the western sections of the Free State and North West provinces have slightly improved soil moisture and farmers went back to the fields for additional planting.
There is, however, 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 might lower the yields.
This week the sunflower seed growing regions could receive widespread rainfall of between 30 and 90 millimetres. This will further improve soil moisture and thus benefit the new season crop which needs moisture at its current stage of development. The forecast rainfall will support the germination process at the recently planted areas.
With almost nothing on the data calendar this week (ending 16 February 2018), the domestic sunflower seed price movements will be driven largely by developments in the ZAR/USD exchange, traded volumes in the market, as well as weather conditions.
The South African potato market lost ground on Friday’s (9 February 2018) trade session with the price down by 1% from the previous day (8 February 2018), closing at R39.17 per pocket of 10kg bags. These losses were partially on the back of a large stock of 1.00 million 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 6% increase in daily stocks to 1.06 million pockets.
SAFEX lamb carcass:
The SAFEX lamb carcass market also experienced a fairly quiet session on Friday (9 February 2018), characterised by thinly traded volumes. The price remained flat from the previous day (8 February 2018), settling at R70.00 per kilogramme.
From a supply front, South African farmers slaughtered 494 909 head of cattle in December 2017, up by 11% from the previous month (November 2017). However, this was down by 27% from the corresponding period of the previous year due to a combination of factors, with the most notable one being the restocking process following the recent drought.