Wandile Sihlobo, head of economic and agribusiness intelligence at Agbiz, shares highlights in his update on agricultural commodity markets.
With the winter wheat harvest process totally over in South Africa, the weather is not of importance in the market. The impact of drier conditions in the Western Cape over the past few months is mirrored in national wheat production. The 2017 harvest is estimated at 1.48 million tonnes, down by 23% year-on-year (y/y). As this is not new news, it is already priced into the market.
The forecast light showers of between 13 and 20 millimetres across the Western Cape is a welcome development, although it will not meaningfully improve dam levels. On 5 February 2018, the province’s dam levels averaged 24%, down by one percentage point from the previous week (ending 29 February 2018) and 13 percentage points from the corresponding period last year.
On the global front, recent reports from the International Grains Council show that Egypt purchased 360 000 tonnes of milling wheat from Russia and Romania. Iraq bought 50 000 tonnes of milling wheat from Australia and South Korea acquired 65 000 tonnes of feed wheat from the optional origin.
The Unites States Department of Agriculture (USDA) forecasts the 2017/2018 global wheat imports at 180 million tonnes, up by 1% y/y. The leading buyers, as reflected in the aforementioned recent sales, are North African countries, the Middle East and Southeast Asia. The sub-Saharan African region is also set to be amongst the world’s wheat importing regions. Within this region, countries such as Nigeria, Sudan, Kenya, Ethiopia and South Africa are the key importers.
Most parts of the South African maize belt had light showers this past weekend (ending 11 February 2018). The western regions received rainfall of between 7 and 50 millimetres, which mainly benefited white maize crops. The eastern regions of the maize belt received rainfall of between 10 and 45 millimetres, which largely benefited yellow maize crops.
The maize crop is generally in good condition in most areas, thanks to good showers received in the past few weeks which improved soil moisture and subsequently benefited the crops. Also heartening to see is that the weather forecast for the next two weeks indicates a possibility of good rainfall across the maize belt. This should further improve soil moisture and crop conditions.
Bethlehem, Harrismith, Heilbron, Lindsey, Vrede, Warden, Bethal, Davel, Hendrina, Kriel, Leandra, Lydenburg, Middleburg, Morgenzon and Witbank regions of the eastern Free State and Mpumalanga provinces received light showers of between 10 and 45 millimetres over the weekend, which bodes well for soya bean crops which are already in a fair condition.
The next two weeks could bring rainfall of between 25 and 90 millimetres across the soya bean growing areas, which should further improve soil moisture, and subsequently crop conditions. The weather forecast for the next three months is favourable, with prospects of good rainfall.
The key risk during this production season is hail. In the past few weeks, hail affected a few areas in KwaZulu-Natal and Mpumalanga provinces, but the impact on crops was minimal, which partially explains our view of a fairly good crop this season. We forecast South Africa’s 2017/2018 soya bean production at 1.2 million tonnes, down by 8% from the previous season.
The South African potato market saw extended losses in yesterday’s (12 February 2018) trade session with the price down by 8% from the previous day (11 February 2018), closing at R36.17 per pocket (10kg bags). These losses were partially on the back of a large stock of 1.06 million pockets at the start of the trade session.
However, during the day, the market experienced commercial buying interest, coupled with relatively lower deliveries on the back of slow harvest activity during the weekend (ending 11 February 2018). This subsequently led to an 18% decline in daily stocks to 867 816 pockets.
The fruit market ended yesterday’s (12 February 2018) trade session on a mixed footing. The price of apples was down by 13% from the previous day (11 February 2018), settling at R8.69 per kilogramme due to a large stock of 144 000 tonnes.
The prices of bananas and oranges increased by 6% and 16% from the previous day (11 February 2018), closing at R5.33 and R6.31 per kilogramme, respectively. In the banana market, the gains followed a 9% decline in daily stock to 296 000 tonnes. The price of oranges was also supported by the lower stock of 7 000 compared to levels of over 30 000 tonnes at the beginning of the month.