Wandile Sihlobo, head of economic and agribusiness intelligence at Agbiz, shares highlights in his update on agricultural commodity markets.
As highlighted in our note yesterday (27 February 2018), the National Crop Estimates Committee placed its first production estimate for maize at 12.2 million tons. Of this, the white maize crop is estimated at 6.1 million tons, down by 38% year-on-year (y/y). The yellow maize crop is also estimated at 6.1 million tons, down by 11% y/y.
This is well above our estimate of 11.2 million tons, as well as the International Grains Council’s estimate of 11.8 million tons. The key underpinning factor is the expectation of higher yields on the back of favourable weather conditions. The area planted is estimated at 2.3 million hectares, down by 0.28% from the preliminary area estimate and 12% lower than the area planted in the 2016/2017 production season.
This estimate implies that South Africa will be well supplied in the 2018/2019 marketing year. The expected harvest is well above South Africa’s maize annual consumption of 10.5 million tons. Moreover, there will large carryover stock of 4.2 million tons to boost the supplies in the 2018/2019 marketing year, which starts on 1 May 2018.
From a trade perspective, South Africa exported 25 786 tons of maize in the week ending 23 February 2018, down by 35% from the volume exported the previous week (ending 16 February 2018). About 63% of these exports were yellow maize, with 37% being white maize. This placed South Africa’s 2017/2018 maize marketing year exports at 2.0 million tons, which equates to 87% of the season’s export forecast of 2.3 million tons.
Contrary to market expectations, South Africa’s 2017 winter wheat production estimate was revised up by 3% from last month (January) to 1.5 million tons, which is a final estimate. However, this is 21% lower than the harvest received in 2016 due to poor yields in the Western Cape.
Almost all wheat producing provinces recorded an uptick from the volumes produced in 2016 with the exception of the Western and Eastern Cape provinces.
The final harvest for the Western Cape is 586 800 tons, down by 47% from the previous season due to a slight decline in area planted, as well as poor yields. The Eastern Cape province is not a major wheat producer; its final harvest was recorded at 9 500 tons, down by 14% from the previous season.
The lower wheat harvest implies that South Africa’s wheat imports could increase to 1.90 million tons in the 2017/2018 marketing year, which is double the volume imported the previous marketing year. There were relatively lower opening stocks at the beginning of the current marketing year, estimated at 341 424 tons, compared to 827 232 tons in the 2016/2017 marketing year.
South Africa imported 68 453 tons of wheat in the week ending 23 February 2018, which is a 30% decline from the previous week’s (16 February 2018) imports. About 88% from Germany, 9% from Latvia and 3% from Argentina. This placed the 2017/2018 marketing year’s wheat imports at 992 306 tons, which equates to 52% of the seasonal import forecast of 1.9 million tons.
South Africa could receive a record soya bean harvest in the 2017/2018 production season. The National Crop Estimates Committee placed its first production estimates at 1.4 million tons, up by 5% from the previous season. This is driven by both an increase in area planted, as well as expected higher yields. The leading producing provinces are Mpumalanga and the Free State, with a combined share of 78%.
While this is above our estimate of 1.2 million tons, it is unsurprising given that the soya bean growing areas of South Africa have been receiving good rainfall since the beginning of the season. Moreover, weather forecasts for the rest of the season indicate good rainfall which reinforces prospects of a good harvest.
The 2017/2018 soya bean marketing year will end today (28 February 2018), but with a large carryover stock of 340 862 tons, which is treble the volume seen in the previous year. This will boost South Africa’s soya bean supplies in the 2018/2019 marketing year, which starts on 1 March 2018.
As highlighted in yesterday’s (27 February 2018) note, South Africa’s soya bean consumption (crushed oil and cake) was at 82 353 tons in January 2018, up by 25% from the previous month (January 2018) due to increased demand from the processors. This is 46% higher than the volume utilised in January 2017.
The National Crop Estimates Committee revised its 2017/2018 sunflower seed area plantings up by 4% from last month (January) to 584 900 hectares. This increase is mainly linked to late plantings in the North West and Free State provinces. However, this is still 8% less than the area planted the previous season.
Therefore, it is unsurprising that the 2017/2018 sunflower seed production is set to decline by 16% from the previous season to 731 505 tons. With that said, this is the first estimate and could change over the next few months, but that will likely be on the upside as weather charts paint a favourable outlook.
While this week (ending 2 March 2018) has been cool and dry over the sunflower seed growing regions, the weather forecast for the next two weeks shows a possibility of light and scattered showers. More importantly, long-term weather forecasts promise a possibility of good rainfall from this month (February) until April 2018, which bodes well for the crop.
It is also worth noting that the domestic sunflower seed market is still well supplied. The ending stock was recorded at 233 329 tons in January 2018, which is 17% higher than the volume recorded in the corresponding period last year.
After recording losses at the start of the week (ending 2 March 2018), the potato market posted gains in yesterday’s (27 February 2018) trade session owing to a lower stock of 772 906 pockets of 10kg bags at the start of the session. The price was up by 20% from the previous day (26 February 2018), closing at R35.12 per pocket.
In yesterday’s (27 February 2018) session, the market experienced commercial buying interest, coupled with relatively lower deliveries on the back of slow harvest activity in some regions of the country. This subsequently led to a further 2% decline in daily stocks to 759 950 pockets.
Yesterday (27 February 2018), the fruit market saw widespread gains boosted by increased commercial buying which subsequently led to a decline in stock levels. The prices of apples and bananas were up by 9% and 23% from the previous day (26 February 2018), closing at R8.47 and R6.60 per kilogramme. These gains followed a 24% and 11% respective decline in apples and bananas stock to 191 000 tons and 319 000 tons.
In addition, the price of oranges increased by 0.38% from the previous day (26 February 2018) and settled at R10.62 per kilogramme. This was also underpinned by lower stocks of 6 000 tons, from levels of roughly 50 000 tons at the end of 2017.