Wandile Sihlobo, head of economic and agribusiness intelligence at Agbiz, shares highlights in his update on agricultural commodity markets.
Although the past few days have been dry and warm in some sections of the maize belt, the weather forecast for the next two weeks shows a possibility of rainfall, which should improve soil moisture and support the crop. In addition, the next two months could bring above normal rainfall across the maize belt, which should benefit the late planted areas of the Free State and North West provinces.
The current marketing year will end on 30 April 2018. The 2018/2019 maize marketing year which starts on 1 May 2018 will be well supplied, despite the expected decline in production this season. The Supply and Demand Estimates Committee forecasts the total maize supply at 15.9 million tons, down by 7% from 2017/2018 marketing year. White maize makes up 55% of this, with 45% being yellow maize. Overall, the large opening stock played a notable role in boosting supplies.
Worth noting is that South Africa could remain a net exporter of maize. The 2018/2019 marketing year’s maize exports are estimated at 2.2 million tons, down by 8% from 2017/2018. About 73% is set to be yellow maize, with 27% being white maize.
Last month’s (February) upward revision of domestic winter wheat production to 1.5 million tons had a marginal impact on wheat import estimates. The 2017/2018 wheat import estimate was revised down by 3% from last month to 1.85 million tons, which is still the second largest import volume on record in a dataset starting from the 1936/1937 marketing year.
Against this backdrop, the import tariff matters will continue to dominate the market in the near future. So far, there are no new developments on the import tariff front. The newly calculated rate is R394.84 per ton, down by 45% from the previous level. This new rate will only be applicable after its publication in the Government Gazette. The timeframe for this process is unclear, but previous adjustments took more than three weeks.
The weather is currently of less importance in the winter wheat growing areas of South Africa as the harvest process is totally over. The expected dry conditions during the next two weeks imply that dam levels could remain critically low in the near term, thus negatively affect households and other agricultural activities.
The most recent data from the Department of Water and Sanitation shows that on 26 February 2018, the province’s dam levels averaged 21%, down by two percentage points from the previous week and 11 percentage points from the corresponding period last year.
The new season soya bean crop is in good condition across most parts of the country, following a fair amount of rainfall received in the past few months. The expected rainfall in the next two weeks and throughout the next two months will further improve crop conditions and possibly boost yields.
The South African soya bean market could be well supplied in the 2018/2019 marketing year owing to an expected large harvest and opening stock. At the start of the 2018/2019 marketing year, 1 March 2018, the opening stock was estimated at 332 442 tons, which is treble the volume seen at the beginning of the previous year, thanks to the record harvest in the 2016/2017 production season.
The domestic Supply and Demand Estimates Committee forecasts soya bean supplies for the 2018/2019 marketing year at 1.7 million tons. This includes opening stock, commercial deliveries, as well as imports. This is a 21% increase from the 2017/2018 marketing year, owing to an expected large harvest.
As indicated in our previous notes, the National Crop Estimates Committee placed its first production estimates for soya beans at 1.4 million tons, up by 5% from the previous season. This was driven by an increase in area planted, as well as expected higher yields, which is underpinned by favourable weather conditions in the eastern sections of the country.
South Africa’s soya bean demand for the 2018/2019 marketing year is projected at 1.2 million tons, up by 9% from the previous season. This includes 1.0 million tons of soya beans for crush for oil and meal (oil cake), with the remainder set to be utilised in other products.
After experiencing a good run for the large part of the week, the potato market pulled back on Friday’s (2 March 2018) trade session with the price down by 3.91% from the previous day (1 March 2018), closing at R34.39 per pocket of 10kg bags. These losses were mainly on the back of a large stock of 982 925 tons at the start of the session.
In the session, the market saw an uptick in deliveries owing to ongoing harvest activity in most parts of the country. This led to a 9% increase in daily stocks to 1.1 million pockets.
The fruit market ended Friday’s (2 March 2018) trade session on a mixed footing. The price of apples was down by 7.19% from the previous day (1 March 2018), closing at R7.36 per kilogramme owing to a large stock of 185 000 tons.
The prices of bananas and oranges were up by 0.43% and 7.27% from the previous day (1 March 2018), closing at R7.00 and R11.80 per kilogramme, respectively. These gains were mainly on the back of strong commercial buying interest. Regarding the banana market, the gains could be short-lived due to a large stock of 230 000 tons at the end of Friday’s (1 March 2018) trade session.