Wandile Sihlobo, head of economic and agribusiness intelligence at Agbiz, shares highlights in his update on agricultural commodity markets.
Last week’s (ending 2 March 2018) showers were mainly concentrated in areas around the eastern sections of Limpopo and Mpumalanga provinces, whereas other regions remained cool and dry. The most recent report from World Weather Inc. shows that soil moisture has improved significantly across the maize belt, particularly the western sections.
As a result, the maize crop is generally in good condition in most sections of the maize belt. The expected rainfall during the next two weeks should further improve soil moisture and crop conditions.
It is worth highlighting again, that the South African Weather Service forecasts a weak La Niña phase through to early autumn. This means that the maize growing regions of the country could receive good rainfall during the next two months. This reinforces the National Crop Estimates Committee’s view of a fairly good crop of 12.2 million tons in the 2017/2018 production season.
In the region, the most recent data from Botswana’s Ministry of Agriculture shows that the 2017/2018 grain area plantings were at 42 800 hectares by the end of February 2018, well below the 167 562 hectares planted at the corresponding period last year.
Yesterday (5 march 2018), there was no new news in the domestic wheat market. The main focus today (6 march 2018) will be the SAGIS weekly trade data which should give an indication of the wheat import activity.
To reiterate a point made in yesterday’s (5 March 2018) note, the upward revision of domestic wheat production to 1.5 million tons led to a 3% downward revision of 2017/2018 wheat import estimate from last month to 1.85 million tons. This is, however, still the second largest import volume on record in a dataset starting from 1936.
On the global front, the International Grains Council forecasts the 2017/2018 global wheat imports at 180 million tons, up by 1% from the previous season (2016/2017). The key importing regions are North Africa and Southeast Asia, with imports estimated at 29 million and 27 million tons, respectively. In North Africa, the key buyers are Egypt, Algeria, Morocco and Tunisia.
Sub-Saharan Africa is also amongst the key wheat importing regions with the 2017/2018 wheat imports estimated at 23 million tons, up by 7% from the previous season. The leading buyers within this region are Nigeria, Sudan, South Africa and Kenya.
South Africa’s 2017/2018 soya bean production season started in a better position than other crops due to rainfall in the eastern sections of the country. The crop is currently in good conditions, despite the dry and cool conditions experienced in the past few days.
Looking ahead, the weather forecasts promise higher rainfall during the next two weeks, which should further improve soil moisture and benefit the crop. This actually reinforces the National Crop Estimates Committee’s view of a possible record harvest of 1.4 million tons in the 2017/2018 production, up by 5% year-on-year (y/y).
While this is a welcome development, hail is always a key concern for the eastern sections of South Africa, especially when there are expectations of heavy rainfall. In the past few weeks, hail affected some areas in KwaZulu-Natal and Mpumalanga provinces, but the impact on crops was minimal.
From a global demand perspective, China recently bought 198 000 tons of soya beans from the United States (US). In fact, the Chinese soya bean demand will remain solid throughout the season. The Unites States Department of Agriculture (USDA) forecasts China’s 2017/2018 soya bean imports at 97 million tons, up by 4% from the previous season. This constitutes 65% of 2017/2018 global soya bean imports.
From a supply point of view, Informa Economics revised its estimate for Brazil’s 2017/2018 soya bean production up by 2 million tons from the previous month to 114 million tons. This is almost in line with the previous season’s harvest. Argentina’s 2017/2018 soya bean production estimate was revised down by 7 million tons from last month to 44 million tons, owing to persistent dry conditions. This is roughly 20% lower than the previous season.
After recording losses on Friday’s (2 March 2018) trade session, the South African potato market was fairly quiet in yesterday’s (5 March 2018) trade session despite the large stock of 1.1 million pockets of 10kg bags at the start of the session.
However, towards the end of the session the market experienced commercial buying interest, coupled with relatively lower deliveries on the back of slow harvest activity during the weekend (ending 4 March 2018). This subsequently led to a 38% decline in daily stocks to 666 195 pockets.
The fruit market started the week (ending 9 March 2018) on a negative footing owing to large stocks. The prices of apples and bananas were down by 2% and 8% from the previous day (4 March 2018), closing at R7.23 and R6.47 per kilogramme, respectively. This was on the back of large stock of 216 00 tons of apples and 346 000 tons of bananas.
The price of oranges declined by 30% from the previous day (4 March 2018), closing at R8.31 per kilogramme due to commercial selling. Looking ahead, the oranges market should soon gain ground as stocks are at lower levels of 4 000 tons, compared to levels of over 50 000 tons in December 2017.