Wandile Sihlobo, head of economic and agribusiness intelligence at Agbiz, shares highlights in his update on agricultural commodity markets.
The weather conditions could remain favourable throughout the production season. The medium-term forecasts promise above average rainfall during the next two months across the maize belt, which should further improve soil moisture and benefit the crop.
From the data front, today (8 March 2018) the United States Department of Agriculture (USDA) will release its monthly update of the World Agricultural Supply and Demand Estimates report. Last month (February), the agency placed South Africa’s 2017/2018 maize production estimate at 12.5 million tons (commercial and non-commercial maize production), down from last season’s record harvest of 17.5 million tons.
While the focus is on the new production season, some farmers continue to deliver old season maize to commercial silos. The total maize deliveries were reported at 4 241 tons in the week ending 2 March 2018. This was well below the previous week’s (ending 23 February 2018) deliveries of 24 593 tons. About 61% of this was white maize, with 39% being yellow maize. Overall, South Africa’s 2017/2018 marketing year’s total maize deliveries for weeks 1 to 44 currently stand at 15.3 million tons. Of this total, 60% is white maize with 40% being yellow maize.
The volumes of wheat recently delivered to commercial silos declined significantly from levels seen the previous weeks. This mirrors the reduction in activity on the farms after the completion of the harvest process.
About 2 848 tons of wheat were delivered to commercial silos in the week ending 2 March 2018. This is four-fold lower than the volume delivered the previous week (ending 23 February 2018), and well below the volumes delivered in the previous months when the harvest process was at its peak. This placed South Africa’s winter wheat producer deliveries for weeks 1 to 22 of the 2017/2018 marketing year at 1.44 million tons.
On the global front, making headlines yesterday (7 March 2018), was the intergovernmental contract between Iran and Russia, which could potentially lead to about 1.5 million tons of wheat exports to Iran in the coming years. This will be an important market for Russia as the country continues to see a solid increase in domestic wheat production.
In its February report, the USDA placed Russia’s 2017/2018 wheat production at 85 million tons; up by 17% from the previous season owing to an increase in area planted, as well as expected higher yields. This is a notable contribution to global supplies, making up a share of 11%.
The expected rainfall has not yet materialised in most soya bean growing areas of the country. The only areas that received light showers on Tuesday evening were Bethlehem, Fouriesburg, Heilbron, Harrismith, Lindley, Ventersburg, Senekal, Morgenzon and Vereeniging.
Nevertheless, this is not much of a concern as soya bean growing areas of South Africa still have a fair amount of soil moisture from rainfall received in the past few weeks. Moreover, the forecast rainfall during the next two weeks is in line with the South African Weather Service’s (SAWS) expectations of above normal rainfall during the next two months across the summer crop growing areas of the country.
In global markets, the global soya bean demand remains solid, underpinned by strong demand from China. The USDA recently reported a sale of 120 000 tons of the United States (US) soya bean to China. As highlighted in our previous note, China National Grain and Oils Information Centre forecasts the country’s 2017/2018 soya bean imports at 96 million tons, slightly below the USDA’s estimate of 97 million tons.
The potato market lost ground in yesterday’s (7 March 2018) trade session owing to a large stock of 739 972 tons at the start of the session. The price was down by 6% from the previous day (6 March 2018), closing at R34.95 per pocket of 10kg bags.
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 12% increase in daily stocks to 831 606 pockets.
The fruit market recorded widespread losses in yesterday’s (7 March 2018) trade session. The prices of apples and bananas were down by 1% and 3% from the previous day (6 March 2018), closing at R8.21 and R7.03 per kilogramme. These losses were mainly due to large stocks of 176 000 tons of apples and 210 000 tons of bananas.
The price of oranges declined by 4% from the previous day (6 March 2018) and settled at R4.63 per kilogramme. This was also pressured by a recovery in stocks to 61 000 tons, from levels of below 30 000 tons in the past few days.