Wandile Sihlobo, head of economic and agribusiness intelligence at Agbiz, shares highlights in his update on agricultural commodity markets.
Harvesting of the maize crop is in full swing and record yields are reported in most areas of the country. The forecast drier and warm weather conditions across the maize belt within the next two weeks could accelerate the process.
South African farmers delivered 1.03 million tonnes of maize to commercial silos during the week ending 9 June 2017, which is 14% higher than the previous week’s deliveries. About 51% of this was white maize and 49% was yellow maize. This brought the country’s 2017/2018 total maize deliveries for week 1 to 6 to 3.80 million tonnes.
The country has large supplies this season, estimated at 16.05 million tonnes, up by 31% from the 2016/2017 season. This figure includes opening stock of 1.01 million tonnes as at 1 May 2017, as well as expected commercial deliveries of 15.01 million tonnes.
This is well above South Africa’s annual maize consumption of 10.50 million tonnes. Unfortunately, there is relatively weak demand in the global market for exportable surplus, particularly white maize. The regional markets, which are traditional buyers of South African white maize, are well supplied due to higher domestic production. We think there is more room to the downside or sideways movement in white maize prices over the near to medium term.
With winter wheat at early growing stages, weather conditions remain a key focus in the domestic market. Unfortunately, the recent rainfall in the Western Cape was not sufficient to replenish soil moisture and dams. More concerning is the forecast persistence of dry weather conditions within the next two weeks which could potentially damage the newly planted crops.
Some farmers continue to deliver the old-season wheat crop to commercial silos. In the week ending 9 June 2017, wheat deliveries were recorded at 624 tonnes, which is 38% lower than the previous week. Overall, South Africa’s 2016/2017 total wheat deliveries for week 1 to 36 currently stand at 1.85 million tonnes.
On the global front this morning, the Chicago wheat price was down by 1.33% from levels seen at midday yesterday (14 June 2017), owing to selling pressure and prospects of a good crop in parts of the EU.
Although good rainfall has occurred over some areas of the US Midwest in the past few days, it was generally concentrated along the eastern parts and left some areas dry, particularly the central and western regions. This does not bode well for crops not in good shape. At the beginning of the week (12 June 2017), only 45% of it was rated good/excellent, compared to a rate of 79% in the corresponding period last year.
France Farm Ministry forecasts the country’s 2017/2018 wheat acreage at 5.1 million hectares, down by 100 000 hectares from the previous season. Weather conditions are expected to be fairly favourable this season, which increases the possibility of higher yields.
In Germany, Deutscher Raiffeisenverband raised its 2017/2018 wheat production estimate by 220 000 tonnes from the previous estimate to 25 million tonnes. This is 2% higher than the previous season.
Nothing much is happening in the domestic soya bean market. Harvesting is almost over and the forecast drier weather conditions within the next two weeks should enable the process to end smoothly. The areas that have harvested received excellent yields, which support the National Crop Estimate Committee’s view of a possible record crop of 1.23 million tonnes.
In global markets this morning, the Chicago soya bean price was down by 0.75% from levels seen at midday yesterday (14 June 2017), partly due to spillover pressure from the maize market.
The forecast drier weather conditions across certain areas of the US Midwest within the next eight days presents a window of opportunity for areas in the final stages of planting. However, the recently emerged crop could be strained. Recent reports suggest that crop conditions in the central and western areas of the US Midwest are deteriorating due to continued dry weather conditions. The rainfall mentioned yesterday only reached the eastern parts of the Midwest.
Recent data from France Farm Ministry shows that soya bean planting could reach 143 000 hectares in the 2017/2018 season, which is 5% higher than the previous season.
The forecast warm and dry weather conditions across the country within the next two weeks should allow harvesting to end smoothly. Areas already harvested obtained yields well above average levels of 1.2 tonnes per hectare, which suggests that the total crop could reach the National Crop Estimate Committee’s forecast of 853 470 tonnes, up 13% from the previous season.
From a global perspective, there was not much happening in the EU’s sunflower seed market. The price remained unchanged at US$393 per tonne due to light traded volumes.
Recent data from France Farm Ministry showed that sunflower seed planting could reach 550 000 hectares in the 2017/2018 season, in line with the previous season’s area.
In the Black Sea region, the sunflower oil market also saw a quiet day (14 June 2017) with the price unchanged from the previous day’s (13 June 2017) level, closing at US$730 per tonne.
According to recent data from APK Inform, Ukraine produced 550 000 tonnes of sunflower oil in April 2017, which is 7% lower than the previous month, but 25% higher than the corresponding period last year. Worth noting is that Ukraine exported 215 000 tonnes of sunflower oil in the first two weeks of this month.
The South African potatoes market lost 4.11% in yesterday’s (14 June 2017) trade session, closing at R26.10 per bag (10 kg). These losses were on the back of higher stocks of 1.18 million bags (10kg) at the start of the trading session.
However, during the session, the market saw a further uptick in deliveries due to ongoing harvest activity. Consequently, the daily stocks increased by 10% towards the end of the session to 1.30 million bags (10 kg).
SAFEX Beef :
The SAFEX beef carcass market lost ground during yesterday’s (14 June 2017) trade session, with the price down by 0.41% from the previous day’s (13 June 2017) level, closing at R45.81 per kilogramme. These losses came on the back of a slight selling pressure. There has been limited participation in the beef carcass contract at the stock exchange. Therefore, the SAFEX carcass prices could differ from the physical market, where there is strong participation.
The sentiment in the physical market remains bullish due to easing slaughter activity, as farmers continue to restock their herds after a 2015-2016 drought spell. The recent data from the Red Meat Levy Admin shows that South African farmers slaughtered 193 373 head of cattle in April 2017, which is 19% lower than the previous month and the corresponding period last year.
The fruit market ended the day mixed during yesterday’s (14 June 2017) trade session. The apple price was up 7% from the previous day (13 June 2017), closing at R6.83 per kilogramme. These gains were on the back of a 7% decline in daily stocks to 230 251 tonnes.
The banana market lost 3% from the previous day, closing at R5.74 per kilogramme. This was due to large stocks of 229 542 tonnes, a 27% daily uptick. The orange market was down 6% from the previous day, closing at R2.20 per kilogramme. These losses were also on the back of a 30% increase in daily stocks to 494 932 tonnes.