Wandile Sihlobo, head of economic and agribusiness intelligence at Agbiz, shares highlights in his update on agricultural commodity markets.
The winter wheat crop is in fair condition in many parts of the Western Cape following the recent showers. However, this was not sufficient to replenish soil moisture. There is a need for more rain, as the crop approaches the pollination stage of development which requires higher moisture.
This week could remain dry and cool throughout the Western Cape which is not conducive for crops. The only glimpse of hope is in the second week (ending 15 September 2017) of September, where the province could possibly receive between 16 and 30 millimetres of rainfall.
In terms of dam levels, the recent update for the week ending 21 August 2017 shows that the Western Cape dams averaged 31%, which is a 1% improvement from the previous week, but 28% lower than the same period last year. The Northern Cape and Free State provinces, which are mostly irrigated, are in good shape with dam levels over 70% full.
South Africa’s monthly wheat consumption reached 287 982 tonnes in July 2017, up by 9% from June 2017 and 9% from July 2016. South Africa’s wheat ending stocks were reported at 634 462 tonnes, down 23% from the previous month and 39% from July 2016.
This is a data-packed week, with the National Crop Estimate Committee’s seventh maize production estimates and SAGIS weekly data due for release. Any notable changes in these particular data points could lead to movements in the maize markets.
Reuters analyst’s survey shows that South Africa’s maize production could be revised up by 1% from the previous estimate to 16.14 million tonnes. Bloomberg’s survey indicates that the maize crop production estimate could remain unchanged at 15.97 million tonnes. This is well above the 2016/2017 harvest of 7.78 million tonnes and a long term average production of 12.50 million tonnes.
In July 2017, South Africa’s maize stocks were estimated at 10.51 million tonnes, which is twice the volume seen in the same period last year. This notable increase is due to higher deliveries on the back of the ongoing harvest process.
The expected uptick in production means that South Africa might see minimal imports of soya beans in the 2017/2018 season, which will be a remarkable improvement following 2016/2017 imports of 271 098 tonnes. The country imported 4 095 tonnes of soya beans in July 2017, placing the country’s total imports to 13 028 tonnes.
There were no exports in July 2017. The last exports were in May 2017, totalling 185 tonnes, all to Mozambique. The 2016/2017 soya bean total exports currently stand at 312 tonnes, all to Mozambique and Botswana. If the forecast 1.34 million tonnes of production materialises, South Africa’s soya bean exports could reach 30 000 tonnes by the end of the 2017/2018 season.
South Africa’s soya bean consumption (crushed oil and cake) was reported at 85 565 tonnes in July 2017, up by 19% from June 2017 and 21% from the corresponding period last year.
Using an estimate of 2.2 million tonnes of South Africa’s soya bean crushing capacity, which then translates into 183 333 tonnes per month, the country utilised 47% of its monthly soya bean processing capacity in July 2017. This is 8% higher than the previous month. South Africa’s soya bean ending stocks reached 927 560 tonnes in July 2017, down 9% from the previous month. However, this was 87% higher than the corresponding period last year due to an expected record harvest.
In terms of trade, South Africa exported 8 tonnes of sunflower seed to Swaziland and Namibia in July 2017. This brought the country’s 2017/2018 sunflower seed exports to 117 tonnes. About 69% went to Swaziland, 19% to Botswana and 12% to Namibia.
In the same month, South Africa imported 124 tonnes of sunflower seed from Egypt and Malawi. This is the third batch of imports this season. The total imports for the 2017/2018 season stand at 356 tonnes. We do not foresee any large import volumes for the 2017/2018 season due to expected large domestic supplies.
South Africa’s sunflower seed consumption (crushed oil and cake) increased by 19% month-on-month (m/m) and 27% year-on-year (y/y) in July 2017 to 81 729 tonnes. Also worth noting is that South Africa’s sunflower seed ending stocks were recorded at 714 251 tonnes in July 2017, up by 0.4% m/m and 32% y/y.
The South African potato market saw marginal gains in Friday’s (25 August 2017) trade session with the price up by 0.81% from the previous day (24 August 2017), closing at R32.32 per pocket (10kg). These gains came on the back of relatively lower stocks in the market.
At the start of the trade session the market had daily stocks of 912 556 pockets (10kg), but this fell by 8% by the end of the session and eased at 840 909 pockets (10kg) due to strong buying interest.
The SAFEX beef market has not shown any notable movements this month due to thinly traded volumes. The price remains flat at R46.00 per kilogramme. This means that the SAFEX beef carcass prices could differ from the physical market prices.
Apart from the aforementioned developments, the beef market is slowly showing signs of normalisation after the 2015/2016 El Niño-induced drought. Data from the Red Meat Levy Admin shows that South African farmers slaughtered 203 983 head of cattle in June 2017, up by 1% from May 2017.
This is still 16% lower than the corresponding period last year. The figures for July 2017 will be updated this week (ending 1 September 2017). Developments will be closely monitored over the coming months in order to determine the impact on prices.
The fruit market ended the day mixed on Friday’s (25 August 2017) trade session. The prices of apples and oranges were up by 3% and 15% from the previous day (24 August 2017), closing at R7.65 per kilogramme and R3.74 per kilogramme, respectively. However, these gains could be shortlived owing to large stocks of 219 599 tonnes of apples and 224 533 tonnes of oranges.
The price of bananas was down by 8% from the previous day, closing at R4.72 per kilogramme. This followed an 8% uptick in daily stocks to 239 168 tonnes.