Wandile Sihlobo, head of economic and agribusiness intelligence at Agbiz, shares highlights in his update on agricultural commodity markets.
Although the past few weeks’ rainfall was not sufficient to replenish soil moisture across many fields in the Western Cape, it benefited the crop as it is currently in fair condition. Crops in the Free State province are in fair to poor condition due to persistent dry conditions.
There is an urgent need for follow up rains as the crop approaches the pollination stage which requires high moisture. Unfortunately, the weather forecast for the next two weeks shows a possibility of dry and cool conditions throughout the country which is not conducive for crops.
In terms of dam levels, the recent update for the week ending 28 August 2017 shows that dams averaged 33% in the Western Cape, which is a 2% improvement from last week, but 28% lower than the corresponding period last year.
More emphasis is placed on the Western Cape because it is the main dryland winter wheat producing region of South Africa. The Free State and Northern Cape provinces are mostly under irrigation and will benefit from higher water levels in the dams, currently above 70% full in both provinces.
The most recent data from the South African Supply and Demand Estimates Committee shows that the country’s 2017/2018 total maize supplies could reach 16.7 million tonnes. This figure includes opening stock of 1.0 million tonnes, as well as expected commercial deliveries of 15.7 million tonnes. This is 36% higher than the previous season’s supplies.
The Committee does not expect any imports this season, whereas exports are set to reach 2.2 million tonnes. One of the key reasons for a relatively lower export estimate is an anticipated weak demand for white maize on the global market. Of the 2.2 million tonnes, white maize exports are set to reach only 870 000 tonnes (or 40%).
This could lead to a large carry-over stock of roughly 4.2 million tonnes, compared to 1.1 million tonnes in the 2016/2017 season. These large stocks could keep maize prices under pressure for some time.
On the global front, the Chicago maize market was down by 0.87% during Friday’s trade session. This morning (4 September 2017) the United States (US) maize market is closed for Labour Day public holiday. Last week (ending 1 September 2017) the US saw solid export activity due to relatively strong demand from Latin American countries. The weekly exports reached 992 500 tonnes, which is well above market expectation.
Data from the South African Supply and Demand Estimates Committee shows that the country’s soya bean supplies for the 2017/2018 season could reach 1.39 million tonnes. This includes an opening stock of 84 792 tonnes for this season, commercial deliveries of 1.28 million tonnes and a small volume of imports. Overall, this is 29% higher than the previous season.
The total demand is projected at 1.15 million tonnes, up by 18% from the previous season. This includes 1.00 million tonnes of soya bean for crush for oil and meal (oil cake), with the remainder set to be utilised in the production of other products.
This also includes 30 000 tonnes for the export market, which is well above the 2016/2017 season’s exports of 6 745 tonnes. So far, the country has only exported 312 tonnes of soya beans to regional markets. There were no exports in July 2017. The last exports were in May 2017, totalling 185 tonnes, all to Mozambique.
The domestic soya bean data calendar is light this week, and market performance will be guided largely by the Chicago (soya bean) price and domestic currency movements throughout the week.
South Africa’s sunflower seed supplies could reach 1.04 million tonnes this season (2017/2018). This figure includes an opening stock of 163 086 tonnes and commercial deliveries of 849 400 tonnes, among other variables. This means that this season’s supplies will be 18% higher than the 2016/2017 season.
This week’s calendar in the South African sunflower seed market is light with no major data releases. Therefore, the market will most likely be driven by the domestic currency movements and traded volumes.
The South African potato market gained ground on Friday’s (1 September 2017) trade session with the price up by 5% from the previous day (31 August 2017), closing at R41.10 per pocket (10kg). These gains came on the back of relatively lower stocks of 737 760 pockets (10kg) at the start of the session.
However, during the trading session, the market saw an uptick in deliveries on the back of ongoing harvest activity. By the end of the session, the daily stocks were up by 5%, closing at 776 015 pockets (10kg).
On Friday (1 September 2017), there was not much happening in the SAFEX beef carcass market. The price remained flat at R46.00 per kilogramme due to thinly traded volumes. This means that the SAFEX beef carcass prices could differ from the physical market prices.
As indicated in our previous notes, the livestock industry is still in its rebuilding process after the 2015/2016 El Niño-induced drought. The most recent data from the Red Meat Levy Admin shows that South African farmers slaughtered 203 647 head of cattle in July 2017, down 6% from June 2017.
This is 13% lower than the corresponding period last year. Developments will be closely monitored over the coming months to ascertain the impact on prices.
The fruit market closed on a mixed footing on Friday’s (1 September 2017) trade session. The prices of bananas and oranges were up by 1% and 3% from the previous day (31 August 2017), closing at R5.11 per kilogramme and R2.78 per kilogramme, respectively. This was on the back of lower stocks of 210 226 tonnes of bananas and 180 779 tonnes of oranges.
The price of apples was marginally down by 1% from the previous day, closing at R7.28 per kilogramme. However, this could be short lived due to lower stocks of 167 469 tonnes, down 28% from the previous day.