Wandile Sihlobo, head of economic and agribusiness intelligence at Agbiz, shares highlights in his update on agricultural commodity markets.
The weather remains a primary focus in the domestic wheat market as the crop approaches the pollination stage of development which requires high moisture. Unfortunately, the outlook is bleak. In its recent Seasonal Climate Watch report, the South African Weather Service indicated that the south-western parts of the country could remain fairly dry during the foreseeable future.
The impact of the expected dry conditions on crops will be clear when the National Crop Estimate Committee releases its second crop assessments at the end of this month. At the moment, the crop is estimated at 1.60 million tonnes, down by 16% from the 2015/2016 production season.
From a trade perspective, the wheat import tariff has finally been published at R379.34 per tonne, which is 60% lower than the previous rate and the lowest levels since February 2015. On the one hand, this could ease the pressure on food processing companies and ultimately consumers, while pressuring farmers on the other.
On the global front this morning (12 September 2017), the Chicago wheat price was down by 0.48% from levels seen at midday yesterday (11 September 2017) due to United States (US) harvest pressure. The US spring wheat harvest process is virtually over. At the beginning of this week, the country had harvested 95% of the crop which is a 6% improvement from last week and 1% ahead of last year’s pace.
South Africa’s maize supplies are in good shape, estimated at 16.7 million tonnes (including opening stocks and commercial deliveries). This is 36% higher than the previous season’s supplies and well above the domestic annual consumption of 10.5 million tonnes.
Prospects for the new season remain positive, particularly on the weather front. As indicated in yesterday’s (11 September 2017) note, the South African Weather Service indicates a possibility of above-normal rainfall in the north-eastern parts of the country between October and December 2017 . This coincides with the planting period and could aid seed germination.
On the global front this morning (12 September 2017), the Chicago maize price was up by 0.29% from levels seen at midday yesterday owing to poor crop ratings. At the beginning of this week, only 61% of the US maize crop was rated good/excellent, unchanged from the previous week (ending 8 September 2017) and 13% lower than the corresponding period last year.
SovEcon revised down its estimate for Russia’s 2017/2018 maize production by 1.2 million tonnes to 15.2 million tonnes. This is slightly lower than the previous season’s crop of 15.3 million tonnes due to expected lower yields in some parts of the country. In Ukraine, the country’s Ministry of Agriculture forecasts the 2017/2018 maize production at 26.6 million tonnes, slightly above the previous season’s harvest of 26.0 million tonnes.
Yesterday (11 September 2017) was a quiet session in the domestic soya bean market and the data calendar for the rest of the week is fairly light, as it is an off season period with not much activity in the fields. Therefore, market performance will largely be guided by the Chicago soya bean price and domestic currency movements during the next few days.
In global markets this morning (12 September 2017), the Chicago soya bean price was down by 0.10% from levels seen at midday yesterday owing to large global supplies.
The recent rainfall in parts of the Midwest did not lead to notable improvement in crop conditions. At the beginning of this week, only 60% of the US soya bean crop was rated good/excellent, down by 1% from the previous week (ending 8 September 2017), and 13% lower than the same period last year.
From a demand perspective, China recently bought 264 000 tonnes of US soya beans. The country is set to remain a key buyer of soya bean throughout the new season. Last month, the United States Department of Agriculture (USDA) estimated China’s 2017/2018 soya bean imports at 94.0 million tonnes, which is a 3% uptick from the 2016/2017 season. An update will be released this evening.
The South African potato market saw extended losses in yesterday’s (11 September 2017) trade session with the price down by 2% from the previous day (10 September 2017), closing at R38.79 per pocket (10kg). These losses were partly on the back of relatively large stocks of 946 022 pockets (10kg) at the start of the session.
However, during the trading session, the market saw a strong buying interest, coupled with lower deliveries after a weekend with reduced harvest activity. This subsequently led to a 25% decline in daily stocks to 708 221 pockets (10kg).
The fruit market remained mixed in yesterday’s (11 September 2017) trade session. The price of apples fell by 3% from the previous day (10 September 2017), closing at R7.24 per kilogramme due to commercial selling. However, this could be short-lived owing to lower stocks of 197 110 tonnes, down 23% from the previous day.
The prices of bananas and oranges were up by 1% and 19% from the previous day, closing at R5.87 per kilogramme and R3.35 per kilogramme, respectively. This followed a 25% and 50% decline in daily stocks of bananas and oranges to 200 226 tonnes and 128 721 tonnes, respectively.