Wandile Sihlobo, head of economic and agribusiness intelligence at Agbiz, shares highlights in his update on agricultural commodity markets.
A large part of the South African maize belt started this week (ending 16 March 2018) with dry and cool weather conditions, with light and scattered showers only in a couple of regions in Mpumalanga province. Moisture-stressed areas, following dry conditions in the past few days could soon see some relief, as the weather forecasts for the next two weeks show a possibility of rainfall of over 30 millimetres.
Last week’s (ending 9 March 2018) maize exports were again disappointing. South Africa exported 14 010 tons, down by 5% from the volume exported in the week ending 2 March 2018. About 68% of these exports were white maize, with 32% being yellow maize. This placed South Africa’s 2017/2018 maize marketing year exports at 2.0 million tons, which equates to 83% of the season’s export forecast of 2.4 million tons.
Within the region, the 2017/2018 maize production season started on a bad footing in Zimbabwe with limited soil moisture in the latter part of December 2017 into the start of 2018. But, at the beginning of last month (February 2018), the maize producing regions received good showers which improved soil moisture and benefited the crop.
Reports from analysts on the ground in the country point to a possibility of average yields in most areas, which is well below the 2016/2017 production season’s bumper harvest of 2.2 million tons. We will closely monitor the developments in the coming weeks as this could have implications on regional maize demand. In the case of South Africa, these developments will have implications on export activity for the 2018/2019 marketing year which starts in May 2018.
As highlighted in yesterday’s (13 March 2018) note, South Africa’s wheat market is currently off-season, and therefore, most activity is in import trading. However, the recent developments in the major wheat production province, the Western Cape, are worth mentioning. The weather charts for the next two weeks show a possibility of light showers of between 16 and 20 millimetres across the coastal areas of the province.
While a welcome development, this will nonetheless not make a meaningful improvement on dam levels which are critically low, estimated at 20% in the week of 05 March 2018, down by 10 percentage points from the corresponding period last year.
There are no new developments on the wheat import tariff. The newly calculated trigger rate is R394.84 per ton, down by 45% from the current active level. This new rate will only be applicable after its publication in the Government Gazette. The timeframe for this process is unclear, but previous adjustments took more than three weeks.
With that said, the import activity has slowed. South Africa imported 55 958 tons in the week ending 9 March 2018, down by 46% from the previous week. About 51% came from Romania, 31% from Latvia and 18% from Argentina. This placed 2017/2018 marketing year’s wheat imports at 1.14 tons, which equates to 62% of the seasonal import forecast of 1.85 million tons.
The soya bean crop is generally in good condition with expectations of above-average yields in some areas. This supports the National Crop Estimates Committee’s view of a new record level of 1.4 million tons this season, up by 5% from the 2016/2017 production season.
Although soil moisture is in good condition, the crop could still benefit from additional rainfall, especially the late planted areas. The expected showers have not yet materialised in most areas. It is only areas around Graskop, Middelburg, Morgenzon, Witbank and Wonderfontein that received light showers on Monday night.
The next two weeks, however, promise the possibility of rainfall of over 50 millimetres in soya bean growing regions of the country. This should further improve soil moisture and benefit the crop.
From a demand front, the 2017/2018 soya bean imports are estimated at 151 million tons, up by 5% from the previous season. China, the European Union (EU), Japan and Mexico are set to be the key buyers. China alone accounts for two-thirds of global soya bean imports. This is driven by growing demand from the animal feed industry.
The weather remains a primary focus in the sunflower seed market as the crop is still at its early stages of development. The expected rainfall has not yet materialised in most areas of the country. However, the crop that is slightly moisture-stressed following dry conditions in the past few days should soon recover as weather conditions promise rainfall during the next two weeks.
As highlighted in our previous notes, the medium-term weather forecast promises a possibility of above normal rainfall in summer crop growing areas of South Africa between this month (March) and May 2018. This should provide sufficient moisture for crop development throughout the season.
In the global market, the 2017/2018 sunflower seed harvest process is not yet complete in Russia. According to SUNSEEDMAN, about 7% of the area planting is yet to be harvested. The United States Department of Agriculture (USDA) placed Russia’s 2017/2018 sunflower seed production at 10.4 million tons, down by 5% from the previous day.
In Argentina, the sunflower seed harvest process is underway but could slow during the next few days due to expected rainfall. On 13 March 2018, about 45% of this season’s crop had already been harvested. The USDA forecasts the country’s 2017/2018 sunflower seed crop at 3.6 million tons, up by 6% year-on-year (y/y).
The potato market had a good run in yesterday’s (13 March 2018) trade session underpinned by lower stocks of 644 269 pockets of 10kg bags at the start of the session. The price was up by 7% from the previous day (12 March 2018), closing at R35.51 per pocket.
However, in yesterday’s (13 March 2018) trading session, the market saw an uptick in deliveries as harvest activity picked up after a quiet period in the weekend. This led to a 21% increase in daily stocks to 780 197 pockets.
The fruit market ended yesterday’s (13 March 2018) session on a mixed footing. The apples and bananas market managed to claw back the recent losses with the prices up by 11% and 12% from the previous day (12 March 2018), closing at R8.12 and R8.06 per kilogramme, respectively. These gains followed a respective decline in daily stocks of apples and bananas to 183 000 tons and 237 000 tons.
The price of oranges experienced extended losses of 29% from the previous day and settled at R5.47 per kilogramme. We maintain that this will be short-lived because of fairly lower stock of 55 000 tons, compared to levels of over 70 000 tons in the past few days.