Wandile Sihlobo, head of economic and agribusiness intelligence at Agbiz, shares highlights in his update on agricultural commodity markets.
The eastern parts of the South African maize belt could receive good showers during the next eight days. This will replenish soil moisture, which is conducive for the new season crop. As we set out in our note yesterday (10 October 2017), the long-term weather forecasts show that there is a possibility of above normal rainfall across the maize belt between November 2017 and February 2018. This will support the new season crop.
From a trade perspective, South Africa exported 61 983 tonnes of maize in the week ending 6 October 2017, which is double the volume exported the previous week (ending 29 September 2017). About 87% of these exports were yellow maize, with 13% being white maize.
The leading buyer was Japan with a share of 83%, all yellow maize. Trailing Japan was Botswana with a share of 8%, largely white maize. This placed South Africa’s 2017/2018 total maize export volume at 1.4 million tonnes, which equates to 64% of the season’s export forecast of 2.2 million tonnes. About 66% of the exported 1.4 million tonnes is yellow maize, with 34% being white maize.
On the global front, the forecast rainfall across the north-eastern parts of the United States (US) Midwest could slow the harvest activity during the next eight days. At the beginning of this week, about 22% of the US maize crop had already been harvested, which is 11 points behind the corresponding period last year. The International Grains Council forecasts the US 2017/2018 maize production at 358, down by 7% from the previous season.
The most recent weather updates show a possibility of light showers across the coastal areas of the Western Cape, which implies that a large part of the crop could be strained for some time. This could lead to a downward revision of the current national crop estimate of 1.7 million tonnes. An update of the potential size of the crop will be released on 26 October 2017.
In terms of dam levels, the recent update for the week ending 9 October 2017 shows that dams averaged 36% in the Western Cape, which is unchanged from the previous week, but 26 points lower than the corresponding period last year.
From a trade perspective, South Africa imported 37 337 tonnes of wheat in the week ending 6 October 2017, all from Ukraine. This was the first batch of imports in the 2017/2018 marketing season. This season’s imports are currently estimated at 1.8 million tonnes, up by 94% year-on-year.
This is under the assumption that domestic production will reach 1.7 million tonnes. Therefore, in the event that production declines further, as we expect, the import estimate of 1.8 million tonnes could be revised up over the coming months.
Although the planting window has already opened in KwaZulu-Natal, the heavy rainfall could delay the process. The forecast for the next eight days shows that rainfall could continue across the eastern parts of the country.
However, this is not much of a concern as there is enough time for farmers to plant. The optimal planting window for KwaZulu-Natal province and other parts of the country closes at the beginning of December.
In global markets, the forecast rainfall in the north-eastern parts of the US Midwest could slow the maturation and harvest process. At the beginning of this week, 36% of the US soya bean crop had already been harvested, which is a 14-point increase from the previous week (ending 6 October 2017). This was 8 points behind the corresponding period last year. At the same time, 61% of the crop was rated good /excellent, which is 13 points lower than the same period last year.
There is a possibility that sunflower seed price competitiveness and good weather could entice farmers to switch some acreage from maize to sunflower seeds. However, clear indications will be revealed by the end of the month when the National Crop Estimate Committee releases its “summer crop intentions to plant” data.
In terms of weather, the prospects are positive with possible widespread showers across the sunflower seed producing areas of South Africa between November 2017 and February 2018.
Further, this week’s calendar is light with no major data releases. Therefore, the market will again be driven by the domestic currency movements and traded volumes in the local market during the next few days.
The South African potato market received additional support in yesterday’s (10 October 2017) trade session with the price up by 8% from the previous day (9 October 2017), closing at R55.79 per pocket (10kg). These gains were on the back of lower stocks of 449 556 pockets (10kg) at the start of the trading session.
However, during the session, the market saw an uptick in deliveries as harvest activity picks up after a quiet weekend. This subsequently led to a 17% increase in daily stocks to 524 473 pockets (10kg).
SAFEX beef carcass:
The SAFEX beef carcass market remains the same. The prices remained flat in yesterday’s (10 October 2017) trade session, at R46.00 per kilogramme due to thinly traded volumes. This implies that the SAFEX beef carcass prices might differ from the physical market, which continues to show solid activity and higher traded volumes.
The South African cattle industry is normalising after the 2015/2016 drought. The most recent data from the Red Meat Levy Admin shows that farmers slaughtered 228 632 head of cattle in August 2017, up by 12% from the previous month (July), but still down by 5% from the same period last year. It is unclear whether this will be a temporary blip or full recovery. Developments will be closely monitored over the coming months.