Agbiz Morning Market Viewpoint on Agri-Commodities: 26 June 2017.

Highlights in today’s morning note

Wheat:

Although the Western Cape province generally needs rainfall, crop conditions across the province paint a mixed picture. The Swartland region received fairly good showers of between 40 and 60 millimetres in June 2017, whereas the Southern Cape and Overberg regions received showers of between 20 and 30 millimetres. As a result, the crop in Swartland is in a fair condition relative to other regions within the province.

With that being said, the entire province urgently needs rainfall to replenish soil moisture. More concerning is the recent dam levels data which shows the average Western Cape dams at 21% full in the week ending 19 June 2017, which is 14% lower than the same period last year

In terms of trade, the International Trade Administration Commission released the outcome of a review of the dollar-based reference price and variable tariff formula for wheat. The outcome presented more of the same, with adjustments on two variables in the formula, namely reference price and exchange rate adjustments (see SA’s wheat import tariff review outcome, 23 June 2017).

Overall, the wheat import tariff is R947.21 per tonne, down by 20% from the previous level. Given that the were no major changes to the wheat import tariff formula, this can be considered as positive for farmers as it still maintains a fair protection level against cheap imports.

Maize:

This week is data parked with key releases such as the National Crop Estimate Committee’s fifth production estimates, SAGIS monthly grain data, and weekly grain trade figures amongst others.

With regards to maize production, the consensus prediction amongst analysts polled by Bloomberg is 15.73 million tonnes, which is 1% higher than the previous estimate of 15.63 million tonnes. The upward revision will most probably be on white maize, whereas yellow maize could remain unchanged. The official estimate will be published on Wednesday afternoon, 28 June 2017.

On the global front – This morning the Chicago maize market was down by 0.82% from levels seen at midday Friday due to prospects of better weather conditions in parts of the US Midwest.

Soybean:

The National Crop Estimate Committee will release its updated production estimates on Wednesday afternoon, 28 June 2017. Weather conditions and harvest processes have remained fairly favourable since last month’s estimate. As a result, we believe that the Committee will keep its soybean production estimate unchanged at 1.23 million tonnes. If there are any adjustments, it will most probably be an upward revision.

In global markets – This morning Chicago soybean price was up by 0.22% from levels seen at midday Friday due to a relatively weaker US Dollar against major currencies.

The Weather forecast for the US paints a promising picture of possible rainfall within the next few days, particularly around the central and eastern parts of the Midwest. This is favourable for new season soybean crop.

Soybean planting is virtually over across the US. At the beginning of last, about 89% of the 36.35 million hectares of soybean had already emerged, which is just 1% behind the corresponding period last year.

This evening the USDA will release an update of its weekly crop conditions data. At the start of last week, only 67% of the recently emerged crop was rated good/excellent, which is 8% behind the same period last year. Given that a large part of last week was dry and warm, the ratings will most likely paint another worrying picture.

RSA Potatoes:

The South African potatoes market lost ground during Friday’s trade session with the price down 3% from the previous day, closing at R27.50 per bag (10 kg bag). This was mainly on the back of a recovery in stock levels.

The market saw an increase in deliveries during Friday’s trade session due to ongoing harvest activity. This meant that daily stocks managed to stabilise at 1.2 million bags (10 kg bags), despite the strong buying interest in the market.

SAFEX beef carcass:

On Friday, the SAFEX beef carcass market ended the day on a quiet note, as trading volumes in the beef market were thin. The price remained flat at R45.00 per kilogramme.

Having said that, the general sentiment in the beef carcass market remains bullish due to easing slaughter activity, as farmers continue to restock their herds after the 2015-16 drought spell.

Data from the Red Meat Levy Admin shows that South African farmers slaughtered 193 373 head of cattle in April 2017, down 19% from the previous month and the corresponding period last year. We will monitor beef slaughtering activity closely to determine the impact on prices.

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