Agbiz Morning Market Viewpoint on Agri-Commodities: 01 February 2018

Highlights in today’s morning note:

 

Maize:

The weather will remain a primary focus in the South African maize market at least until March 2018, when the crop passes the pollination stage of development. Fortunately, the incoming data from the South African Weather Services suggests that the summer rainfall areas of the country could receive above normal rainfall from this month until April 2018.

The near-term weather forecasts also support the local weather bureau’s view, suggesting a possibility of between 25 and 90 millimetres of rainfall across the maize producing regions within the next eight days. This should improve soil moisture, which will potentially support crops in areas that planted late in the season.

Given the National Crop Estimates Committee’s preliminary planting estimate of 2.30 million hectares (down by 12% y/y) and favourable weather forecasts for the season, we estimate that South Africa’s maize production could reach 11.2 million tonnes (from 16.7 million tonnes in 2016/17 production season). This implies that the country’s maize supplies could remain soil, as the carryover stock is expected to be roughly 4.3 million tonnes (domestic consumption is 10.5 million tonnes).

In our production estimate, we applied an average yield for the past five seasons for both white and yellow maize estimates and assumed that weather conditions will remain favourable throughout the season, as suggested by the South African Weather Service. Overall, the official production estimates and the revised area plantings data will be released by the National Crop Estimates Committee on 27 February 2018.

 

Wheat:

The last winter wheat harvest activity in the VKB and OVK regions in the eastern Free State province have recently been completed. The yields received in both regions are well below average due to unfavourable weather conditions earlier in the season. As a result, the volumes recently delivered to commercial silos are well below the previous week’s one.

About 11 105 tonnes of wheat were delivered in the week ending 26 January 2018, down by 28% from the volume delivered the previous week. This placed South Africa’s wheat producer deliveries for “week 1 to 17” of the 2017/18 marketing year at 1.37 million tonnes.

The impact of lower yields in the Free State and the Western Cape provinces is clear from the national production estimate which was left unchanged earlier this week, at 1.48 million tonnes, but down by 23% from 2016 harvest. The lower wheat harvest essentially implies that South Africa’s wheat imports could increase to 1.90 million tonnes in the 2017/18 marketing year, which is double the volume imported the previous marketing year .

At the moment, rainfall is not of importance in the wheat growing areas of the Western Cape province but could improve dam levels and subsequently benefit households and other agricultural activities such as horticulture and livestock. An update for the week ending 29 January 2018 shows that dams averaged 25% in the unchanged from the previous week, but down by 13 percentage points lower than the corresponding period last year.

 

Soybeans:

The preliminary soybean plantings estimate of 701 000 hectares is the biggest area on record. If one applies an average yield of 1.7 tonnes per hectare from the past five season, South Africa’s soybean production could reach 1.19 million tonnes. This would be 9% lower than the 2016/17 production season. The key reason being the higher average yield of 2.3 tonnes per hectare obtained in the 2016/17 production season

The National Crop Estimates Committee will release its official first production estimates and revised estimates for area planted on 27 February 2018. Weather is also an important factor at this stage of development. The past few weeks brought fairly good rainfall for most soybean growing areas of the country. As a result, the crop is in a fair condition in most regions.

In addition, the weather forecasts paint a promising picture of good rainfall throughout the season. The local weather bureau forecasts a weak La Niña phase through early autumn, which is February to April 2018. This implies that South African summer rainfall areas could receive above-normal rainfall.  

The near-term weather forecasts already show a possibility of between 25 and 90 millimetres of rainfall in the soybean growing areas of South Africa. With that said, hail is always a key concern for the eastern parts of the country, especially when there are expectations of heavy rainfall. The past few weeks brought a bit of it in regions of Mpumalanga and KwaZulu Natal province, but the crop damage was somewhat limited.

 

Sunflower seed:

The weather is still main focus in the sunflower seed market as the crop is at early stages of development. Bloemhof, Delareyville, Derby, Leeudoringstad, Ventersdorp, Viljoenskroon and Schweizer-Reneke regions of the North West and western Free State provinces regions received rainfall of between 10 and 24 millimetres on Tuesday evening. This follows good showers of between 20 and 110 millimetres at the end of last week.

Although this is patchy, leaving some areas dry and warm, it is a welcome development following the drier weather condition experienced in the last few weeks of 2017 and the start of 2018.

Looking ahead, the weather charts continue to paint an encouraging picture of rainfall across the sunflower seed growing areas of the country within the next two weeks. This supports the view of the South African Weather Services, which highlighted a possibility of above-average rainfall from this month until April 2018 in summer crop growing areas of the country.

Also worth noting is that the 2017/18 sunflower seed area plantings of 560 100 hectares are the lowest area in 5-years. This suggests that production could decline significantly, even if South Africa was to receive an average yield of 1.2 tonnes per hectare. In fact, at such yield estimate and area, South Africa’s sunflower seed production would possibly reach 672 120 tonnes, down by 23% year-on-year.

 

RSA Potatoes:

The South African potatoes market had a good run in yesterday’s trade session with the price up by 0.20% from the previous day, closing at R40.68 per pocket (10kg). These gains were due to the lower stock of 612 051 pockets (10kg bag) 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 period over the weekend. This led to a 12% uptick in daily stocks to 684 309 pockets (10kg bag).

 

RSA fruit:

Yesterday the fruit market saw widespread losses due to commercial selling.  The prices of apples, bananas and oranges were down by 6%, 4% and 2% from the previous day, closing at R9.06 per kilogram, R5.94 per kilogram and R7.69 per kilogram, respectively.

However, these losses could soon be reversed owing to lower stocks. Yesterday, apples and oranges stocks were respectively down by 20% and 4% from the previous day, closing at 120 000 tonnes and 282 000 tonnes. The oranges stocks were up by 68% from the previous day, closing at 37 000 tonnes. Nevertheless, this is still below the levels of 50 000 tonnes recorded in the past few weeks.

 

Click here to read more reports by Wandile Sihlobo

Agbiz Morning Market Viewpoint on Agri-Commodities 01 February 2018