Agbiz Morning Market Viewpoint on Agri-Commodities: 07 February 2018

Highlights in today’s morning note

Weather:

Most parts of South Africa could receive rainfall of between 16 and 90 millimetres within the next eight days, which should improve soil moisture and subsequently benefit the summer crops (figure 1). This is with the exception of the regions around Mossel Bay, which could remain dry and warm over the observed period.

Maize:

Mpumalanga province received light and scattered rainfall on Monday, which is conducive for yellow maize. Other parts of the maize belt had a fairly dry start of the week. However, that is not much of a concern, the crop is in a good condition in most areas, thanks to the recent rainfall.

Also heartening to see is that the maize crop conditions have slightly improved in the western parts of the Free State and the North West provinces, following the recent rainfall. These particular areas received very little rainfall at the end of 2017 and the beginning of 2018 and there were concerns about possible crop failure in most regions. The sentiment has since changed to a relatively more positive one. The expected rainfall in the next two weeks will further improve soil moisture and thereafter benefit the crop.

From a trade perspective, South Africa exported 51 593 tonnes of maize in the week ending 02 February 2018, up four-fold from the volume exported the previous week. About 87% of these exports were yellow maize, with 13% being yellow maize. This placed South Africa’s 2017/18 maize marketing year exports at 1.9 million tonnes, which equates to 86% of the season’s export forecast of 2.2 million tonnes.

 Wheat:

With the harvest process complete across the country, trade is the dominant subject in the wheat market. The lower production of 1.48 million tonnes, as well as lower opening stock of 341 424 tonnes imply that South Africa will have to import 1.9 million tonnes of wheat in the 2017/18 marketing year in order to fulfill the domestic needs.

Actually, the wheat import activity is already underway. South Africa imported 58 598 tonnes of wheat in the week ending 02 February 2018, which is double the volume imported the previous week. About 66% from Lithuania, 18% from Argentina and 16% from the United States. Overall, this placed 2017/18 marketing year’s wheat imports at 760 916 tonnes, which equates to 40% of the seasonal import forecast of 1.9 million tonnes.   

Although a net importer of wheat, South Africa continues to export wheat to regional markets. The 15th batch of exports this season was recorded at 1 324 tonnes, down by 31% from the previous week. About 81% went to Swaziland, 16% to Namibia and 3% to Zimbabwe. This placed total wheat exports for 2017/18 marketing year at 8 732 tonnes.

As highlighted in our note yesterday, South Africa is not the only wheat importing country in Sub-Saharan Africa, countries such as Nigeria, Sudan, Kenya and Ethiopia are amongst the key importers in the region.

In fact, the International Grains Council forecasts Sub-Saharan Africa’s 2017/18 wheat imports at 22.6 million tonnes, up by 10% y/y due decline in the region’s production, as well as an uptick in consumption.

 Soybeans:

The new season soybean crop is generally in good condition across the country. The areas that experienced heat stress at the beginning of January 2018 are also showing signs of improvements, thanks to the recent good rainfall.

On Monday, Amersfoort, Balfour, Davel, Ermelo, Hendrina, Middelburg and Witbank regions of Mpumalanga province received rainfall of between 10 and 40 millimetres, which bodes well for the new season soybean crop. The next two weeks promise more rainfall across the summer crop growing areas of South Africa, which should further improve soil moisture and subsequently benefit the crop.

In global markets – This morning the Chicago soybean price was up by 2% from the previous week, owing to concerns of dryness in Argentina.

Elsewhere, the Chinese National Grain and Oils Information Centre recently revised its 2017/18 soybean production estimates up by 200 000 tonnes from the previous month to 14.6 million tonnes. This is 13% higher than the previous season’s volume due to an increase in area planted, as well as higher yields in some regions.

The Chinese soybean imports are also expected to increase despite the uptick in domestic production. This is mainly due to the growing demand from the animal feed industry. The USDA forecasts China’s 2017/18 soybean imports at 97 million tonnes, up by 4% y/y. This equals to two-thirds of the global soybean imports.

RSA Potatoes:

The South African potatoes market had a good run in yesterday’s trade session, mainly supported by lower stocks of 569 540 pockets (10kg bag) at the start of the session. The price was up by 5% from the previous day, closing at R43.44 per pocket (10kg).

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 21% increase in daily stocks to 687 797 pockets (10kg bag).

Click below for more reports by Wandile Sihlobo

Agbiz Morning Market Viewpoint on Agri-Commodities 07 February 2018