Agbiz Morning Market Viewpoint on Agri-Commodities: 19 February 2018

Highlights in today’s morning note

South Africa’s sub-soil moisture – 15 February 2018

Source: World Weather Inc.

 

Maize:

The recent rainfall brought relief in the western sections of the Free State and North West provinces. The most recent report fromWorld Weather Inc. shows that soil moisture has improved significantly in these particular regions from extreme dryness experienced at the beginning of the year.

Although it is too late for additional planting, the improvements in soil moisture bode well for the crop in areas that managed to plant on time. Moreover, the forecast rainfall this week could further improve soil moisture and the outlook for maize crops. As highlighted in our previous notes, the South African Weather Service forecasts good rainfall across summer crop growing areas of the country from now and April 2018.

Above all, these positive weather developments increase a possibility of yet another good crop, while might be lower than the 2016/17 production season due to a decline in area planted. We estimate that South Africa’s 2017/18 maize production could at least reach 11.2 million tonnes, which is well above annual consumption of 10.5 million tonnes. The official production estimates will be released by the National Crop Estimates Committee at the end of this month.

 

Wheat:

With wheat imports set to reach the second highest level on record in the 2017/18 marketing year, the import tariff matters will continue to dominate the market. On 12 February 2018, we indicated that the wheat import tariff could possibly remain unchanged at the current level of R716.33 for some time. This view was based on expectations that the Chicago wheat prices could slightly decline after the United States Department of Agriculture’s monthly report showed that there are large global wheat supplies in the market.

At the time, the international wheat prices had consistently traded higher than the base price of US$218.00 per tonne by more than US$10 per tonne and our belief was that this price trend would be broken.

However, the unfavourable weather conditions in the southern Plains of the US kept Chicago wheat prices at relatively higher levels for a third consecutive week, thus triggering a new wheat import tariff rate at R394.85, which is 45% lower than the current rate.

Worth noting is that the new rate of R394.85 has not yet been published on the government gazette, and will only be applicable after its publication. The timeframe for this process is unclear, but previous adjustments took more than three weeks.

 

Soybeans:

South Africa’s soybean crop is in good condition owing to favourable weather conditions throughout the season. In addition, the expected rainfall this week and within the next two months will further improve soil moisture in soybean growing areas. This increases a possibility of yet another good crop.

As highlighted in the previous notes, we forecast South Africa’s 2017/18 soybean production at 1.2 million tonnes, down from 1.3 million tonnes in the previous season. The official estimates by the National Crop Estimates Committee will be released on 27 February 2018.

Apart from production developments, the 2017/18 soybean marketing year will end on 28 February 2018, but in better shape than the previous year. The ending stock is estimated at 340 862 tonnes, which is treble the volume seen in the 2016/17 marketing year. This will boost South Africa’s soybean supplies in the 2018/19 marketing year, which starts on 01 March 2018.

 

Sunflower seed:

After a warm and drier start of the 2017/18 production season, the sunflower seed growing areas of South Africa received a fair amount of rainfall at the end of January 2018 and start of this month. As a result, the crop is currently in good conditions across the country.

Additional planting that started at the end of January in the western sections of Free State and North West provinces has been completed in most areas. Therefore, the improved soil moisture should support the germination process of the crops. Also worth noting is that at the end of the month, the National Crop Estimates Committee will possibly lift its sunflower seed planting estimate from the current level of 560 100 hectares.

Moreover, this week could bring further improvements in soil moisture and the weather forecasts show a possibility of over 50 millimetres of rainfall in most sunflower seed growing areas of the country.  As indicated in our previous notes, the long-term outlook also promises good rainfall until April 2018. This will potentially support the newly planted crop from germination to pollination stages of development.

 

RSA Potatoes:

The South African potatoes market lost ground in Friday’s trade session owing to a higher stock of 1.2 million pockets (10kg bag) at the start of the trade session. The price was down by 4% from the previous day, closing at R32.71 per pocket (10kg).

In the session, the market experienced an increase in commercial buying interest, coupled with relatively lower deliveries on the back of slow harvest activity in some parts of the country. This subsequently led to an 8% decline in daily stock to 1.1 million pockets (10kg bag).

 

RSA Fruit:

The fruit market will start today’s trade session on a mixed footing following a volatile session on Friday. The prices of apples and oranges were under pressure in Friday’s trade session due to large stocks, as well as commercial selling in the case of oranges.

Meanwhile, the price of bananas was up by 6% from the previous day, closing at R6.24 per kilogram due to a decline in daily stocks. The bananas stocks fell by 16% in Friday’s trade session and settled at 226 000 tonnes owing to strong commercial buying interest.

 

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Agbiz Morning Market Viewpoint on Agri-Commodities 19 February 2018