Agbiz Morning Market Viewpoint on Agri-Commodities: 02 March 2017

Highlights in today’s morning note

Maize:

South African farmers continue to deliver maize crop to commercial silos. In the week ending 24 February 2017, total maize producer deliveries were recorded at 30 456 tonnes (68% was white maize and 32% was yellow maize). This is 35% lower than the previous week’s deliveries. Overall, South Africa’s total maize producer deliveries for “week 1 to 43” currently stand at 6.62 million tonnes.

For the new season, the crop is in fairly good condition and the forecast dry weather condition of the next two weeks should offer an essential dry spell, following weeks of heavy rains. This could also open a window for potentially early deliveries, particularly in irrigation areas.

On the global front – this morning Chicago maize price was up by 1.65% from the level seen at midday yesterday, owing to spillover support from the wheat market. Moreover, the bullish sentiment in the US maize market is partly on the back of reports that biofuel production could be increased, which will subsequently lead to high demand for maize.

Wheat:

South African farmers continue to deliver wheat to commercial silos. In the week ending 24 February 2017, wheat deliveries were recorded at 6 544 tonnes, which is 14% lower than the volume recorded the previous week. This brought South Africa’s 2016/17 total wheat deliveries for “week 1 to 21” to 1.79 million tonnes.

The Western Cape province continues to experience dryness and conditions are expected to remain unchanged over the next two weeks. The average provincial dam level was estimated at 32% full on the 27 February 2017. This is 6% lower than the corresponding period last year. From the wheat production perspective, this is not an immediate concern as winter wheat farmers are still off season.

However, over the medium to long term, this could be a challenge. Recent data from the Australian Bureau of Meteorology suggest that there is an increasing likelihood that an El Niño weather event could appear over the Pacific Ocean in the second half of 2017, potentially giving rise to a period of widespread hot and dry conditions. This could potentially affect the 2017/18 winter wheat production.

Sunflowerseed:

South Africa’s sunflower seed growing areas have seen a fairly dry start of this week, which bodes well with crop growing conditions after last week’s high rainfall. Overall, the crop is in fairly good condition and the prospects are promising .

In global markets – yesterday the EU’s sunflower seed market saw additional gains, with the price up by 0.24% from the previous day’s level, closing at US$418 per tonne. The support was still on the back of strong global demand for sunflower seed products (oil and meal).

Meanwhile, the Black Sea region’s sunflower seed oil market saw marginal losses of 0.53% from the previous day’s levels, closing at US$737 per tonne.

There were no major events in the global sunflower seed market, the losses recorded in the Black sea market are still on the back of large supplies. Sunseedman estimated Ukraine’s 2016/17 total sunflower seed production at 14 million tonnes – up by 17% from the previous season. Moreover, Russia’s 2016/17 sunflower seed production is estimated at 11 million tonnes, which is a 10% annual increase.

SAFEX Beef:

The SAFEX beef market gained ground during yesterday’s trade session, with the price up by 1.14% from the previous day’s level, closing at R44.50 per kilogramme. This was mainly driven by increased activity at the stock exchange.

As noted earlier this week, the gains that we are currently seeing are an indication of some level of rebalancing of meat supplies. Over the past few months, the South African beef industry saw higher slaughtering rate as farmers were unable to maintain their herds due to elevated feed costs (on the back of the drought), as well as seasonal demand during Christmas holiday. Data from the Red Meat Levy Admin shows that in December 2016, South African farmers slaughtered 299 767 head of cattle, which is 22% higher than the previous month.

The recent rainfall and slowing weekly slaughtering activity seem to suggest that farmers have started rebuilding their herds. Therefore, we could see support in meat prices over the medium to long term as the slaughtering rate is likely to decline substantially during this process of recovery.

SA fruit:

Yesterday the Johannesburg Fresh Produce Market ended the day mixed. The apple price was up by 2.25% from the previous day’s level, closing at R7.72 per kilogramme. This was due to an increase in buying interest, which led to a 21% decline in stock levels to 166 706 tonnes.

The bananas market gained 7.49% from the previous day’s level, closing at R6.89 per kilogramme. This was also on the back of a 28% decline in stock levels to 205 979 tonnes. Meanwhile, the oranges market saw significant losses and closed at R4.00 per kilogramme due to a recovery in stock levels (following an increase in deliveries).

Click here to read the full report: Agbiz