Agbiz Morning Market Viewpoint on Agri-Commodities: 06 February 2018

Highlights in today’s morning note:

Maize:

This past weekend brought good showers in most parts of the South African maize belt. The western regions received rainfall varying between 10 and 57 millimetres, which mainly benefited white maize crops. Meanwhile, the eastern regions of the maize belt received rainfall of between 10 and 47 millimetres, which largely benefited yellow maize crops.

The rainfall received in the past few weeks is starting to yield positive results. Crop conditions have slightly improved in the western areas of the maize belt. The eastern regions were already in good condition due to a fair amount of rainfall received since the start of the season.

Also encouraging to see is that the weather forecast for the next two weeks presents a possibility of good rainfall across the maize belt. This should further improve soil moisture and therefore benefit the crop.

Wheat:

As noted in the previous reports, the movements of the international wheat prices will be of importance in the local market this season, partly due to expected large import volume of 1.9 million tonnes, as well the impact on the import tariff (see Agbiz Morning Market Viewpoint on Agri-Commodities, 05 February 2018).

The global wheat market is generally well supplies. The International Grains Council forecasts the 2017/18 global wheat production at 757 million tonnes, up by 1% from the previous season. This is also in line with the USDA’s production estimates. 

The expected decline in production in key wheat producing countries such as the United States, Australia, Ukraine, Argentina, Canada and Kazakhstan is compensated by an uptick in production in Russia, the European Union, China and India. Of all these countries, Russia and India are expected to record the most significant annual percentage increases of 17% y/y and 14% y/y to 85 million tonnes and 98 million tonnes, respectively.

Moreover, the 2017/18 global wheat stocks are also solid, estimated at 254 million tonnes, which is a 6% annual increase. Given that this information has somewhat been priced in already, the global wheat prices could trade sideways at levels around US$220 per tonne in the short to medium term. In such a scenario, there would not be much changes in the current wheat import tariff rate of R716.30 per tonne in the near term (also see Agbiz Morning Market Viewpoint on Agri-Commodities, 05 February 2018).

From a regional demand perspective, Sub-Saharan Africa’s 2017/18 wheat imports are set to reach 22.6 million tonnes, up by 10% y/y due decline in the region’s production, as well as an uptick in consumption. The key buyers will be Nigeria, Sudan, Kenya, South Africa and Ethiopia.

Sunflower seed:

Although the sunflower seed optimal planting window closed on 20 January 2018, the planting activity in some areas around northwest parts of the Free State and North West province is still underway. This follows good rainfall in the past few days which motivated farmers to continue planting.

The ongoing planting activity is an encouraging development, but planting outside the window implies that crops could be negatively affected by frost later in the season, which will, in turn, lower the yields. With that said, if the shifts in weather patterns could perhaps delay the cold conditions later in the season, then the late planted crops could present a better harvest.

This also means that the National Crop Estimates Committee could potentially revise its preliminary planting estimate up from the current level of 560 100 hectares when they release the revised area estimate at end of this month. The current estimate of 560 100 hectares is down by 12% from the area planted in 2016/17 season.

Bothaville, Hoopstad, Orkney, Viljoenskroon, Derby, Klerksdorp, Regina and Ventersdorp regions of western Free State and North West provinces received good rainfall over the weekend, varying between 10 and 57 millimetres. This will benefit the newly planted regions.

Looking ahead, the weather forecasts indicate that there is an increased chance for additional rainfall of between 20 and 90 millimetres within the next eight days. This will improve soil moisture and subsequently benefit the sunflower seed crops.

RSA Potatoes:

Yesterday the South African potatoes market managed to claw back its recent losses with support emanating from lower stocks of 804 451 pockets (10kg bag) at the start of the session. The price was up by 2% from the previous day, closing at R41.38 per pocket (10kg).

However, during the day, the market experienced commercial buying interest, coupled with relatively lower deliveries on the back of slow harvest activity during the weekend. This subsequently led to a 29% decline in daily stocks to 569 540 pockets (10kg bag).

RSA fruit:

The fruit market started the week on a mixed footing, partially driven by an increase in producer deliveries at the fresh produce market. The prices of apples and bananas were down by 5% and 14% from the previous day, closing at R9.10 and R5.08 per kilogram, respectively. These losses followed a 45% and 50% respective increases in apples and bananas stocks to 171 000 tonnes and 322 000 tonnes.

Meanwhile, the price of oranges was up by 7% from the previous day, closing at R8.10 per kilogram due to lower stocks of 28 000 tonnes at the end of yesterday’s session.

Find full report attached to this e-mail.

Agbiz Morning Market Viewpoint on Agri-Commodities 06 February 2018