Agbiz Morning Market Viewpoint on Agri-Commodities: 19 June 2017.

Highlights in today’s morning note

Wheat:

Although the recent rainfall in the province was not sufficient to replenish soil moisture, it benefited the newly emerged crops. With that said, it had minimal impact on dams. In the week ending 12 June 2017, the Western Cape average dam levels were estimated at 20% full, which is 10% below the corresponding period last year.

Dam levels in the Northern Cape and Free State provinces, which produce nearly half of South Africa’s wheat crop, are at healthy levels of above 80% full. This will benefit the crop.

On the global front – This morning the Chicago wheat price was significantly up by 4.52% from levels seen at midday Thursday, on the back of dry weather hitting US yields.

With spring wheat crops still at early growing stages, weather remains a key focus in the US wheat market. The current drier conditions in some parts of the Midwest continue to threaten the crop.

The drier weather conditions had a negative impact on crops as early as the beginning of last week. It was only 45% of the crop that was rated good/excellent, compared to a rate of 79% in the corresponding period last year. This evening the USDA will release an update in its weekly crop progress report.

Maize:

Harvesting of maize crop is in full swing and excellent yields are reported across the country. The forecast drier and warm weather conditions across the maize belt this week should accelerate the process, which will also lead to an uptick in producer deliveries . 

So far the incoming evidence in line with the National Crop Estimate Committee’s view of a possible record crop this season – estimated at 15.63 million tonnes. As indicated in our previous note, the country will generally have large supplies in the season under review.

Adding opening stocks to the expected crop leads to total supplies of 16.05 million tonnes.  This is well above South Africa’s annual maize consumption of 10.50 million tonnes.

This, unfortunately, comes against a relatively weak demand in the global markets, particularly for white maize. The regional markets, which are traditional buyers of South African white maize, are well supplied due to higher domestic production.

On the global front – This morning the Chicago maize market was up by 1.06% from levels seen at midday Thursday owing to concerns of dryness in parts of the US Midwest.

Soybean:

Harvesting is almost over and the forecast drier weather conditions within the next two weeks should enable the process to finish off smoothly. The areas that have harvested received exceptional yields, which support the National Crop Estimate Committee’s view of a possible record crop of 1.23 million tonnes. 

In global markets – this morning Chicago soybean price was also up by 1.94% from levels seen at midday yesterday, owing to persistent dryness in parts of the US Midwest.

Weather remains a key focus in the US soybean market. The forecast drier weather conditions across certain areas of the US Midwest could strain the recently emerged crop. At the beginning of last week, US farmers had planted with 92% of the intended 36.35 million hectares for this season, which is 1% ahead of the corresponding period last year.  About 77% of the crop had already emerged, in line with the previous season.

This evening, the USDA will release an update, with crop ratings, in its weekly crop progress report. 

Elsewhere, Russia’s 2017/18 soybean acreage is complete on 2.3 million hectares, which is 27% higher than the previous season. In addition, Ukraine’s Agricultural Ministry forecasts the country’s 2017/18 soybean acreage at 1.88 million hectares, which is 1% higher than the previous season.

RSA Potatoes:

The South African potatoes market gained 0.11% on Thursday’s trade session, closing at R26.13 per bag (10 kg bag). This was mainly on the back of strong buying interest.  

However, these gains could be short lived due to higher stocks in the market. Thursday’s trade session started off with stocks at higher levels of 1.30 million bags (10 kg bags).

During the session, the market saw an uptick in deliveries owing to ongoing harvest activity. Therefore, the daily stocks increased by 8% towards the end of the session to 1.40 million bags (10 kg bags).

SAFEX beef carcass:

The SAFEX beef carcass market lost ground during Thursday’s trade session, with the price down by 2.86% from the previous day, closing at R44.50 per kilogramme. These losses were largely on the back of increased selling.

The SAFEX beef carcass prices could, however, differ from physical market prices due to relatively lower participation or light traded volumes at the stock exchange. In fact, the sentiment in the physical market remains bullish due to easing slaughter activity, as farmers continue to restock their herds after a 2016 drought spell.

Data from the Red Meat Levy Admin shows that South African farmers slaughtered 193 373 head of cattle in April 2017, down 19% from the previous month and the corresponding period last year.

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