RSA fruit: Yesterday the fruit market managed to claw back some of its recent losses with support coming from strong buying interest. The price of apples was up by 9% from the previous day, closing at R6.91 per kilogramme. The bananas and oranges prices were, respectively, up by 0.14% and 11% from the previous day, closing at R7.01 per kilogramme and R3.09 per kilogramme. 

Maize: The National Crop Estimate Committee (CEC) revised its maize production estimates up by 2% from the previous month to 15.97 million tonnes. This is above the market expectations of 15.80 million tonnes and doubles the previous season’s production of 7.78 million tonnes.

Wheat: The CEC’s preliminary wheat planting data shows that farmers reduced the area planted in 2017 by 2% from the previous season to 498 850 hectares. This decline in the area was due to some farmers switching to barley and canola owing to profitability reasons.  

Click here to read the Morning Market Viewpoint on Agri-Commodities for today.

Soybeans: In its sixth production estimate, the CEC maintained its soybean production estimate unchanged from last month at 1.34 million tonnes. This is 81% higher than the previous season and the biggest crop on record. 

Sunflower seed: The CEC left its production estimate unchanged from the previous month at 821 970 tonnes. This is 9% higher than the previous season due to expected higher yields. The harvest process is virtually over with above average yields reported in many areas of the country. This supports the CEC’s view of a relatively large crop this season. 

RSA Potatoes: The South African potatoes market lost ground in yesterday’s trade session and closed in negative territory due to relatively large stocks of 846 765 bags (10kg bags). The price was down by 5% from the previous day, closing at R28.67 per kilogramme.

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The most anticipated of all was the National Crop Estimate Committee’s sixth production estimate which showed a 2% m/m upward revision in maize production estimate to an all-time high of 15.97 million tonnes. Other commodities were left unchanged from the previous month.

In terms of market performance, all grain and oilseed commodities were under pressure with the exception of sunflower seed. For fruits and vegetables, the week has been fairly volatile, driven by changes in volumes traded.

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The annual food producer price inflation decelerated to 4.7% y/y in June 2017, from 5.7% y/y in May 2017. This shows the benefits of the higher agricultural output this year following good summer rainfall across the country. The deceleration was largely in grain, sugar, dairy, starches, and vegetable and fruit products. Meanwhile, meat and meat products accelerated due to on-going cattle herds restocking process resulting from the 2015-16 drought, as well as low base factors.

The general deceleration in food producer inflation is due to the recovery in agricultural production. The total production of summer grains and oilseeds is estimated at 18.44 million tonnes, which is a 96% annual increase. This has led to a widespread decline in agricultural commodity prices. White maize spot price currently trades at levels around R1 768 tonnes, which is 59% lower than the same period last year. Yellow maize spot price is trading at levels around R1 889 per tonne, which is 42% lower than the same period last year. Soybean spot price is at a level around R4 711 per tonne, which is a 31% annual decline. The decline in yellow maize and soybean prices will also benefit other sectors, such as the livestock and poultry.

While meat price inflation increased at the fastest pace of 17% y/y, there seems to be some level of improvement in slaughtering which could lift meat supply. The most recent data from the Red Meat Levy shows that farmers slaughtered 202 886 head of cattle in May 2017, up by 5% from the previous month.

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Looking ahead – the large agricultural output will keep agricultural commodity prices under pressure over the short-to-medium term. This essentially means that food inflation also could remain at relatively lower levels. With that said, the recent outbreak of avian influenza in the poultry sector remains a risk. The virus has been reported in isolated farms in Mpumalanga, Free State and Gauteng. We will closely monitor the developments within the poultry industry in order to ascertain the impact on food inflation in the coming months.

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Maize:

Interesting to note is that the International Grains Council (IGC) is even more optimistic on South Africa’s maize production, estimating the overall crop at 16.4 million tonnes, compared to 7.8 million tonnes in the previous season. The harvest process is in full swing with reports of exceptional yields across the country. The process could gain momentum within the next two weeks due to expected warm weather conditions in the maize belt.

Wheat:

The South African Weather Service noted that there is a possibility of wetter conditions in the south western parts of the country between August and October 2017. This will be a welcome relief after weeks of dryness in the Western Cape province during the first half of their traditional rainy season.

Soybeans:

As indicated in our note yesterday, South Africa’s soybean supplies for 2017/18 season could reach 1.41 million tonnes. This includes an opening stock of 84 792 tonnes, as well as commercial deliveries of 1.31 million tonnes and a small volume of imports. This is 30% higher than the previous season.

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Sunflower seed:

Although South Africa generally expects a good sunflower seed harvest this season, the areas that planted late in a season received lower yields of between 0.6 and 0.7 tonnes per hectare. The country’s sunflower seed production estimate is 821 970 tonnes, up 9% from the previous season.

RSA Potatoes:

Yesterday the South African potatoes market managed to claw back some of its recent losses with support coming from lower stock levels. The price was up by 0.49% from the previous day, closing at R28.45 per 10kg bag.

RSA fruit:

The fruit market started the week on a mixed footing. The prices of apples and bananas were up by 9.37% and 0.15% from the previous day, closing at R7.59 per kilogramme and R6.86 per kilogramme, respectively. The apples stocks were down by 9% from the previous day easing at 215 990 tonnes. At the same time, the bananas daily stocks fell by 23% to 157 050 tonnes. Meanwhile, the price of oranges fell by 16% from the previous day, closing at R2.79 per kilogramme. 

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RSA Potatoes:

The South African potatoes market saw additional gains in yesterday’s trade session with the price up by 5% from the previous day, closing at R29.82 per 10kg bag. These gains were on the back of lower stocks of 826 523 bags (10kg bags) at the start of the session.

Maize:

South African maize exports fell by 43% in the week ending 28 July 2017 from the previous one and eased at 87 577 tonnes. This was mainly due to a decline in activity in the Kenyan market. About 60% of these exports were yellow maize, with 40% being white maize.

Wheat:

The southern parts of the Western Cape province could receive light showers this week, whereas other parts of the province could remain dry and cool. However, the week ending 17 August 2017 could bring rainfall of between 16 and 30 millimetres across the province which will possibly improve crop conditions and soil moisture.

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Soybeans:

The harvest process is complete with exceptional yields which support the National Crop Estimate Committee’s view of a record crop of 1.34 million tonnes – an 81% annual increase.

RSA fruit:

The prices of apples and bananas retracted from the previous day’s highs due to large stocks, closing at R6.92 per kilogramme and R5.79 per kilogramme, respectively. The apples stocks were up by 27% from the previous day easing at 274 368 tonnes. At the same time, the bananas daily stocks increased by 79% to 280 678 tonnes.

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Soybeans:

The domestic soybean usage declined in June 2017, despite the increase in supplies. SAGIS data shows that in June 2017, South Africa’s soybean consumption (crushed oil and cake) fell by 22% from the previous month and 30% from the same period last year and eased at 72 095 tonnes.

Maize:

The total maize deliveries were reported at 806 246 tonnes in the week ending 28 July 2017, down 17% from the previous week. About 64% of this was white maize with 36% being yellow maize. This brought South Africa’s 2017/18 total maize deliveries for “week 1 to 13” to 12.39 million tonnes. Of this total, 58% is white maize and 42% is yellow maize.

Wheat:

The weather remains a key focus as the crop is still at early growing stages which require moisture. Unfortunately, the next eight days is likely to be no different from the previous few weeks of dryness. The forecasts only present a possibility of light showers in the coastal areas.

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Sunflower seed:

The relatively lower sunflower seed prices have led to an increase in consumption or usage. As shown in SAGIS data for June 2017 that South Africa’s sunflower seed consumption (crushed oil and cake) increased by 48% month-on-month and 14% year-on-year in June 2017 to 68 482 tonnes.

RSA Potatoes:

In yesterday’s trade session the South African potato market pulled back from the previous day’s level and closed in negative territory. These losses followed a slight uptick in daily stocks to 932 055 bags (10kg bags) at the beginning of the session.

RSA fruit:

The fruit market ended the day mixed in yesterday’s trade session. The bananas and oranges prices were up by 7% and 11% from the previous day, closing at R6.19 per kilogramme and R3.33 per kilogramme, respectively. The price of apples lost 4% from the previous day, closing at R6.64 per kilogramme due to large stocks of 256 739 tonnes.

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Meanwhile, wheat and oilseeds markets ended the week in negative territory, largely pressured by lower international prices and relatively large domestic supplies – particularly for oilseeds.

For fruits and vegetables, the week has again been fairly wobbly with daily stock levels underpinning the market. Lastly, there was nothing much happening in the SAFEX beef market, prices remained flat from the levels seen last week.

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The recent update for the week ending 31 July 2017 shows that dams averaged 27%, compared to 55% in the same period last year. The medium term forecasts present some hope, as the South African Weather Service’s indicated that there is a possibility of wetter conditions in the south western parts of the country between August and October 2017. 

Highlights in today’s morning note

Wheat:

Last week, the Southern Cape region of the Western Cape province received light showers of between 3 and 6 millimetres, which is not sufficient to make an improvement on crop conditions. Meanwhile, other regions of the province remained dry and cool. Overall, the crop is not in good shape and urgently needs moisture in order to develop well this season. 

Maize:

The lower maize prices that were seen in the past few days sparked buying interest amongst market participants, thus leading to bargain-buying in Friday’s trade session. Moreover, the weaker Rand against the US Dollar, as well as higher Chicago maize prices also added support to the maize market. 

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Soybeans:

There was not much happening in the domestic soybean market as harvest process is already complete. Looking ahead, the domestic soybean market will largely be guided by the Chicago (soybean) price and domestic currency movements.

Sunflower seed:

The harvest process is virtually over with few patches left in the western areas of the North West province. The forecast dry and warm weather conditions within the next two weeks could allow farmers to complete the process smoothly.

RSA Potatoes:

The South African potatoes market lost ground in Friday’s trade session and closed in negative territory due to relatively large stocks of 1.21 million bags (10kg pockets/bag). The price was down by 2% from the previous day, closing at R28.46 per 10kg pocket.

SAFEX beef:

In Friday’s trade session, there was not much happening in the SAFEX beef carcass market. The price remained unchanged from the previous day, closing at R46.00 per kilogramme. However, it is worth noting that the SAFEX beef carcass prices could differ from the physical market due to thinly traded volumes at the stock exchange.

RSA fruit:

The fruit market ended the day mixed in Friday’s trade session. The prices of apples and bananas were down by 5% and 4% from the previous day, closing at R7.14 per kilogramme and R5.66 per kilogramme, respectively. Meanwhile, the price of oranges gained 0.34% from the previous day, closing at R2.95 per kilogramme. 

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The good performance in the domestic currency in June and early part of July, coupled with expected large domestic grain and oilseed harvest boosted the tractor sales in July 2017. The sales were recorded at 502 units – up by 5% from June 2017 and 11% higher than the corresponding period last year. Although grain prices are under pressure, the higher yields per hectare have, to some extent, boosted farmers’ incomes.

 As noted in our previous reports, South Africa has had a good run this year in terms of production. The 2017 summer grain and oilseed harvest is estimated at 18.44 million tonnes, which is a 96% annual increase. The favourable summer rainfall, higher yields and an increase in area plantings are the key drivers of this rebound.

Contrary to tractors, the combine harvester sales declined by 7% m/m and 35% y/y, with only 13 units sold in July 2017. This is the lowest sales figure since December 2016. Furthermore, this decline came after five consecutive months of solid performance in harvester sales, owing to a good harvest.  With that said, the decline in July 2017 figures is not surprising as the summer harvest process is virtually over across the country.

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Looking ahead – We expect the tractor sales to remain stable in the near term, ahead of the new planting season which starts in October 2017.  The combine harvesters’ sales could remain weak in the near term and possibly gain momentum towards the end of the year when the winter crop harvest period commences. In the short-to-medium term, the key risk to the aforementioned is the weaker exchange rate. An important factor to monitor in the long term is the cost of servicing the farm debt, as it would have implications on the agricultural machinery sales performance.

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After cutting 44 000 jobs in the first quarter of 2017, South Africa’s agricultural sector saw a further 40 000 jobs lost in the second quarter – putting the total labour force at 835 000 jobs.

However, it is worth noting that this is in line with the season’s trend due to reduced horticultural activity in the second quarter.

Taking a closer look at the provincial decomposition, it is clear that most job losses occurred in the Northern Cape, Western Cape, KwaZulu Natal and Gauteng provinces where the bulk of labour intensive crops are grown. Meanwhile, other provinces saw slight job gains.

In terms of sub-sector performance – The reduction in employment were in field crops and horticulture, forestry and aquaculture. Meanwhile, the other sub-sectors, such as the livestock, game farming, as well as mixed farming showed job gains.

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