Agbiz Morning Market Viewpoint on Agri-Commodities: 15 January 2018

Highlights in today’s morning note

South Africa’s average dam levels: week ended 08 January 2018 (last year’s figures in brackets – 08 January 2017)

Source: Department of Water and Sanitation and Agbiz Research

Maize:

The weather remains a primary focus in the domestic maize market as the crop is still at early growing stages that require moisture. The recent rainfall has somewhat been patchy and concentrated within the eastern parts of the country. Thus, it is unsurprising that last week’s World Weather Inc. report showed that soil moisture levels are extremely low in the western parts of South Africa, which mainly produce white maize. Meanwhile, the eastern areas have a fair amount of soil moisture which is conducive for the new season maize crop.

Fortunately, the weather forecast for the next two weeks paints a promising picture of rainfall across the South African maize belt. While this is expected to vary between 16 and 70 millimetres, it is a welcome development after weeks of drier conditions, particularly in the western regions.

Although it is early in the season and weather conditions have been unfavourable, some observers are slightly optimistic about South Africa’s maize production. The United States Department of Agriculture (USDA) left its estimate for South Africa’s 2017/18 total maize production unchanged from December 2017, at 12.5 million tonnes. This is a 28% decline from a record harvest of 2016/17 season. More importantly, this is roughly in line with the long-term production trend and well above the annual maize consumption of 10.5 million tonnes.

Wheat:

On the global front – The USDA forecasts the 2017/18 global wheat production at 757 million tonnes, up by 0.2% from December 2017 estimates and 1% from the previous season. The global ending stocks are also solid, at 268 million tonnes

From a country perspective, the USDA kept its estimate for US 2017/18 all-wheat production unchanged from December 2017, at 47 million tonnes. However, this is 25% lower than the previous season’s harvest due to expectations of lower yields and a decline in area plantings. Moreover, this is in line with the International Grains Council’s estimate.

The EU’s 2017/18 wheat production was revised down by 1% from last month to 152 million tonnes. With that said, this is 4% higher than the 2016/17 season’s crop due to an increase in area planted, as well as expectations of relatively higher yields.

Sunflower seed:

The most recent report from World Weather Inc. shows that soil moisture levels are very low in the western and central parts of Free State and Eastern Cape, as well as the North West province. This follows a prolonged period of drier weather conditions in the past few months. Overall, this explains the delays in sunflower seed planting activity in these particular provinces.

More concerning is that the sunflower seed planting window narrowing, closing on 20 January 2018. Therefore, if the Free State and North West provinces do not receive rainfall this week, the overall area planted to sunflower seed will be well below the intentions of 665 500 hectares.

To reiterate a point made in our previous notes, planting outside the ‘optimal planting window’ implies that crops could be negatively affected by frost later in the season, which will, in turn, lower the yields.

In the global market – The USDA left its 2017/18 global sunflower seed production estimate unchanged from December 2017, at 45.8 million tonnes. However, this is a 4% y/y decline owing to expected lower harvest in the Black Sea. Russia and Ukraine’s 2017/18 sunflower seed production is estimated at 10.5 million tonnes and 13.0 million tonnes, respectively down by 4% and 14% from the previous season.

Soybeans:

While temperatures have been extremely high in the past few weeks, much of eastern South Africa still has favourable subsoil moisture and soybean crops are in good condition in most of the region, from eastern Free State and southern Limpopo into Kwa-Zulu Natal and Mpumalanga.

With that said, a boost in precipitation will be needed later this month and in early February in order to sustain crops in good condition. Fortunately, the weather forecast shows that the next two weeks could bring rainfall of between 16 and 70 millimetres.

In global markets – The USDA revised its 2017/18 global soybean production estimate up by 0.3% from December 2017 to 349 million tonnes. With that said, this is 1% lower than the previous season. The global ending stocks were revised up by 1% from last month to 99 million tonnes. This is 2% higher than the previous season.

RSA Potatoes:

The potatoes market lost ground in Friday’s trade session. The price was down by 4% from the previous day, closing at R39.47 per pocket (10kg). These losses were on the back of relatively large stock of 891 752 pockets (10kg bag) at the beginning of the trading session.

Moreover, during the day, the market saw an increase in deliveries due to ongoing harvest activity. This subsequently led to a 2% uptick in daily stocks to 911 991 pockets (10kg bag).

RSA Fruit:

On Friday’s trade session, the fruit market ended the day mixed due to relatively lower stock levels and commercial selling pressure. The price of apples was up by 14% from the previous day, closing at R8.82 per kilogram. This followed a 26% decline in daily stocks to 119 000 tonnes.

Meanwhile, the prices of bananas and oranges were down by 2% and 16% from the previous day, closing at R7.22 per kilogram and R5.35 per kilogram, respectively. However, these losses could soon be reversed owing to relatively lower stocks of 177 000 tonnes of bananas and 16 000 tonnes of oranges.

Click below to read more reports by Wandile Sihlobo

Agbiz Morning Market Viewpoint on Agri-Commodities 15 January 2018