Highlights in today’s morning note
With the crop still in early growing stages, weather remains a key focus in the South African wheat market. They key producing province, Western Cape, received light showers of between 2 and 10 millimetres last week. This is well below the required levels to improve soil moisture and dam levels.
Nonetheless, the crop is generally in fair conditions but could be negatively affected by warm and drier conditions this week. The weather forecasts show a possibility of dryness across many parts of the country this week, with the exception of the western areas of the Western Cape province which could receive light showers.
More concerning is the that the Western Cape dams levels are critically low, estimated at 23% full in the week ending 26 June 2017, which is 15% lower than the same period last year. Meanwhile, other wheat irrigation areas (Northern Cape and Free State provinces), which produce nearly half of South Africa’s wheat crop, are in good shape with dams over 80% full.
On the global front – This morning the Chicago wheat price was up by 5.86% from levels seen at midday Friday as dry weather continues to threaten the US spring crop production.
In addition, the most recent data from the USDA shows that US farmers planted 45.7 million hectares of all-wheat this season, which is 400 000 hectares below the market expectations, and a record low.
Harvesting is underway across the country and could gain momentum this week due to forecast warm and dry weather conditions in the maize belt.
Recent data from the South African Supply and Demand Estimates Committee shows that the county’s 2017/18 total maize supplies could reach 16.04 million tonnes. This figure includes opening stock of 1.00 million tonnes, as well as expected commercial deliveries of 15.04 million tonnes. Overall, this is 31% higher than the previous season’s supplies.
The Committee does not expect any imports this season, whereas exports are set to reach 2.2 million tonnes. One of the key reasons for a relatively lower export estimate is an anticipated weak demand for white maize in the global market. Of the 2.2 million tonnes, white maize exports are set to only reach 870 000 tonnes (or 41%).
The traditional white maize importers, African markets, are well supplied this season due to improvements in domestic production. In essence, this could lead to a large carry-over stock of roughly 3.2 million tonnes, compared to 1.09 million tonnes in the 2016/17 season. These large stocks could keep maize prices under pressure for some time.
On the global front – This morning the Chicago maize market was up by 3.03% from levels seen at midday Friday owing to fears that drier weather conditions could negatively affect the newly planted crop.
Recent data from the South African Supply and Demand Estimates Committee shows that the country’s soybean supplies for the 2017/18 season could reach 1.41 million tonnes. This includes an opening stock (at 1 March 2017) of 84 792 tonnes, as well as commercial deliveries of 1.31 million tonnes. Overall, this is 27% higher than the previous season.
Moreover, the domestic demand is projected at 1.23 million tonnes, also up 24% from the previous season. This includes 1.05 million tonnes of soybean for crush for oil and meal (oilcake), with the remainder set to be utilised in the production of other products.
The exports for the 2017/18 season are estimated at 30 000 tonnes, well above the previous season’s exports of 6 745 tonnes. So far, the country has only exported 312 tonnes of soybeans to regional markets.
At the same time, soybean imports are estimated at 15 000 tonnes. About half of that has already been imported, largely from Zambia. This is well below the 2016/17 large import volume of 271 098 tonnes. Having said that, South Africa will continue to see notable imports of soybean oilcake to supplement the growing animal feed demand.
In global markets – This morning Chicago soybean price was up by 4.24% from levels seen at midday Friday due to fears that drier weather could negatively affect the US soybean crop.
The most recent data from the USDA shows that US farmers planted a record high area of 89.5 million acres, up 7% from the 2016/17 season. However, the crop has suffered from dryness in the past few weeks. At the beginning of last week, about 66% of the crop was rated good/excellent, which is 6% behind the same period last year. This evening the USDA will release an update of crop conditions.
The weather forecast for this week shows a possibility of drier conditions across sunflower seed growing areas of the country. This should allow farmers to accelerate the harvest activity, particularly in late planted areas around the western parts of North West province.
From a supply and demand perspective – South Africa’s sunflower seed supplies could reach 991 156 million tonnes this season (2017/18). This figure includes opening stock (at 1 March 2017) of 163 086 tonnes and commercial deliveries of 821 970 tonnes. This essentially means that this season’s supplies will be 13% higher than the previous one.
In terms of trade, imports are estimated at 100 tonnes. The country has already imported this volume from China and Malawi, which means there won’t be any additional any additional imports this season. Meanwhile, exports could reach 300 tonnes and that will most likely be destined to neighbouring countries. About 29% of this has already been exported.
The South African potatoes market lost ground in Friday’s trade session with the price down by 2% from the previous day, closing at R26.80 per bag (10 kg bag). These losses were on the back of large stocks of 1.3 million bags (10 kg bags) at the start of the session.
In addition, the market saw an increase in deliveries throughout the session due to an ongoing harvest activity, coupled with strong buying interest. Subsequently, the stocks levels remained flat from the previous day, at 1.3 million bags (10kg bags).
On Friday, the fruit market ended the day on mixed footing, with apple price under pressure, closing at R6.70 per kilogramme. This was on the back of relatively large stocks of 185 300 tonnes.
Meanwhile, the bananas and oranges prices were up by 11% and 3% from the previous day, closing at R6.83 per kilogramme and R2.31 per kilogramme, respectively. These gains were largely on the back of strong buying interest. However, they can be short-lived as stocks remain at higher levels.
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