Agbiz Morning Market Viewpoint on Agri-Commodities: 06 July 2017.

Highlights in today’s morning note

Maize:

The forecast warm and drier weather conditions within the next two weeks could add momentum to harvest activity across the country. The areas that have harvested reported exceptional yields, which supports the National Crop Estimate Committee’s view of a record crop of 15.63 million tonnes.

Evidently, farmers delivered 1.3 million tonnes of maize to commercial silos in the week ending 30 June 2017, which is just 5% lower than the previous week’s deliveries. About 62% of this was white maize and 38% was yellow maize. This brought the country’s 2017/18 total maize deliveries for “week 1 to 9” to 8.1 million tonnes.

On the global front – This morning the Chicago maize market was up by 0.27% from levels seen at midday yesterday as drier weather conditions in the US continue to threaten the new season crop.

The weather will remain a key focus in the US for some as the crop approaches the pollination stage of growth which requires high moisture. Unfortunately, the forecast for the next few days shows a possibility of continuous dryness which does not bode well with the crop.

Recent data from the USDA shows that at the beginning of this week, only 68% of maize crop was rated good/excellent, which is 7% behind the corresponding period last year – reflecting the effects of drier and warmer weather conditions.

What’s more, the International Grains Council already estimates that the US maize production could decline by 7% in the 2017/18 season to 357.7 million tonnes. This expected decline is largely attributed to prospects of lower yields in most parts of the country.

Wheat:

The Western Cape dams levels are critically low, estimated at 24% full in the week ending 03 July 2017, which is 26% lower than the same period last year. Whereas, the wheat irrigation areas – Northern Cape and Free State provinces – which produce nearly half of South Africa’s wheat crop are in good shape with the water level in dams over 80% full.

Some farmers continue to deliver the old-season wheat crop to commercial silos. In the week ending 30 June 2017, wheat deliveries were recorded 2 584 tonnes, which is 61% higher than the previous week’s volume. Overall, South Africa’s 2016/17 total wheat deliveries for “week 1 to 39” currently stand at 1.86 million tonnes.

On the global front – This morning the Chicago wheat price was down by 1.14% from levels seen at midday yesterday due to profit taking – following higher prices in the past few days.

Weather remains a key focus in the US wheat market. The forecast for the week presents a possibility of continuous dryness, which could worsen the crop conditions. At the beginning of this week, only 37% of spring wheat was rated good/excellent, compared to 72% in the same period last year.

Soybean:

As indicated in our note yesterday, the harvest process is virtually over, with reports of excellent yields in most areas . The forecast drier weather conditions within the two weeks could add momentum to the harvest process in areas that have not yet completed.

In global markets – This morning Chicago soybean price was up by 1.04% from levels seen at midday yesterday as drier weather conditions in the US Midwest continue to threaten the soybean crop.

The latest weather models show that large parts of the US Midwest could remain cool and dry within the next few days. This could negatively affect the crop as it needs moisture at the current stages of development.

At the start of this week, about 64% of the crop was rated good/excellent, which is 7% behind the same period last year. These results reflect the impact of last week’s dryness. Given that the prospects are paints a picture of continuous dryness, crop condition could deteriorate further.

The US planted 36.2 million hectares this season, which is 7% higher than the 2016/17 season.  However, recent estimates from the International Grains Council suggest that production could decline 2% year-on-year to 115.5 million tonnes, despite the increase in area. This expected decline is attributed to prospects of lower yields owing to current dryness.

Sunflower seed:

From a global perspective – The EU sunflower seed market saw extended losses in yesterday’s trade session with the price down by 0.25% from the previous day, closing at S$398 per tonne. These losses were due to prospects of large supplies from the new season crop.

With the crop still in early growing stages, the weather remains a key focus in the EU sunflower seed market. The forecast, however, presents a disappointing picture of possible dryness within the next few days, which is not conducive for crops. The EU’s 2017/18 sunflower seed production is set to increase by 5% from the previous season to 9.0 million tonnes. This is mainly due to the increase in area plantings.

Meanwhile, the Black Sea’s sunflower oil market gained 0.68% from the previous day, closing at US$738 per tonne due to higher crude oil prices.

According to SUNSEEDMAN the Black Sea’s sunflower seed crop is in a satisfactory condition, with rainfall needed as the crop approaches the pollination stage of developments. Fortunately, the weather models have turned out positive and are currently showing a possibility of rainfall across the eastern parts of Ukraine and southern areas of Russia.

RSA Potatoes:

The South African potatoes market pulled back from the previous day’s higher levels, with the price down by 2.18% from the previous day, closing at R28.66 per bag (10 kg bag). These losses were largely on the back of higher stocks.

The market started the day with relatively lower stocks of 996 995 million bags (10 kg bags). However, during the session, there was an increase deliveries due to ongoing harvest and that led to a 3% uptick in stocks to 1.04 million bags (10kg bags).

SAFEX beef carcass:

The SAFEX beef carcass market saw fairly quiet session in yesterday’s trade session with prices unchanged from the previous day due to thin volumes in the market. Having said that, it is worth noting that the SAFEX prices could differ from the physical market due to limited participation (in the stock exchange).

The general sentiment in the beef carcass (physical) market remains slightly bullish due to easing slaughter activity, as farmers continue to restock their herds after the 2015-16 drought.

Data from the Red Meat Levy Admin shows that South African farmers slaughtered 202 886 head of cattle in May 2017, down 18% from the corresponding period last year. We will monitor the developments closely to determine the impact on prices.

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