Highlights in today’s morning note
Some parts of the Western Cape province received light showers this weekend, varying between 15 and 3 millimetres. Unfortunately, this was not evenly distributed, with areas such as the Southern Cape experiencing a cool and dry weekend. As expected, the rainfall was not sufficient to replenish soil moisture and improve crop conditions. The weather forecast for this week shows a possibility of drier conditions across many parts of the province, with the exception of the western and coastal areas which could receive light showers.
More concerning is the that the Western Cape dams levels are critically low, estimated at 24% full in the week ending 03 July 2017, which is 18% lower than the same period last year. Whereas, the wheat irrigation areas, Northern Cape and Free State provinces, that produce nearly half of South Africa’s wheat crop are in good shape with the water level in dams over 80% full.
On the global front – This morning the Chicago wheat market took a breather after last week’s higher prices. The prices were down by 0.19% from levels seen at midday Friday.
The drier weather conditions in the US Midwest continue to threaten the crop. At the beginning of last week, only 37% of spring wheat was rated good/excellent, compared to 72% in the same period last year. The update will be released this evening as part of the USDA crop progress report and could paint a worse picture given that it hasn’t rained since the last crop assessment. More concerning is that the forecast for the week shows a possibility of continuous dryness across the Midwest.
Harvest is in full swing across the country with excellent yields. This supports the National Crop Estimate Committee’s view of a possible large crop of 15.63 million tonnes. The forecast warm and drier weather conditions within the next two weeks could add momentum to the (harvest) process.
On the global front – This morning the Chicago maize market was up by 2.64% from levels seen at midday Friday as drier weather conditions in the US continue to threaten the new season crop.
The weather remains a talk of the town in the US maize market. The drier conditions that were seen in the past few weeks have strained the crop. At the beginning of last week, only 68% of maize crop was rated good/excellent, which is 7% below the corresponding period last year.
The update will be released this evening by the USDA and will most likely paint a bleak picture as the weather hasn’t improved since the last crop assessment. More concerning is that this week, more parts of the US Midwest could experience continuous dryness, as weather models show the limited chance of widespread showers.
Interestingly, Informa Economics has revised its estimate for US 2017/18 maize production up by 2.3 million tonnes to 359.8 million tonnes. This is 1% higher than the previous season. The upward revision was, however, on the back of an increase in area plantings, with yields expected to be average.
Soybean harvest process is over, with reports of excellent yields in most areas of the country. This supports the National Crop Estimate Committee’s view of a record crop of 1.34 million tonnes, which is 81% higher than the previous season.
In global markets – This morning Chicago soybean price was up by 3.47% from levels seen at midday Friday as drier weather conditions in the US Midwest continue to threaten the soybean crop.
Elsewhere, China National Grain and Oils Information Centre forecasts the country’s 2017/18 soybean production at 14.3 million tonnes, which is 9% higher than the previous season.
Moreover, China’s soybean meal inventories were estimated at 1.2 million tonnes on the 23 June 2017, which is 88% higher than the corresponding period last year. This uptick is largely on the back of a slowdown in demand from the livestock sector.
With that said, the slowdown in demand will most likely be a temporary blip. The long-term forecasts for China’s soybean imports and products remain optimistic. The country’s 2017/18 soybean imports are estimated at 93 million tonnes, up 4% from the previous season.
Sunflower seed harvest is virtually over, with the exception of areas that planted late in the season, such as the western parts of the North West province. The forecast warm and drier weather conditions within the next two weeks could add momentum to the harvest activity in these particular areas. Overall, the process should be complete by end of this month.
From a global perspective – The EU sunflower seed market gained ground during Friday’s trade session with the price up by 0.76% from the previous day, closing at S$400 per tonne. These gains were partly driven by bullish sentiment that is underpinned by fears of drier weather conditions in parts of the EU.
With that said, the prospects for the EU’s 2017/18 sunflower seed production remain positive. The region’s sunflower seed production is estimated at 9.0 million tonnes, which is 5% higher than the 2016/17 crop . With that said, the weather will be a key factor to monitor over the next few months in order to assess the possibility of achieving this forecast output of 9.0 million tonnes.
SAFEX Beef carcass:
The SAFEX beef carcass market gained ground on Friday’s trade session with support emanating from an increase in traded volumes at the stock exchange. It is, however, worth noting that the SAFEX prices could differ from the physical market due to limited participation (in the stock exchange).
The beef market seems to be showing some levels of normalisation after the 2015-16 El Nino-induced drought. Recent data from the Red Meat Levy Admin shows that South African farmers slaughtered 202 886 head of cattle in May 2017, up by 5% from the previous month.
With that said, this is still 18% lower than the corresponding period last year (drought year with higher slaughtering rate). We will monitor the developments closely to determine the impact on prices.
On Friday, the South African potatoes market ended the day in positive territory due to an increase in buying interest. The price up by 1% from the previous day closing at R29.02 per bag (10 kg bag).
The market started the day with relatively higher stocks of 1.2 million bags (10 kg bags). However, during the session, there was strong buying interest which subsequently led to an 8% decline in stocks to 1.1 million bags (10kg bags).
The fruit market ended the day on a mixed footing in Friday’s session, with apple price up by 1% from the previous day, closing at R6.68 per kilogramme. This was on the back of lower stocks of 218 886 tonnes, down 18% from the previous day.
The orange price was up by 10% from the previous day, closing at R2.76 per kilogramme. This was also supported by relatively lower stocks of 426 486 tonnes, down by 7% from the previous day. Meanwhile, the bananas market lost 3% from the previous day, closing at R5.97 per kilogramme due to an uptick in stocks.
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