Highlights in today’s morning note
The maize harvest process 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 1.03% from levels seen at midday yesterday due to unfavourable weather conditions in the US Midwest.
The drier conditions that were seen in the past few weeks have strained the new season maize crop. Evidently, at the beginning of this week, only 65% of maize crop was rated good/excellent, which is 11% below the corresponding period last year.
The weather forecasts for the next few days show a promising picture of light scattered showers across the US Midwest. However, it remains to be seen whether these forecast showers will materialise and cause notable an improvement on crop conditions. This is a critical stage of crop development that needs moisture as the maize crop approaches pollination.
The winter wheat crop continues to be strained by dryness in the Western Cape province. The weekend showers were not evenly distributed and not sufficient to replenish soil moisture and improve crop conditions.
Unfortunately, the weather forecast for this week shows a possibility of drier conditions across many parts of the Western Cape province, with the exception of the coastal areas which could receive light showers.
More emphasis is placed on the Western Cape province because it is the main dryland winter wheat producing region of South Africa. The other provinces, such as the Free State and Northern Cape are mostly irrigation and will benefit from higher water levels in the dams, currently above 80% full in both provinces.
On the global front – This morning the Chicago wheat price was up by 2.91% from levels seen at midday yesterday due to unfavourable weather conditions in the US, as well we some areas of the EU.
The US spring wheat crop is not in good shape due to drier wheat conditions. At the beginning of this week, only 35% of spring wheat was rated good/excellent, compared to 70% in the same period last year. With that said, weather conditions could improve later this week. The weather models show a possibility of light scattered showers across the US Midwest.
As indicated in our note yesterday, 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 0.78% from levels seen at midday yesterday with support coming from unfavourable weather conditions in the US.
The past few days experienced dry and warm conditions which are not conducive for the new season crop. At the beginning of this week, about 62% of the crop was rated good/excellent, which is 7% lower than the same period last year.
With that said, the latest weather models show some improvements for some parts of the Midwest, with prospects of light scattered showers. However, the region needs effective rainfall to improve soil moisture as the crop approaches the pollination stage of growth. Overall, the International Grain Council forecasts the US 2017/18 soybean production at 115.5 million tonnes which are 2% lower than the previous season.
There was not much happening in the market. 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.
From a global perspective – The EU sunflower seed market ended the day in negative territory during yesterday’s trade session, with the pressure emanating from lower crude oil prices. The sunflower seed price was down by 0.25% from the previous day, closing at S$399 per tonne.
The prospects for the EU’s 2017/18 sunflower seed remain positive, with production set to increase by 5% from the previous season to 9.0 million tonnes . Looking ahead, the weather will be a key factor to monitor in order to assess the possibility of achieving this forecast output of 9.0 million tonnes.
The South African potatoes market started the week on a negative footing with the price down by 2% from the previous trading day, closing at R28.40 per bag (10 kg bag). These losses were largely on the back of relative higher stocks of 1.1 million bags (10kg bags) at the start of the session.
During the session, the market saw an increase in buying interest, coupled with a decline in producer deliveries after a weekend with reduced harvest activity. This subsequently led to a 15% decline in stocks to 928 468 bags (10kg bags).
SAFEX beef carcass:
The SAFEX beef carcass market had a quiet start of the week with thinly traded volumes at the stock exchange. Subsequently, the price remained unchanged from the previous day, closing at R46.00 per kilogramme .
The beef market is showing some levels of normalisation after the 2015-16 El Nino-induced drought. 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.
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