Highlights in today’s morning note
Most parts of the Western Cape province received rainfall of between 20 and 50 millimetres over the past few days. This has briefly eased concerns regarding the new season crop. Farmers are expected to complete planting the estimated area of 325 000 hectares within the next few weeks. With that said, the weather forecast for the next two weeks paints a troubling picture, with clear skies across the province. Drier weather conditions could strain the newly planted crop.
For irrigation areas of the province, on 05 June 2017, dam levels were still critically low – estimated at 17% full compared to 30% for the same period last year. Fortunately, nearly half of South Africa’s wheat crop is under irrigation in the Northern Cape and Free State province, which should thrive well as dams in these respective provinces benefited from summer rainfall, currently above 80% full.
In the longer term, there are concerns that the El Niño weather pattern, typically associated with hot and dry weather conditions, may return later this year to the detriment of the crops. Data from the Australian Bureau of Meteorology shows that there is a 50% chance of El Niño developing in 2017, which is approximately twice the normal likelihood.
The USDA is upbeat on South Africa’s maize production. The agency boosted its expectations for South Africa’s 2016/17 maize production to 16.40 million tonnes, which is 7% higher than the previous month and double the previous season’s crop. This comes on the back of an increase in area plantings, as well as expected higher yields due to favourable weather conditions.
However, it is worthwhile to note that the USDA’s crop estimate is not directly comparable to the South African Crop Estimate Committee’s figures due to two basic reasons: (1) the marketing years are different, (2) the USDA estimates the overall national maize production, while the Crop Estimate Committee focuses only on commercial maize production. Differences aside, both agencies are painting an optimistic picture for South Africa’s maize supplies this year.
Harvesting is underway across the country, with forecast drier and warm weather conditions across the maize belt set to add momentum to the process.
From a global front – Weather remains a key focus in the US soybean market. The forecast drier and windy weather in parts of the Midwest could stress the newly planted crop. Earlier this week, US farmers had planted 83% of the intended 36.35 million hectares for the 2017/18 season, which 1% ahead of the corresponding period last year. Moreover, 58% of the crop has emerged, which is 4% below the corresponding period last year. This evening the USDA will release an update in its weekly crop progress report.
The USDA forecasts 2017/18 global soybean production forecast at 345 million tonnes, down 2% from the previous season. This is due to expected slight production decline in the US and South America. The ending stocks are forecast at 92 million tonnes, down by 1% from the previous season.
From the demand perspective, China is set to remain a key buyer of soybeans, with 2017/18 imports estimated at 93 million tonnes, up 4% from the previous season.
Sunflower seed harvest is almost complete across the country. The areas that have harvested obtained yields that are above average levels of 1.2 tonnes per hectare. This suggests that the total crop could reach the National Crop Estimate Committee’s forecast of 853 470 tonnes, up 13% from the previous season. The forecast favourable dry weather conditions within the next two weeks should allow the process to finish off smoothly.
From a global perspective – On Friday’s trade session the EU’s sunflower seed price was down 0.25% from the previous day, closing at US$404 per tonne due to large regional supplies, as well as lower crude oil prices.
The Black Sea sunflower oil market lost 0.40% from the previous day, closing at US$730 per tonne, also pressured by lower crude oil price, large sunflower oil supplies, as well as the favourable outlook for the new season crop.
From a production perspective, the European Commission paints a promising picture of the EU’s 2017/18 sunflower seed production. The Commission forecasts production at 9.1 million tonnes, up 6% from the previous season due to a slight increase in area plantings, as well as expected higher yields.
Sunflower seed planting is totally over in the Black Sea. Russia’s sunflower seed planting finished at 7.1 million hectares, down 7% from the 2016/17 season. Ukraine planted 5.5 million hectares, down 6% from the previous season.
The South African potatoes market lost ground during Friday’s trade session with the price down 2% from the previous day, closing at R27.71 per bag (10 kg bag). These losses came on the back of higher stocks of 1.2 million bags (10kg bags) at the start of the session.
During the session, the market saw an increase in deliveries due to ongoing harvest activity. This subsequently led to an 8% uptick in daily stocks by end of the session to 1.3 million bags (10 kg bags).
SAFEX beef carcass:
On Friday’s trade session, the SAFEX beef carcass price remained flat due to lower traded volumes at the stock exchange. Therefore, this suggests that the SAFEX carcass prices could differ from the physical market, where there is strong participation.
Moreover, the sentiment in the physical market remains bullish due to easing slaughter activity, as farmers continue to restock their herds after a 2015-16 drought spell. The recent data from the Red Meat Levy Admin shows that South African farmers slaughtered 193 373 head of cattle in April 2017, which is 19% lower than the previous month and the corresponding period last year.
The fruit market saw widespread gains during Friday’s trade session, with support coming from strong buying interest and relatively lower stocks. The apple price was up 7% from the previous day, closing at R6.79 per kilogramme, with support coming from strong buying interest.
The bananas market gained 4% from the previous day, closing at R6.23 per kilogramme, also supported strong buying interest, as well as relatively lower stocks of 185 786 tonnes. The oranges market was up 1% from the previous day, closing at R2.33 per kilogramme also backed by strong buying interest and relatively lower stocks of 484 564 tonnes.
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