Highlights in today’s morning note
The weather forecast has significantly changed from what was seen yesterday. It has cleared up across the Western Cape and western parts of the Northern Cape province, currently showing a possibility of dry and warm weather condition there. However, the summer crop growing areas of the country could still receive rainfall within the next 8-days. These expected showers vary between 16 and 60 millimetres and could improve soil moisture and dam levels, and in turn, benefit summer crops (see figure 1).
Although the maize crop is generally in good condition across the country, there is a need for follow up rains in most areas. Hopefully, the forecast rainfall over the next two weeks will materialise and further improve the conditions. Overall, we forecast South Africa’s 2016/17 maize production at 11.9 million tons, which is 53% higher than the previous season . Of this total estimate, 56% share is white maize and 44% share is yellow maize. The official CEC estimates will be released on the 28th February 2017.
At midday, SAGIS will release South Africa’s maize weekly trade data. Last week, total maize imports for the week ending 03 February 2017 came in at 85 486 tons (about 80% of this was yellow maize from Ukraine and 20% was white maize from the US). This placed South Africa’s 2016/17 (marketing year) yellow maize imports at 1.28 million tons – 69% of the seasonal import forecast. Moreover, South Africa’s 2016/17 white maize imports stand at 673 076 tons – 79% of the seasonal import forecast.
On the global front – this morning Chicago maize price was up by 0.27% from the level seen at midday yesterday, largely supported by recent a recent sale of 101 600 tons of US maize to an unknown buyer. Moreover, the weekly export inspection data also added support to the market. The USDA reported weekly maize export inspections of 1.3 million tons, well above the previous week’s volume of 1.1 million tons.
At midday, SAGIS will release South Africa’s weekly wheat trade data. Last week, imports for the week ending 03 February 2017 came in at 49 137 tons (52% from the Czech Republic and 48% Poland). This was double the volume seen the previous week. Overall, South Africa’s 2016/17 total wheat imports stand at 187 732 tons, which is 13% of the seasonal import forecast (1.5 million tons).
Although a net importer of wheat, South Africa continues to export wheat to regional markets. In the week ending 03 February 2017, total exports reached 4 616 tons, all went to regional markets (Africa). Overall, South Africa’s 2016/17 total wheat exports currently stand at 27 884 tons. About 53% of this went to Zimbabwe, 15% to Namibia, 10% to Botswana, 11% to Lesotho, 7% to Mozambique, and 4% to Swaziland.
On the global front – this morning Chicago wheat price was up by 0.89% from the level seen at midday yesterday, partly supported by strong global demand. That said, this could be short-lived due to large global wheat supplies.
The 2016/17 global wheat production is estimated at 748.24 million tons, which is 2% higher than the previous season’s output. The key contributors to this expected production uptick is the US, Argentina, Australia and Canada, with production estimated at 62.86 million tons (+12% y/y), 15.00 million tons (+33% y/y), 33.00 million tons (+35% y/y) and 31.70 million tons (+15% y/y), respectively.
There were no major news or events in the domestic soybean market. Worth noting at this point is that the crop is generally in good condition and set to benefit from forecast rainfall this week. We estimate this season’s soybean crop at 867 520 tons, which is a 17% annual production increase . That said, the official CEC’s estimates will be released on the 28th February 2017.
In global markets – this morning Chicago soybean price was down by 0.28% from the level seen at midday yesterday, due to expected large global supplies. The USDA has placed the 2016/17 global soybean production at 336.62 million tons, up by 8% from the previous season.
In the wake of US-Mexico trade concerns, recent media reports suggest Mexico has engaged with Argentina and Brazil in an effort to discuss a possible trade agreement. This could be beneficial to Brazil and Argentinian soybean farmers, as Mexico is a key market for soybeans. On average, Mexico imports roughly 3.6 million tons of soybeans annually. The normal key supplier, with over 94% market share, is the US.
The recent USDA report placed Brazil’s 2016/17 soybean production at 104 million tons, which is 8% higher than the previous season. Also, worth noting is that soybean harvesting in underway in Brazil. Data from Sunseedman shows that progress was at 20% complete on the 13th February 2017. That said, weather forecast show a possibility of rainfall this week and that could cause harvest delays.
The sunflower seed crop is in good condition across the country. The forecast rainfall this week could be beneficial to the crop. That said, a part of the sunflower seed crop was planted around January 2017 due to late rainfall. Consequently, there are fears that later in the season some areas could be affected by frost. More information about this will unfold as the season progresses.
If South Africa receives normal rainfall distribution throughout the season, this year’s sunflower seed crop could reach 798 960 tons of sunflower seed, which is 6% higher than the previous season (despite the drop in area, which has been compensated by higher yields) . The CEC will release the official estimated on the 28th February 2017.
In global markets – yesterday the EU’s sunflower seed market extended the previous day’s losses, with a price down by 0.48% and closing at US$418 per ton. The bearish pressure was still emanating from large EU’s sunflower seed supplies, with 2016/17 production estimated at 8.6 million tons, which is 6% higher than the previous season’s crop. Meanwhile, the Black Sea region’s sunflower seed oil market continued on a quiet note, with prices unchanged from the previous day’s level, closing at US$760 per ton.
The South African potatoes market extended the previous day’s losses, with the price down by 9% from the previous day level, closing at R32.60 per bag (10 kilograms). These losses were largely on the back of higher stocks level that was seen at the start of the session (996 334 bags (10 kg bags)).
However, during the session the market saw a slight decline in producer deliveries, and strong buying interest which subsequently led to a 20% decline in daily stock levels to 794 355 bags (10 kg bags).
South African Fruit:
Yesterday the Johannesburg Fresh Produce Market saw widespread losses. The apple price was down by 5% from the previous day’s level, closing at R7.15 per kilogram, mainly pressured by relatively large stock levels of 235 617 tons (which is 85% higher than the previous day).
The bananas price saw losses of 6% from the previous day’s level, closing at R8.18 per kilogram. This comes on the back of a 2% increase in daily stock levels to 165 024 tons.
Lastly, the oranges market remains very wobbly, yesterday the price fell by more than half of what was seen the previous day, closing at R4.87 per kilogram due to higher stock levels.
Yesterday the SAFEX beef market gained ground owing to an increase in activity in the market. The Spot price was up by 1.19% from the previous day’s level, closing at R42.50 per kilogram.
Despite these marginal gains, the South African beef market has generally been under pressure since July 2015 due to large supplies. This comes on the back of higher slaughtering rate as farmers were unable to maintain their herds due to drier grazing fields and elevated feed costs. In December 2016, South Africa slaughtered 299 767 herd of cattle, which is 22% higher than the previous month. In addition to higher feed costs which led to an increase in slaughtering, the seasonal demand during Christmas holiday was also a major driver of this activity.
Looking ahead, a recovery of the South African beef industry is dependent on weather conditions. Over the past few weeks, South Africa received moderate rainfall. Vegetation is improving and grazing fields are already replenished. Moreover, the weather forecast suggests South Africa could receive rainfall over the coming weeks, which bodes well with the much-needed improvement in grazing fields. Against this background, we anticipate that farmers will soon start to rebuild their herds, which in turn will lead to a decline in slaughtering rate to the normal levels of 6 500 herd of cattle a week.
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