Highlights in today’s morning note
The weather forecast shows a possibility of rainfall across many areas of South Africa within the next eight days. This expected rainfall varies between 20 and 80 millimetres and could improve soil moisture and dam levels, and in turn, benefit summer crops. Meanwhile, the western parts of the Western Cape and Northern Cape province could remain dry and warm over the observed period (see figure 1).
In the week ending 10 February 2017, South Africa’s maize imports came in at 14 925 tonnes (about 75% of this was yellow maize from Ukraine and 15% was white maize from the US). This placed South Africa’s 2016/17 yellow maize imports at 1.29 million tonnes – 70% of the seasonal import forecast. Moreover, South Africa’s 2016/17 white maize imports stand at 671 969 tonnes – 79% of the seasonal import forecast.
In the same week, South Africa exported 16 686 tonnes of maize to regional markets (Africa), with 68% share being white maize and 32% being yellow maize. Overall, South Africa’s 2016/17 total maize exports currently stand at 640 205 tonnes (61% is white maize and 39% is yellow maize).
South Africa’s maize crop is in fairly good condition and set to see further improvement within the next two week due to expected rainfall. We forecast South Africa’s 2016/17 maize production at 11.9 million tonnes, which is a 53% annual increase . The official CEC estimates will be released on the 28th February 2017.
On the global front – this morning Chicago maize price remained unchanged from the level seen at midday yesterday. Yesterday the USDA reported a sale of 229 000 tonnes of US maize to an unknown destination.
There were no major events in the domestic wheat market, except the release of weekly wheat trade data. Imports for the week ending 10 February 2017 came in at 15 783 tonnes – all from Germany. This is 68% lower than the volume imported the previous week. Overall, South Africa’s 2016/17 total wheat imports stand at 203 515 tonnes, which is 14% of the seasonal import forecast (1.5 million tonnes).
Although a net importer of wheat, South Africa continues to export wheat to regional markets. In the week ending 10 February 2017, total exports reached 3 962 tonnes, all went to regional markets (Africa). Overall, South Africa’s 2016/17 total wheat exports currently stand at 31 846 tonnes. About 56% of this went to Zimbabwe, 13% to Namibia, 9% to Botswana, 10% to Lesotho, 9% to Mozambique, and 3% to Swaziland.
On the global front – this morning Chicago wheat price was up by 0.45% from the level seen at midday yesterday, owing to strong global demand. That said, this could be short-lived due to large global wheat supplies.
Elsewhere, recent data from the Australian Bureau of Agricultural and Resource Economics shows that the winter wheat harvest process is almost complete. The 2016/17 Australian wheat production is estimated at 35.1 million tonnes, which is a 45% annual increase. This comes on the back of favourable weather conditions across many areas of the country. Moreover, this is slightly above the International Grains Council estimate of 33.5 million tonnes for Australia’s 2016/17 wheat crop.
Overall, there are large wheat supplies in the global market, with 2016/17 production estimated at 748.24 million tonnes, which is 2% higher than the previous season’s output. The key contributors to this expected production uptick are the US, Argentina, Australia and Canada.
The South Africa soybean crop is in fairly good conditions and set to benefit from expected rainfall within the next two weeks. We forecast this season’s soybean crop at 867 520 tonnes, which is a 17% annual production increase . With 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 0.19% from the level seen at midday yesterday, due to favourable weather conditions in South America.
South America’s weather developments are still of much interest in the global market. The region is of importance in global soybean market as it produces almost half of the global crop. The recent weather forecast suggests that both Brazil and Argentina could see rainfall this week.
Soybean harvest is underway in Brazil. Data from Sunseedman shows that progress was at 20% complete on the 14th February 2017, well above the corresponding period last year. That said, forecast wet weather conditions for this week could cause harvest delays. Overall, the crop is still in fairly good condition. The USDA forecasts Brazil’s 2016/17 soybean production at 104 million tonnes, which is 8% higher than the previous season.
Although forecast rainfall could delay harvest activity in Brazil, Argentina could actually benefit as most of the crop is still at growing stages. The USDA forecast Argentina’s 2016/17 soybean production at 55.5 million tonnes, which is 2% lower than the previous season. This downward revision comes on the back of unfavourable weather conditions that were seen earlier in the season.
The South African sunflower seed crop is currently in good condition and set to benefit further from the forecast rainfall within the next two weeks. If the country receives normal rainfall distribution throughout the season, this year’s sunflower seed crop could reach 798 960 tonnes 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 was fairly quiet in the EU’s sunflower seed market, with prices unchanged from the previous day’s level, closing at US$418 per tonne. In addition, the Black Sea region’s sunflower seed oil market also remained quiet, with prices unchanged from the previous day’s level, closing at US$760 per tonne.
Overall, there is a bearish sentiment in the global sunflower seed market which emanates from higher global supplies. The 2016/17 global sunflower seed production is estimated at 48 million tonnes – which is 14% higher than the previous season and the highest volume in the past 5-years. This comes on the back of 8% year-on-year increase in area plantings to 27.5 million hectares.
The South African potatoes market gained ground in yesterday’s trade session, with prices up by 1.38% from the previous day’s level, closing at R33.05 per bag (10 kilogrammes). These losses were largely on the back of lower stocks level that was seen at the start of the session (794 355 bags (10 kg bags)).
However, during the session, the market saw an uptick in producer deliveries, which subsequently led to a 13% increase in daily stock levels to 899 857 bags (10 kg bags).
South African Fruit:
After seeing losses over the past few days, the Johannesburg Fresh Produce Market gained ground during yesterday’s trade session. The apple price was up by 0.42% from the previous day’s level, closing at R7.18 per kilogramme, with support largely on the back of lower stock levels of 181 494 tonnes (which is 23% lower than the previous day).
The bananas price was up by 6% from the previous day’s level, closing at R8.65 per kilogramme, also supported by lower stock levels. Lastly, the oranges market gained 4% from the previous day’s level, closing at R5.06, with support emanating from strong buying interest.
Yesterday the SAFEX beef market saw a fairly quiet day, with prices unchanged from the previous day’s level, closing at R42.50 per kilogramme.
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. Data from the Red Meat Levy Admin shows that in December 2016, South African farmers 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 months, 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.
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