Agbiz Morning Market Viewpoint on Agri-Commodities: 16 February 2017

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Agbiz Morning Market Viewpoint on Agri-Commodities: 16 February 2017

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 40 and 125 millimetres and could improve soil moisture and dam levels, and in turn, benefit summer crops. Meanwhile, the western parts of the Northern Cape province could remain dry and warm over the observed period (see figure 1). Worth noting is Cyclone Dineo which could potentially increase rainfall in the northern and north-eastern parts of the country, particularly Limpopo and north-eastern parts of Mpumalanga province.


South African farmers continue to deliver the previous production season’s (2015/16) maize crop to commercial silos. In the week ending 10 February 2017, total maize producer deliveries were recorded at 27 548 tonnes (67% was white maize and 33% was yellow maize). This was well above the previous week’s volume of 8 794 tonnes. Overall, South Africa’s total maize producer deliveries for “week 1 to 41” currently stand at 6.53 million tonnes.

The South African Weather Service has noted that a tropical storm heading for the coast is expected to develop into a cyclone with strong winds. For now, we think that the impact of this will be minimal on maize crop as weather forecasts mainly show a possibility of higher rainfall towards north-eastern parts of Mpumalanga and Limpopo.

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.

As noted earlier this week, we continue to view the fall armyworm outbreak in the country as a key risk that could potentially change our view if it is not controlled effectively. That said, with South Africa’s maize crop roughly 85% Genetically Modified, available pesticides on the market, technical assistance from the Department of Agriculture, Forestry, and Fisheries (DAFF), as well as organised agriculture groups, we are optimistic that the country is in a better position to control this pest.


South African farmers continue to deliver wheat to commercial silos. In the week ending 10 February 2017, wheat deliveries were recorded at 11 836 tonnes, which is 47% higher than the volume recorded the previous week. This brought South Africa’s 2016/17 total wheat deliveries for “week 1 to 19” to 1.76 million tonnes.

On the global front – this morning Chicago wheat price was up by 0.67% from the level seen at midday yesterday, still getting support from strong global demand.

Elsewhere, APK-Inform forecasts Kazakhstan’s 2016/17 wheat production at 15 million tonnes, which is 700 000 tonnes below the previous estimate. In the same season, exports are set to reach 5 million tonnes, which is 19% higher than the previous season.

In South Asia, weather forecasts show a possibility of heat waves in the northern parts of India within the next 10 days and that could negatively affect the wheat crop. The International Grains Council forecasts India’s 2016/17 wheat production at 86 million tonnes, which is 1% lower than the previous season. The potential impact of the forecast heatwave will be apparent on the revised production estimates later this month.

Despite these developments, there are large wheat supplies in the global market. The 2016/17 global wheat production is estimated at 748.24 million tonnes, 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 events in the South African soybean landscape. The weather forecast remains favourable within the next two weeks. That said, we foresee a possibility of higher rainfall in the north-eastern parts of Mpumalanga due to expected Cyclone Dineo. More about this will unfold over the coming days as climatic conditions develop.

Despite these developments, the soybean crop is still in good conditions throughout the country. For now, we are comfortable with our forecast for this season’s soybean crop at 867 520 tonnes – a 17% annual production increase . The official CEC’s estimates will be released on the 28th February 2017.

In global markets – this morning Chicago soybean price was up by 1.53% from the level seen at midday yesterday, mainly supported by strong demand from the US soybean processing industry.

South America’s weather developments remain of much interest in the global market. The region is of importance as it produces almost half of the global soybean crop. Current weather forecasts suggest that both Brazil and Argentina could see wet weather conditions this week. Although this could be beneficial for the larger part of Argentina, an opposite could be true for some farmers in Brazil as they are at harvest period.


Yesterday there was no major news in the domestic sunflower seed market. Apart from that, the crop is in good condition and will benefit further from the forecast rainfall within the next two weeks. If South Africa receives normal rainfall distribution throughout the season, this year’s sunflower seed crop could reach 798 960 tonnes, 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 lost ground, with a price down by 0.48% from the previous day’s level, closing at US$416 per tonne. This comes on the back of large supplies, with the region’s (EU) production estimated at 8.6 million tonnes, which is 6% higher than the previous season’s crop.

Meanwhile, the Black Sea region’s sunflower seed oil market remained quiet, with prices unchanged from the previous day’s level, closing at US$760 per tonne. In the first 2-weeks of February, Ukraine exported 164 100 tonnes of sunflower oil and 139 700 tonnes of sunflower meal to an unknown destination.

The Black Sea region generally had a good season. Sunseedman estimated Ukraine’s 2016/17 total sunflower seed production at 14 million tonnes – up by 17% from the previous season. Moreover, Russia’s 2016/17 sunflower seed production is estimated at 11 million tonnes, which is a 10% annual increase.


The South African potatoes market lost ground during yesterday’s trade session, with prices down by 7.14% from the previous day’s level, closing at R30.69 per bag (10 kilogrammes). These losses were mainly on the back of higher stocks level that was seen at the start of the session (899 857 bags (10 kg bags)).

Moreover, during the session, the market saw an uptick in producer deliveries, which subsequently led to a 5% increase in daily stock levels to 946 280 bags (10 kg bags).


Yesterday the SAFEX beef market gained ground, with prices up by 0.71% from the previous day’s level, closing at R42.80 per kilogramme.

Despite these recent 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. 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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