Agbiz Morning Market Viewpoint on Agri-Commodities: 18 April 2017

Highlights in today’s morning note

Weather:

The weather forecast for the next eight days shows a possibility of light showers across the central and north-western parts of the country (figure 1). This is essential for the areas that planted late, as they can still benefit from moisture, particularly the western parts of the North West province.  With that said, the Western Cape province, which critically needs rainfall ahead of winter wheat season is set to remain dry and warm over the observed period.

Maize:

Maize harvest process is underway in some parts of South Africa, particularly the irrigation and the areas that planted early in the season. So far, the yields are reportedly above average, which supports the National Crop Estimate Committee’s view of a possible bumper crop of 14.3 million tonnes. Moreover, the weather forecast for the next eight days remains favourable for harvest activity. It shows possibilities of dry and warm weather across the eastern parts of the country.

Regionally, Malawi’s 2016/17 maize production is estimated at 3.2 million tonnes, which is 36% higher than the previous season. Malawi is the third largest maize producer in Southern Africa, therefore an increase in its domestic production could present competition for South Africa’s maize exports in the region.

On the global front, this morning Chicago maize price were down by 0.81% from the level seen at midday Thursday due to expected large global supplies.

Wet weather conditions across the US Midwest are causing delays in plantings. In the week ending 16 April 2017, plantings were at 6% complete, which is 6% behind the corresponding period last year. The US 2017/18 maize plantings are estimated at 36.4 million hectares, which is 4% lower than the previous season.

Elsewhere, Reuters poll of analysts suggests that the Chinese 2017/18 maize plantings could decline by 6% from the previous season to 35.2 million hectares. In addition, the output is likely to decline to 207.5 million tonnes, also 6% lower than the previous season. This is well below the International Grains Council estimate of 215.8 million tonnes for China’s 2017/18 maize production.

Wheat:

Local market’s attention is shifting to the planting of the 2017 winter wheat, which should commence in the beginning of May 2017. However, weather forecast shows a possibility of dry and warm conditions until the end of the month, which does not bode with planting processes.

The irrigation areas are no exception, the dam levels are critically low, which could possibly delay planting activity. Data from the Department of Water and Sanitation shows that in the week ending 10 April 2016, the Western Cape average dam levels were at 23% full, which is 7% lower than the corresponding period last year.

On the global front, this morning Chicago wheat price was down by 2.99% from the level seen at midday Thursday, owing to large global supplies. Moreover, recent USDA’s data shows that 54% of the winter wheat was rated good/excellent, which is a 1% improvement from the previous week.

Elsewhere, Russia’s Agricultural Ministry forecasts the 2017/18 grain production at 110 million tonnes, which is 9% lower than the previous season – with expected declines mainly on wheat production.

In Germany, there are positive prospects for the 2017/18 wheat production. Deutscher Raiffeisenverband forecasts the country’s wheat production at 25.3 million tonnes, which is 3% higher than the previous season. This is mainly on the back of expected higher yields due to favourable weather prospects for this season. 

Soybean:

Harvesting is underway in the eastern parts of the country, but not yet in full swing. So far, the yields are reportedly average to above average, which supports the National Crop Estimate Committee’s view of a possible record crop – 1.2 million tonnes.

Weather forecasts show a possibility of fairly drier conditions across the eastern parts of the country within the next eight days, which is supportive of harvest activity.

In global markets, this morning Chicago soybean price was down by 0.73% from the level seen at midday Thursday, due to favourable weather conditions in Argentina, as well as expected large global supplies.

Wet weather conditions could slow planting activity in parts of the US Midwest.  The US 2017/18 soybean planting at 36.2 million hectares, which is 7% higher than the previous season. This increase is set to come at the expense of maize acreage, due to profitability levels.

Sunflower seed:

The North West province has benefited from the recent rainfall, as a result, crops are in good condition across the province. The key concern for most farmers in the region is whether this season will finish off without frost damage. For now, weather forecasts for the next two weeks show a positive outlook and if conditions remain this way for the rest of the month and the greater part of May, then the season should finish off well.

In global markets, on Thursday the EU’s sunflower seed market saw a quiet session, with prices unchanged from the previous day, closing at US$393 per tonne. With that said, there is a bearish sentiment in the EU’s sunflower seed market which emanates from large supplies and positive prospects for the new season. 

The EU’s 2016/17 sunflower seed production is estimated at 8.6 million tonnes, which is 4% higher than the previous season. Looking ahead, the 2017/18 sunflower seed production estimated at 9.1 million tonnes, which is 7% higher than the 2016/17 season.

The Black Sea sunflower oil market also saw a quiet day, with the price unchanged from the previous day’s level, closing at US$719 per tonne. The Black Sea region is well supplied this season, with combined 2016/17 sunflower seed production of Russia and Ukraine estimated at 25 million tonnes, which is 14% higher than the previous season.

SA fruit:

The Johannesburg Fresh Produce Market ended the day mixed during Thursday’s trade session. The apple market gained ground on the back of lower stock levels of 192 348 tonnes (compared to 288 009 tonnes the previous day).

Meanwhile, the bananas market lost 10% from the previous day, closing at R8.05 per kilogramme, due to higher stock levels of 175 752 tonnes.

Lastly, the oranges market also closed in negative territory, with the price down by 18% from the previous day, closing at R3.34 per kilogramme. This was on the back of higher stock levels of 484 320 tonnes, which is double the volume seen the previous day.

Potatoes:

On Thursday, the South African potatoes market gained ground due to strong buying interest, as well as relatively lower stock levels. At the start of the session, the stocks were at 995 529 kg (10 kg bags), which is 0.3% lower than the previous day’s levels.

During the session, the market saw continuous buying interest, which led to a 21% decline in stock levels to 785 926 kg (10 kg bags).

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