Highlights in today’s morning note
With little fresh news in the domestic maize market, prices were under pressure due to the relatively stronger Rand against the US Dollar, as well as bearish sentiment emanating from expected large domestic supplies .
Weather forecasts present favourable conditions for harvest activity, as well as crops that are still drying off in the fields. That said, this week is likely to see minimal activity with farmers attending the NAMPO festival in Bothaville, biggest agricultural show in Southern Africa.
Maize harvest activity is gaining momentum in South Africa. Farmers delivered 340 623 tonnes of maize to commercial silos in the week ending 12 May 2017. About 52% of this was yellow maize and 48% was white maize. This brought the country’s 2016/17 total maize deliveries for “week 1 to 2” to 514 687 million tonnes.
Kenya’s Agricultural Minister indicated that the government will subsidise maize imports to help lower the price of maize meal following the drought in the region. Yesterday, the country’s maize reserves were estimated at 4 500 tonnes, which was less than a day’s worth of consumption.
On the global front – this morning Chicago maize price was down 0.27% from the level seen at midday yesterday owing large global supplies. The USDA estimated 2016/17 global maize production at 1.065 billion tonnes, up 10% from the previous season.
Weather forecast shows a possibility of drier conditions throughout the country this month, which will possibly stall planting activity around the Western Cape province. Moreover, dam levels in the Western Cape province are critically low, estimated at 19% full in the week ending 15 May 2017, compared to 31% in the corresponding period last year.
As indicated earlier this week, nearly half of South Africa’s wheat crop is under irrigation in the Northern Cape and Free State province, which should thrive well as dam levels in these respective provinces benefited from summer rainfall.
The dams in the Northern Cape were almost at capacity on the 15 May 2017, at 92% full compared to 65% in the corresponding period last year. In the Free State province, dam levels were around 85% full, which is a third higher than the same period last year.
South African farmers continue to deliver wheat to commercial silos. In the week ending 12 May 2017, wheat deliveries were recorded at 319 tonnes, which is well below the previous week’s volume of 1 588 tonnes. This brought South Africa’s 2016/17 total wheat deliveries for “week 1 to 32” to 1.85 million tonnes.
There was not much activity in the market as many players are still attending the NAMPO. The weather forecasts present a favourable drier outlook for this month which should accelerate harvest activity across the country. In areas that have harvested, yields are reportedly above the 1.6 tonnes per hectare average, which supports the view of a possible record crop .
In global markets – this morning Chicago soybean price down 1.43% from the level seen at midday yesterday with large supplies in South America weighing on the global market.
With plantings underway in the US, the weather has become an important factor in the market. The forecast for this week presents a possibility of wet conditions which could possibly slow the planting activity .
China is said to have been the buyer of the recent soybean export sales to unknown destinations, including the recent 132 000 tonnes reported earlier this week. The country is set to remain a key buyer of soybeans in the global market, accounting for a share of over 60% in 2016/17 global soybean demand, according to the recent USDA WASDE report. The Chinese 2016/17 soybean imports are estimated at 89 million tonnes, up 7% from the previous season.
Following this increase in demand, the Chinese government has embarked on a drive to stimulate domestic soybean production. In the province of Heilongjiang and Liaoning, government representatives indicated that farmers planting soybean instead of maize will receive higher subsidies.
Harvest is underway in many parts of the country and could gain momentum this month with the weather expected to remain dry and warm in many regions of the country. Moreover, this should also benefit the areas that planted late, with the crop still drying up.
In global markets – yesterday the EU’s sunflower seed market gained ground with the price up 0.98% from the previous day, closing at US$411 per tonne. These gains are on the back of strong global demand for sunflower seed products (oil and meal).
With that said, there is some underlying bearish sentiment in the EU sunflower seed market which emanates from expected large production. The region’s 2017/18 sunflower seed production could reach 9.1 million tonnes, which is 7% higher than the previous season due to an increase in acreage.
The Black Sea sunflower oil market gained 0.27% from the previous day, closing at US$744 per tonne. The increase in global demand, as well as the removal of restrictions by Turkey on Russia’s sunflower seed products, were still the key factors underpinning the market.
The weather forecast for the Black Sea region shows a possibility of wet conditions this week around Bulgaria, South-Romania and South-Russia. This could potentially cause planting delays.
Russia had planted 62% of the intended area for sunflower seed on the 15 May 2017, which is ahead of the corresponding period last year. Ukraine had planted 4.8 million hectares of sunflower seed on the 15 May 2017, which is equivalent to 89% of the intended area for this season.
The South African potatoes market was under pressure during yesterday’s trade session with large stocks underpinning the market. At the start of the session, the stocks were at 1 022 384 bags (10 kg bags), up 0.3% from the previous day.
During the session, the market saw an uptick in deliveries due to an increase in harvest activity. As a result, the stocks increased by 6% from the previous day to 1 085 320 bags (10 kg bags).
The SAFEX beef market has been fairly quiet with limited participation in the stock exchange. That said, the market sentiment in the beef market remains slightly bullish due to easing slaughter activity, as farmers continue to restock their herds after a drought spell.
The most recent data from the Red Meat Levy Admin shows that African farmers slaughtered 238 097 head of cattle in March 2017, which is 6% lower than the corresponding period last year.
The fruit market saw widespread gains during yesterday’s trade session with support coming from strong buying interest. However, these gains could be short lived due to higher stocks. The apples market gained 2% from the previous day, closing at R6.69 per kilogramme. The stocks were at 310 883 tonnes, up 6% from the previous day.
The bananas price was up 13% from the previous day, closing at R8.55 per kilogramme also supported by strong buying interest. At the same time, the stocks were up 12% from the previous day reaching 167 139 tonnes which could provide bearish pressure to the market in the near term.
The oranges market gained 7% from the previous day, closing at R2.78 per kilogramme. This will most likely be short-lived as stocks have doubled the previous day’s volume to 390 920 tonnes due to an increase in deliveries.
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