Agbiz Morning Market Viewpoint on Agri-Commodities: 20 March

Highlights in today’s morning note

Weather:

The weather forecast for the week ahead shows a possibility of light showers across Limpopo, Gauteng, Mpumalanga, Kwa-Zulu Natal and the Eastern Cape province. These expected showers vary between 10 and 25 millimetres. Meanwhile, the rest of other provinces could remain dry and warm (figure 1). Overall, these weather developments will not have much effect on summer crops as they are already maturing. For the Western Cape, however, this is concerning as dam levels are already critically low..

Maize:

South African maize crop is currently in good condition, and that supports the National Crop Estimate Committee’s view of a possible bumper crop this season. Warm weather conditions continue to support the crop in the maturation processes.

The forecast rainfall in the eastern parts of South Africa will not have much impact on the crop as it is already in maturation stages. With that said, the western parts of the North West province planted late, therefore rainfall is still essential for maize crops in those regions.

On the global front – this morning Chicago maize price was up by 1.37% from the level seen at midday Friday, still getting support from higher US weekly maize export sales, which reached 1.26 million tonnes, well above market expectations.

Elsewhere, wet weather conditions in Brazil have raised mixed feelings. On the one hand, these could negatively affect the quality of the maize crop. On the other, these wet conditions could be beneficial for the safrinha maize crop which is still at early growing stages (second season maize crop). The IGC forecasts Brazil’s 2016/17 total maize crop at 87.4 million tonnes, which is 31% higher than the previous season.

Of minimal impact to the market, but of interest is Germany’s 2017/18 maize production forecast of 4.5 million tonnes, up by 22% from the previous season due to an expected increase in area plantings and higher yields.

Wheat:

On the global front – this morning Chicago wheat price was up by 1.15% from the level seen at midday Friday, mainly supported by lingering concerns over a lack of moisture for the US winter wheat crop. Moreover, the weather forecast for this week shows a possibility of persistent dryness across the US Plains and that might worsen the conditions.

Last week, the US weekly wheat export sales were reported at 264 000 tonnes, which is the bottom of market expectations. Small exports in the US were not a factor of low global demand, but strong competition from other markets such as the Black Sea region and the EU. Key wheat buyers like Egypt are still in the market, consistently making purchases. Last week, Egypt bought 420 000 tonnes of wheat, with 71% of this from Russia and the remainder from France and Ukraine.

Soybean:

The South African soybean market gained ground during Friday’s trade session, with support emanating from higher Chicago soybean prices, as well as strong domestic buying interest. However, the fundamental market factors remain quite bearish. (1) The domestic currency remains progressively strong against the US Dollar. (2) There are positive prospects that this season’s soybean crop could be a record high . As a result, we suspect that these gains could be short lived.

In global markets – this morning Chicago soybean price was up by 0.40% from the level seen at midday Friday, owing to spill-over support from the maize market. Last week, the US soybean weekly export sales were reported at 472 000 tonnes, in line with market expectations. This too was supportive of the market.

In South America, of late, most parts of Brazil have been fairly rainy, and that does not bode well with the harvest process and logistical activities. On the 17th March 2017, Brazil had harvested 63% of its soybean crop, still ahead of the corresponding period last year. The USDA placed Brazil’s 2016/17 soybean production at 108 million tonnes, which is 12% higher than the previous season due to an uptick in area plantings and yields, on the back of favourable weather conditions.

Sunflower seed:

The sunflower seed crop is in fairly good condition across South Africa. Although warm weather conditions over past few weeks have generally been favourable for the crops, rainfall within the next two weeks would be essential in the western parts of the North West province (with crops that were planted late). Some areas of the province received light showers over the weekend, which is favourable for the crop that is still at early growing stages.

On the negative side, there are reports of sclerotinia disease in some sunflower seed fields around Lichtenburg town of the North West province. This disease could lead to lower yields if it is not controlled effectively. The North West province’s 2016/17 sunflower seed production at 304 500 tonnes, which is 33% of the national production forecast.

SAFEX Beef:

The SAFEX beef market has been a quiet path for some time and Friday was no different, the spot price remained unchanged from the previous day’s level, closing at R44.00 per kilogramme. This was largely on the back of reduced activity at the stock exchange.

The slaughtering activity shows a slowing trend which suggests that farmers have started restocking their herds. This comes after recent rainfall led to a notable improvement in grazing fields, as well as relatively lower feed costs. Data from the Red Meat Levy Admin shows that in January 2017, South African farmers slaughtered 227 483 head of cattle, which is 28% lower than the previous month. Moreover, in the week ending 03 March 2017, slaughtering weekly activity was at 15 191 head of cattle which is 12% lower than the corresponding period last year.

SA fruit:

The Johannesburg Fresh Produce Market ended during Friday’s trade session. The apple market down by 0.65% from the previous day’s level, closing at R7.59 per kilogramme due to relatively large stock levels. The oranges market lost 33.28% from the previous day, closing at R4.03 per kilogramme, mainly pressured by weak buying interest and relatively large supplies of 63 422 tonnes. Meanwhile, the bananas market managed to gain 5.31% from the previous day’s level, closing at R9.13 per kilogramme, due to a 45% daily decline in stock levels to 93 600 tonnes

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