Highlights in today’s morning note
This week started off on a quiet note, with Chicago maize market closed for a US Federal holiday. This opened room for domestic factors to be key drivers of the market. The slightly weakening Rand against the US Dollar, as well as fears of potential delays in early producer deliveries added support to the market, with spot and July 17 contract month prices closing in positive territory.
The highest rainfall recorded this past weekend was 148 millimetres in Graskop in Mpumalanga, which is not a grain producing town. Most maize producing areas in the province received rainfall over roughly 30 millimetres, which bodes well with the crop that is still at the pollination stage and requiring fairly wet weather conditions.
Trailing behind Mpumalanga was eastern Free State, with the highest rainfall of 65 millimetres recorded in Fouriesburg. Many areas of the western Free State received moderate rainfall of between 20 and 49 millimetres. Over the same period, the highest rainfall recorded in North West was 41 millimetres in Delareyville. Other areas in the province received moderate showers of between 20 and 35 millimetres.
The forecast for the next two weeks suggests that the South African maize-belt could receive consistent high rainfall. Although rainfall is helpful for crop development, too much of it could bring challenges. In some areas, farmers fear that the wet weather conditions could delay early producer maize deliveries, particularly in irrigation areas. Moreover, the younger crops might also be negatively affected by very wet conditions.
With that said, South Africa’s maize crop is still in good condition and that supports our view that this year’s crop could at least reach 11.9 million tonnes, which is a 53% annual increase.
There was no major news in the South African wheat market. The expected high rainfall in most parts of the country will be helpful in filling up dams which could later be beneficial for irrigation areas during winter wheat planting season.
South Africa had a good season this year, with wheat production up by 31% from the previous season to 1.89 million tonnes. On Tuesday next week, the National Crop Estimate Committee will release its seventh production estimate. Given the producer deliveries activity in past three weeks, we believe that the seventh production estimate could be slightly revised up to 1.90 million tonnes.
On the global front – this morning Chicago wheat price was down by 0.23% from the level seen at midday yesterday due to large global supplies. Moreover, weather forecasts suggest the US Plains and Midwest could see mild and favourable temperatures this week which is essential for advancing winter wheat growth in the region.
The South African soybean market found support on the back of a relatively weaker Rand against the US Dollar, as well as emerging fears that wet weather conditions in some parts of Mpumalanga could lower the quality of the soybean crop.
However, at the moment, the crop is still in good condition and the jitters in the market are mainly supported by weather forecasts which show a possibility of consistent rainfall pattern over the next two weeks.
Overall, we are still comfortable with our view that South Africa’s soybean crop could reach at least at 867 520 tonnes – a 17% annual production increase .
In global markets – this morning Chicago soybean price was up by 0.68% from the level seen at midday yesterday, with rainfall in Argentina raising concerns over potential decline in yields.
South Africa’s sunflower seed crop is in good condition, which supports our view that this season’s crop should at least reach 798 960 tonnes, which is 6% higher than the previous season.
With that said, forecast high rainfall for the next two weeks might complicate growing conditions in some areas. Already, there were reports of Sclerotinia in some sunflower seed fields in the North West province, but with pesticides in the market, the farmers should be in a better place to manage the disease (albeit higher input costs).
The ongoing harvest activity continues to add bearish pressure on South African potatoes market. Yesterday the market saw further losses of 3.41% from the previous day’s level due to higher stock levels (1 078 660 bags (10 kg bags)) that were seen at the start of yesterday’s trade session.
The Johannesburg Fresh Produce Market remains wobbly, largely driven by stock levels and buying interest. Yesterday the apple price was down by 7.79% from the previous day’s level, closing at R7.54 per kilogramme. This was due to a 27% uptick in stock levels to 217 324 tonnes.
The bananas price was down by 11.89% from the previous day’s level, closing at R7.09 per kilogramme, pressured by relatively higher stock levels of 173 607 tonnes. Meanwhile, the oranges market managed to claw back the previous day’s losses, up by 2.11% from the previous day’s level, closing at R13.06 due to strong buying interest.
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