Highlights in today’s morning note
This is a data-packed week for grain markets. The weekly grain trade data is due for release on Tuesday. This will most likely show increased activity following the previous exports of 10 689 tonnes for the week ending 12 May 2017.
The weekly producer deliveries data will be released on Wednesday. Farmers spent much time at the NAMPO festival last week with minimal activity on the fields, therefore the deliveries data could show a slight decline from the 340 623 tonnes volume in the week ending 12 May 2017.
On Thursday, SAGIS monthly data will paint a picture of South Africa’s maize stocks. In March 2017, total maize stocks were at 1.6 million tonnes, which is 17% lower than the previous month and 40% lower than the corresponding period last year. With early deliveries starting to come to the market, the stocks could show a marginal recovery.
On Friday, the National Crop Estimate Committee will release its fourth production estimate. Currently, the Committee forecasts total maize production at 14.5 million tonnes, which is an 85% increase from the previous year, but more importantly, it is 16% higher than average maize production of 12.5 million tonnes. In areas that have harvested, farmers are reporting yields that are well above market expectations. As a result, we could possibly see a further upward revision in the production estimate this week. Some analysts are forecasting a 500 000 tonnes uptick, which could see production reach as much as 15 million tonnes.
On the global front – this morning Chicago maize price was up 2.72% from levels seen at midday Friday due to wet and cold weather conditions across the US Midwest.
The planting progress and overall weather conditions in the Western Cape province remain a focus of the domestic market. Weather forecast for the next two weeks shows a possibility of drier and warm conditions which could slow planting activity. In areas that have planted, seeds could fail to germinate due to dryness, and in parts of Swartland, recently germinated grain is reportedly dying off due to dryness.
However, the irrigation areas of Northern Cape and Free State provinces which plant nearly half of South Africa’s wheat crop should thrive well as dam levels in these respective provinces benefited from summer rainfall .
On the global front – this morning, the Chicago wheat market was up 2.10% from levels seen at midday Friday owing to wet weather conditions in the US Midwest.
With spring wheat plantings underway, weather remains a key factor in the US wheat market. The forecast for the next eight days shows a possibility of wet conditions, which could slow planting activity and negatively affect winter wheat quality.
At the beginning of last week, the US farmers had planted 78% of the targeted area for this season’s spring wheat crop, which is 9% behind the corresponding period last year due to adverse weather conditions in the past few weeks. This evening the USDA will release an update in its weekly crop progress report.
The expected drier and warm weather this week should add momentum to soybean harvest activity in the country. The areas that have already harvested are reporting yields of above the 1.6 tonnes per hectare average, which supports the view of a possible record crop .
On Friday, 26 May 2017, the National Crop Estimate Committee will release its updated production estimates. Crop conditions have remained fairly favourable since last month’s estimate. As a result, we believe that the Committee will keep its production estimate unchanged. If there are any adjustments, it will most probably be an upward revision.
In global markets – this morning Chicago soybean price up 0.74% from levels seen at midday Friday with support coming from reports of wet weather conditions.
The planting progress and overall weather conditions in the US Midwest remain the focus of the market, and some rainfall is expected within the next eight days which could slow planting activity. At the start of last week, the US farmers had planted 32% of the targeted acreage, which is 2% behind the corresponding period last week. This evening the agency will release an update in the crop progress report.
In South America, soybean harvesting is towards completion, but there could be some delays this week due to expected wet conditions. Argentinian farmers had harvested 76% of the crop on the 19 May 2017, ahead of the corresponding period last year, a 61% progress. The country’s 2016/17 soybean production is estimated at 57.5 million tonnes, which is slightly below the previous season’s crop of 58.8 million tonnes.
The current warm weather conditions bode well with sunflower seed crop harvest activity, and also essential for areas that planted late with crops still drying off the fields. Earlier this month there were fears of possible frost which could have negatively affected the late planting areas. However, the past few weeks have turned out differently, with warmly favourable weather conditions. If the weather remains this way until the end of the month, as forecasts suggest, then this season should finish off well.
From a global perspective – The EU’s sunflower seed market saw marginal losses during Friday’s trade session, with the price down 0.73% from the previous day, closing at US$410 per tonne.
These losses were partly on the back of large supplies and expected a large crop in the new season. The EU’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. Moreover, expected favourable weather conditions should also boost the yields.
The South African potatoes market posted marginal gains during Friday’s trade session with support coming from strong buying interest. The price was up 0.26% from the previous day’s level, closing at R26.95 per bag (10 kg bag).
Moreover, during the session, the market saw a decline in deliveries due to slow harvest activity, which subsequently led to an 8% decline in daily stocks to 1 082 433 bags (10 kg bags).
The SAFEX beef market remains fairly quiet with limited participation in the stock exchange. That said, the market sentiment in the beef market is 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 ended the day mixed during Friday’s trade session. The apple price gained ground due to strong buying interest, closing at R6.65 per kilogramme.
Meanwhile, the bananas price was down 4% from the previous day, closing at R7.53 per kilogramme due to large supplies of 167 798 tonnes – a 77% daily uptick.
The oranges market lost 2% from the previous day, closing at R2.48 per kilogramme. This was also underpinned by a large stock of 461 934 tonnes which is a 65% higher than the previous day.
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