Highlights in today’s morning note
This week could bring rainfall of between 20 and 90 millimetres across South Africa. This will be a welcome development after weeks of dryness and extreme heat in the central and western parts of the country. The Western Cape province will also benefit, following months of persistent dryness.
The past weekend brought nothing but dryness and heat in the South African maize belt. Bloemfontein, Bethlehem, Marquard, Klerksdorp, Ermelo, Kriel, Middelburg, Standerton, Irene and Greyling Stad were the only areas that received light and scattered showers, which were anyhow not sufficient to make an improvement on soil moisture.
This week promises to break the prolonged dry spell in the maize–belt, showing prospects over 50 millimetres of rainfall within the eight days. Nonetheless, there will be minimal improvements in planting activity in the coming weeks, as the optimal planting window has already passed. Some areas that managed to plant experienced heat stress which damaged crops, particularly the western regions. We will closely monitor the developments in the coming weeks in order to assess the impact on overall maize production .
On the global front – The expected 3% y/y decline in global maize production to 1.05 billion tonnes is linked to anticipations of lower yields in the US, Brazil, Argentina, Ukraine, China, India, Russia and South Africa.
The only region, amongst the key global producers, that set to receive an uptick in production is the EU. The EU’s 2017/18 maize production is estimated at 64.60 million tonnes, up by 3% from the previous season. Overall, the global market remains well supplied, thanks to large stocks from the 2016/17 season.
The winter wheat harvest process is virtually over in the eastern parts of the Free State province. Therefore, the expected rainfall this week will have minimal impact on the process. The rainfall will, nonetheless, benefit the summer crops which urgently need moisture at this stage of development.
Although South Africa’s winter wheat production is set to experience a 23% y/y decline and ease at 1.48 million tonnes, this is above the 2015/16 production which was at 1.44 million tonnes. The 2015/16 season’s wheat imports reached 2.06 million tonnes. In the 2017/18 season, wheat imports are estimated at 1.90 million tonnes. With that said, the current production estimate is not yet final, there will be an update on January 30.
On the global front – While global wheat demand is set to remain solid, with 2017/18 global imports estimated at 180 million tonnes (1% y/y), Russia’s wheat exports for January 2018 are set to decline by 18% from the previous month and ease at 3.2 million tonnes.
North Africa and the Middle East are generally expected to be the key global wheat importing regions in the 2017/18 season, with volumes estimated at 28 million tonnes and 18 million tonnes, respectively.
Yesterday there was not a lot of news in the domestic soybean market. The weather is the primary focus and will remain so at least until the end of February. While the expected rainfall within the next eight days will possibly improve soil moisture and thereafter crop conditions, the yields could generally be average in most parts of the country.
The incoming reports suggest that rainfall in the KwaZulu-Natal and Mpumalanga provinces have been patchy in the past few weeks. Some areas received excess rain and hail which damaged soybean crops, whereas other areas received very little precipitation, and currently experiencing heat stress.
On balance, South Africa’s soybean crop is in a fair condition and will get a much-needed boost from the expected rainfall. One data point that the market is anxiously waiting for the preliminary planting figures which are due for release on January 30. This will give an indication of the area planted, given that farmers were quite optimistic at the beginning of the season, aiming to plant 720 000 hectares – the largest area on record.
After experiencing a good run in the past few days, the South African potatoes market pulled back in yesterday’s trade session owing to a large stock of 815 299 pockets (10kg bags) at the beginning of the session. The price was down by 4% from the previous day, settling at R36.60 per pocket (10kg).
During the day, the market saw strong commercial buying interest, coupled with relatively lower deliveries on the back of slow harvest activity over the weekend. This subsequently led to a 36% decline in daily stocks to 523 903 pockets (10kg bag).
Yesterday the fruit market started the day on a mixed footing. The prices of apples and bananas were down by 16% and 9% from the previous day, closing at R7.47 per kilogram and R5.13 per kilogram, respectively, due to large stocks. Apples and bananas stocks recovered by 30% and 27% from the previous day, closing at 144 000 tonnes and 321 000 tonnes, respectively, following an uptick in deliveries.
Meanwhile, the price of oranges increased by 40% from the previous day, closing at R4.99 per kilogram. These gains followed a 21% decline in daily stocks to 15 000 tonnes.
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