Highlights in today’s morning note
This year’s maize exports will be the highest in two decades. The last time South Africa exported a volume of maize large than the expected 2.7 million tonnes was in 1994/95 season – a volume of 4.7 million tonnes. The second biggest volume since then was in 1996/97 season – a 2.6 million tonnes, followed by 2.2 million tonnes in 2005/06 season.
However, the dynamics are quite different this year, particularly regarding white maize demand. African markets are typically the largest buyers of South Africa’s white maize surplus, but most countries such as Zambia, Zimbabwe and Malawi are expecting bumper harvests this season which should cushion their domestic needs and even have surpluses for the export market. In essence, this does not only lessen the export market for South Africa but also presents competition in other regional export markets such as Kenya, Mozambique, Tanzania, amongst others.
This expected uptick in exports is mainly on the back of an expected big maize harvest of 14.5 million tonnes – a second-biggest crop on record. From a yield perspective, this season, South Africa could harvest an average highest yield on record – 5.5 tonnes per hectare.
Bloomberg’s poll of analysts suggests that South Africa’s maize production estimate could be revised up to 14.66 million tonnes on Friday when the National Crop Estimate Committee releases its fourth production estimates. Worth noting is that in areas that have harvested, farmers are reporting yields that are well above market expectations. As a result, some analysts are forecasting a notable uptick to 15.00 million tonnes.
On the global front – this morning Chicago maize price was down 0.27% from levels seen at midday yesterday owing to notable progress in US planting activity. The US had planted 84% of the intended 36.4 million hectares for this season on the 21 May 2017, in line with the corresponding period last year. That said, the weather forecast shows a possibility of wet conditions across the US Midwest this week, which could slow planting activity.
The Western Cape government has declared the entire province a disaster area due to the ongoing drought. More concerning is that the province produces almost half of South Africa’s winter wheat crop, with planting period open between April to July each year.
Current dryness has caused delays in planting activity. Moreover, the weather forecast shows that conditions could remain unchanged throughout the month which could further 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.
The other half of South Africa’s wheat crop is produced in the irrigation areas of Northern Cape and Free State provinces. These provinces should thrive well this season as dam levels benefited from summer rainfall .
On the global front – this morning, the Chicago wheat market was down 1.37% from levels seen at midday yesterday owing to good progress in US spring wheat planting activity and improved conditions of winter wheat crop.
The US farmers had planted 90% of the targeted area for this season’s spring wheat crop on the 21 May 2017, which is 4% behind the corresponding period last year due to adverse weather conditions in the past few weeks.
In addition, about 52% of US winter wheat crop was rated good/excellent, which is a percentage point improvement from the previous week, but still 10% lower than the corresponding period last year. This shows that the recent rainfall had minimal impact on wheat quality.
Weather conditions for soybean growing areas remain favourably dry and warm which should accelerate harvest activity in areas that have not yet completed the process.
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 . The average yield is set to reach 2.2 tonnes per hectare, which will be the highest on record.
In global markets – this morning Chicago soybean price was down 0.10% from levels seen at midday yesterday owing to improvement in US soybean planting activity.
US farmers had planted 53% of the targeted acreage on the 21 May 2017, in line with the corresponding period last year. Informa Economics estimates that US soybean area plantings could reach 36.3 million hectares this season, which is a 7% annual uptick. Overall, the planting progress and overall weather conditions in the US Midwest remain the focus of the market, and this week is expected to remain cold and wet which could slow planting activity.
The expected wet weather conditions across the North West province this week could slow harvest activity in areas that planted early in the season, while the late planted areas will most likely not be affected.
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 warm conditions return next week and possibly last 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 claw back the previous day’s losses with support coming from strong global demand and spillover support from the palm oil market. The price was up 1% from the previous day, closing at US$415 per tonne.
Overall, there is still the bearish sentiment in the EU market which emanates from expected large supplies in the 2017/18 season. The EU’s sunflower seed production is estimated at 9.1 million tonnes, which is 7% higher than the 2016/17 season due to an increase in acreage and expected favourable weather conditions.
The South African potatoes market lost ground during yesterday’s trade session with large supplies adding bearish pressure to the market. At the start of yesterday’s trade session, the stocks were estimated at 1 082 433 bags (10 kg bags), which is well above the levels of 900 000 tonnes seen at the start of the previous week.
The fruit market ended the day mixed during yesterday’s trade session. The apple price gained ground due to strong buying interest, as well as a 38% decline in daily stocks to 179 471 tonnes.
Meanwhile, the bananas price lost 4% from the previous day, closing at R7.19 per kilogramme due to relatively large stocks of 144 536 tonnes.
The oranges market was down 1% from the previous day, closing at R2.45 per kilogramme owing to relatively large supplies of 424 311 tonnes compared to levels of 300 000 tonnes at the start of the previous week.
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