Highlights in today’s morning note
The winter wheat crop in the Western Cape province is not in good shape due to persistent dryness. The recent weather forecasts paint an even more worrying picture of continuous dryness within the next two weeks. The impact of the current dry weather conditions on crops will be reflected in the first production estimates data which is due for release next month, 29 August 2017. This week, the CEC will release its preliminary wheat area planting estimate .
In terms of dam levels – the recent update for the week ending 17 July 2017 shows that dams averaged 25% full, compared to 47% in the same period last year. The other wheat producing provinces, such as the Free State and Northern Cape, are mostly irrigation and will benefit from higher water levels in the dams, currently above 80% full.
On the global front – This morning the Chicago wheat price was down by 1.39% from levels seen at midday Friday due to prospects of improving weather conditions in some parts of the Midwest.
Although some parts of the US Midwest are set to receive light showers this week, the majority of wheat growing regions will most likely remain dry and warm. This is will continue to strain the spring wheat crop which urgently needs moisture.
Elsewhere, Canada had a good start this season. However, recent reports from Canada shows that wheat crop conditions continue to decline due to high temperatures and insufficient moisture.
The forecast of dry and warm weather conditions within the next two weeks could add momentum to the harvest process, which is currently in full swing country-wide. The areas that have harvested received exceptional yields and that supports the National Crop Estimate Committee (CEC) view of a possible record crop of 15.63 million tonnes. On Wednesday, 26 July 2017, the CEC will release its sixth production estimate .
On the global front – This morning the Chicago maize market was down by 3.63% from levels seen at midday Friday owing to forecasts of rainfall in some parts of the US Midwest.
The weather remains a key focus in the US maize market, as the crop approaches pollination stage which requires moisture. Unfortunately, the past few weeks experienced persistent dryness and higher temperatures, which are not conducive for crop development.
In fact, this could potentially lead to a further downward revision of the US 2017/18 maize production estimate which is currently placed by the USDA at 362.09 million tonnes, down by 6% year-on-year.
On Friday, there was not much happening in the market. The focus is on this month’s production estimates update which is due for release on Wednesday, 26 July 2017. The current estimate is 1.34 million tonnes, which is 81% higher than the previous season.
The harvest process finished on positive footing with exceptional yields reported in many areas. Therefore, we do not expect any meaningful adjustments in the current estimate, if there are any adjustments, it will most probably be an upward revision.
In global markets – The weather remains a key focus in the US soybean market. The recent weather forecasts show a possibility of light showers in the east and southern parts of the Midwest. This could bring a much-needed relief as crops have been experiencing dryness for weeks. With that said, some parts of the Midwest will most likely remain dry and that is not conducive for crops .
Elsewhere, data from the Buenos Aires Grain Exchange shows that Argentina’s soybean harvesting for 2016/17 season is complete. The crop is estimated at 57.5 million tonnes, which is 2% lower than the previous season. The decline is due to heavy floods that were experienced at the start of the season.
The forecast dry and warm weather conditions across the country within the next two weeks could add momentum to the sunflower seed harvest process. The process has been completed in many areas with the exception of few areas in the western parts of the North West province.
South Africa’s 2016/17 sunflower seed production is set to increase by 9% from the previous season to 821 970 tonnes. An update of this estimate will be released on Wednesday, 26 July 2017.
From a global perspective – The EU sunflower seed market gained ground in Friday’s trade session owing to spillover support from other vegetable oil markets. The price up by 1% from the previous day, closing at S$408 per tonne.
With the new season crop still at early growing stages, the weather will remain a key focus in the EU market. There are still lingering concerns about dryness in some parts of the region, such as France. However, the European Commission remains optimistic about the 2017/18 sunflower seed crop with production set to increase by 5% from the previous season to 9.0 million tonnes.
In the Black Sea region, the new season sunflower seed crop is reportedly in a fair condition across the region owing to recent showers. That said, the weather forecast shows a possibility of drier conditions within the next few days, which is not conducive for the crop as it needs moisture.
The South African potatoes market lost ground in Friday’s trade session with the price down by 1% from the previous day, closing at R26.86 per kilogramme. These losses were on the back of large stocks of 1.16 million bags (10kg bags) at the start of the session.
During the session, the market saw a strong buying interest and a slight decline in deliveries. This subsequently led to a 6% decline in stocks to 1.09 million bags (10kg bags).
SAFEX Beef carcass:
On Friday, there was not much happening in the SAFEX beef carcass market. The price remained unchanged from the previous day, closing at R46.00 per kilogramme .
The beef market is showing some signs of normalisation after the 2015-16 El Nino-induced drought. Data from the Red Meat Levy Admin shows that South African farmers slaughtered 202 886 head of cattle in May 2017, up by 5% from the previous month.
However, this is still 18% lower than the corresponding period last year (drought year with higher slaughtering rate). We will monitor the developments closely to determine the impact on prices.
On Friday, the fruit market saw widespread losses due to higher producer deliveries. The apple price was down by 1% from the previous day, closing at R6.65 per kilogramme.
Moreover, the bananas market lost 3% from the previous day, closing at R7.05 per kilogramme. This was partly on the back of large stocks of 154 234 tonnes, following higher deliveries.
The price of oranges was down by 4% from the previous day, closing at R3.07 per kilogramme. However, the market could soon find support due to lower stocks of 219 642 tonnes, which is 33% lower than the previous day.
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