Agbiz Morning Market Viewpoint on Agri-Commodities: 25 July 2017.

Highlights in today’s morning note

Maize:

With the sixth maize production estimates due for release this Wednesday, Reuters and Bloomberg analyst’s survey shows that South Africa’s maize production could be revised up by 1% from the previous estimate to 15.77 and 15.80 million tonnes, respectively. This doubles the last season’s output of 7.78 million tonnes.

Regionally – according to media reports, Zambia will export 100 000 tonnes of maize to east African countries which have been negatively affected by drier weather conditions, particularly Kenya, Tanzania and Burundi. The 2016/17 season brought a record maize harvest of 3.6 million tonnes in Zambia, which enabled the country to have a surplus and subsequently lift the maize export ban.

On the global front – This morning the Chicago maize market was up by 1.88% from levels seen at midday yesterday owing to poor crop conditions. The recent data from the USDA indicates that at the beginning of this week, only 62% of the US maize crop was rated good/excellent. This is 14% below the corresponding period last year.

With that said, the expected rainfall in the Midwest could bring relief and potentially improve crop conditions this week. In addition, this is a critical time with a large part of the crop approaching a pollination stage of development which requires moisture.

Wheat:

Although the weather forecast has changed drastically, it only presents a possibility of showers in the week ending 09 August 2017 in the central and northern parts of the South Africa. The Western Cape province, which urgently needs moisture could remain dry and warm within the next two weeks. The other wheat producing provinces, Free State and Northern Cape, are mostly irrigation and will benefit from higher water levels in the dams, currently above 80% full.

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 National Crop Estimate Committee will release its preliminary wheat area planting estimate. Farmers intended to plant 2.4% less area than the previous season’s 508 365 hectares.

On the global front – This morning the Chicago wheat price was down by 0.20% from levels seen at midday yesterday due to prospects of improving weather conditions in some parts of the Midwest.

This expected rainfall could bring relief and improve crop development after weeks of persistent dryness which have damaged some spring wheat crop. At the beginning of this week, only 33% of spring wheat was rated good/excellent, compared to 68% in the corresponding period last year. The International Grains Council (IGC) forecasts a 23% year-on-year decline in US 2017/18 wheat production to 48.6 million tonnes due to expected lower yields.

Soybeans:

The key 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 – This morning Chicago soybean price was up by 2.12% from levels seen at midday yesterday owing to poor crop rating data.

At the moment the crops are generally not in good shape due to the persistent dryness that was experienced over the past few weeks. The most recent data from the USDA shows that 57% of US soybean crop was rated good/excellent at the beginning of this week, which is 14% lower than the same period last year. Also worth noting is that the US 2017/18 soybean production is set to decline by 1% from the previous season to 115.9 million tonnes due to expected lower yields in some parts of the Midwest.

With the crop still in early growing stages, the weather remains a key focus in the US soybean market. The weather forecasts show a possibility of light showers across the Midwest this week. This could bring a much-needed relief as crops have been experiencing dryness for weeks.

Elsewhere, data from Brazil’s Agricultural Ministry shows that the country’s 2017/18 soybean production could decline by 2% from the previous season to 110.7 million tonnes. This is slightly higher than the International Grains Council (IGC) estimate of 110.0 million tonnes.

RSA Potatoes:

In yesterday’s trade session the South African potatoes market managed to claw back some of its recent losses. The price was up by 1% from the previous day, closing at R27.22 per kilogramme. These gains were on the back of lower stocks of 1.09 million bags (10kg bags) at the start of the session.

Moreover, during the session, the market saw a strong buying interest, coupled with a decline in deliveries after the weekend. This subsequently led to a 27% drop in stocks to 796 380 bags (10kg bags).

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