Highlights in today’s morning note
South Africa faces stiff maize export competition: Business Day, 25 May 2017
Farmers delivered 316 134 tonnes of maize to commercial silos in the week ending 19 May 2017, which is 7% below the previous week’s deliveries. About 51% of this was white maize and 49% was yellow maize. The decline in deliveries is mainly due to reduced harvest activity last week as many farmers were at the NAMPO festival. This brought the country’s 2016/17 total maize deliveries for “week 1 to 3” to 825 559 tonnes.
The key focus this week in the maize market is crop production estimates data which is due for release on Friday. There is a lot of optimism in the market with some analysts suggesting that the crop could be revised up to 15 million tonnes.
Reuters analysts poll suggest that South Africa’s maize production could reach 14.73 million tonnes, while Bloomberg’s one suggested that the crop could reach 14.66 million tonnes – both of which are above the Crop Estimate Committee’s current estimate of 14.54 million tonnes.
Elsewhere, Kenya’s ministry of agriculture indicated that the country could receive 43 000 tonnes of maize from Mexico today. This will supplement domestic supplies following lower production due to drought. The country plans to import more over the coming months.
On the global front – this morning Chicago maize price was up 0.81% from levels seen at midday yesterday owing to unfavourable weather outlook for the US Midwest.
US maize farmers have made good progress with planting thus far. However, the current wet and cold conditions could cause damage in some areas. Already, there are reports of possible replanting in some states due to crop failure on the back of wet conditions.
The weather remains a key focus in the wheat market and the next few days could remain dry and warm across many parts of the country which will most likely delay wheat planting activity.
The major wheat producing province, Western Cape, will likely remain dry with limited activity in the fields. More concerning is that the province produces almost half of South Africa’s winter wheat crop, with the planting period stretching between April and July each year.
As indicated yesterday, the significance of the Western Cape province to national wheat production means that prevailing conditions in the province could lead to reduced area plantings. The National Crop Estimates Committee had already indicated as far back as last month, that wheat farmers intend to plant 2.4% less area than the previous season’s 508 365 hectares.
The significance of dryness in the Western Cape is also reflected on the dam levels which are critically low, estimated at 18.5% full in the week ending 22 May 2017, compared to 30.5% in the corresponding period last year.
Overall, some farmers continue to deliver the old-season wheat crop to commercial silos. In the week ending 19 May 2017, wheat deliveries were recorded at 821 tonnes, which is double the volume delivered in the previous week. This brought South Africa’s 2016/17 total wheat deliveries for “week 1 to 33” to 1.85 million tonnes.
On the global front – this morning, the Chicago wheat market was up 1.40% from levels seen at midday yesterday owing to fears that wet weather conditions in the US Midwest could damage the crop.
The weather and planting progress remain a key focus in US wheat market with wet conditions expected within the next eight days. The past few days have been wet and cold which might have negatively affected the crop. A clearer assessment of the crop will be released on Monday in the USDA’s crop progress report.
Wet conditions are not only limited to the US, but Canada as well, where heavy rainfall is also expected within the next eight days. This could delay wheat planting around the Prairies.
Harvest is in full swing across the country. The areas that have already harvested are reporting yields of above the 1.6-tonne-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.
The key focus of the market this week is tomorrow’s Crop Estimate Committee figures which will give an update of the size of the crop. Crop conditions have generally remained favourable since last month’s crop production 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 was up 0.21% from levels seen at midday yesterday also supported by unfavourable weather conditions across the US Midwest.
The weather and crop conditions in the US Midwest remain a key focus in the market. Although the USDA’s assessment reflected favourable conditions earlier this week, indicating that 53% of the intended 36.35 hectares already planted and 19% of that had emerged, continuous wet and cold conditions could slow the planting activity.
Going to the weekend, the weather forecast shows signs of continuous wet and cold conditions across the US Midwest. On the positive front, the USDA recently reported a sale of 126 000 tonnes of soybeans to an unknown destination.
In the Black Sea region, Ukraine had planted 1.8 million hectares of soybean by 22 May 2017, which is equivalent to 90% of the intended area for this season. Moreover, this is 10% ahead of the corresponding period last year. At the same time, Russia had planted 1.3 million hectares of land, which is equivalent to 60% of the intended area for this season’s crop.
The South African potatoes market retracted from the previous day’s higher levels with an increase in stocks weighing on the market. The price down 5% from the previous day, closing at R28.92 per bag (10 kg bag).
At the start of yesterday’s trade session, the stocks were at 786 362 bags (10 kg bags) which is 13% higher than the previous day. During the session, the market saw an increase in deliveries due to ongoing harvest activity, which subsequently led to an 18% uptick daily stocks to 924 690 bags (10 kg bags).
The fruit market ended the day mixed during yesterday’s trade session. The apple price was down 4% from the previous day, closing at R6.24 per kilogramme. This was mainly on the back of large stocks of 286 678 tonnes, which is 18% higher than the previous day.
Meanwhile, the bananas price gained 11% from the previous day due to strong buying interest, closing at R6.02 per kilogramme. However, this could be short lived due to large stocks of 236 375 tonnes – a 14% daily uptick.
The oranges market was up 3% from the previous day, closing at R2.39 per kilogramme, also supported by strong buying interest. Similar to the bananas market, these gains could be short lived due to a large stock of 462 061 tonnes – an 18% daily uptick.
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