Highlights in today’s morning note
After the National Crop Estimate Committee (CEC) revised South Africa’s maize production forecast to 14.54 million tonnes in April, it has further lifted its forecast to 15.63 million tonnes – making this season’s crop the largest on record.
White and yellow maize production estimates were revised up by 9% and 4% from the previous estimates to 9.47 million tonnes and 6.16 million tonnes, respectively. This is largely on the back of an increase in area planted, as well as expected higher yields on the back of favourable weather conditions.
South Africa’s average annual maize consumption is 10.5 million tonnes. Therefore, the uptick in production means that the exportable maize surplus could at least reach 3.00 million tonnes (52% white maize and 48% yellow maize).
On the one hand, yellow maize could easily find buyers in the global market, while white maize could face lower demand on the other. White maize exports typically go to African markets, but the dynamics have changed dramatically across the region this season.
Zambia, Malawi and Zimbabwe are expecting notable improvements in domestic maize production. This will not only limit South Africa’s export opportunities to these respective countries but will also present competition to other African markets. In East African markets that currently need maize such as Kenya, Burundi and Tanzania, the genetically modified (GM) seed restrictions remain a key barrier. Thus, presenting an opportunity to non-GM maize producers such as Zambia and Malawi, as they have recently lifted the maize export bans. About 85% of South Africa’s maize production is grown with GM seeds.
On the global front – this morning Chicago maize price remained unchanged from levels seen on Friday, with US markets closed for Memorial Day holiday. Overall, weather, planting progress and conditions remain a key focus in the US maize market.
The weather remains a key focus in the domestic wheat market and this week could remain dry and warm across many parts of the country which will most likely delay winter wheat planting activity in the Western Cape province. Areas that have already planted could see damage to the newly emerged crops. 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.
From a data perspective – South Africa’s monthly wheat consumption reached 246 351 tonnes in April 2017, down 8% from the previous month, but up 1% from April 2016.
At the same time, South Africa’s wheat ending stocks were at 1.3 million tonnes, down 11% from the previous month and down 3% from April 2016.
From the global perspective – The International Grains Council forecasts 2016/17 global wheat production at 754 million tonnes, which is 2% higher than the previous season. The key drivers of this production are the uptick in Russia, the US, Australia, Canada, Argentina and Kazakhstan. The 2016/17 global wheat ending stocks are estimated at 241 million tonnes, which is a 7% annual increase.
Looking ahead, the Council forecasts 2017/18 global wheat production at 736 million tonnes, which is a 2% annual decline. This is due to expected crop declines in Russia, US, Canada, Australia, Ukraine and Argentina.
In its monthly review, the CEC left South Africa’s soybean production forecast unchanged at 1.23 million tonnes. This is 66% higher than the previous season and also the largest crop on record. Harvest is in full swing across the country. The areas that have already harvested are reporting yields that 30% higher than the 1.6-tonne-per-hectare average, which supports the view of a possible record crop this season.
This expected uptick in production means that South Africa might see minimal imports this season, which will be a remarkable improvement following 2016/17 imports of 271 098 tonnes. The country imported 1 193 tonnes of soybean in April 2017, all from Zambia. This placed South Africa’s 2017/18 soybean imports at 7 352 tonnes.
From an export perspective – South Africa exported 127 tonnes of soybean in April 2017. About 99% of this went to Mozambique and 1% to Botswana. If the production forecast of 1.23 million tonnes materialises, South Africa’s exports could reach 65 000 tonnes.
South Africa’s soybean consumption (crushed oil and cake) reached 60 696 tonnes in April 2017, up 78% from the previous month due to positive crushing margins. Using an estimate of 2.2 million tonnes of South Africa’s soybean crushing capacity, which then translates into 183 333 tonnes per month, the country utilised only 33% of its soybean processing capacity in April 2017.
Also, worth noting is that South Africa’s soybean ending stocks were at 673 722 tonnes in April 2017, up four folds from the previous month due to an increase in deliveries on the back of ongoing harvest. In addition, this is 45% higher than the corresponding period last year.
The CEC left the sunflower seed production estimate unchanged from the previous one – at 853 470 tonnes, which is 13% higher than the previous season. Harvest is underway in many parts of the country, with yields reportedly at levels of 1.4 tonnes per hectare in certain areas of North West Province, which is relatively above South Africa’s average sunflower seed yield of 1.2 tonnes per hectare.
If this production forecast materialises, South Africa might not need any sunflower seed imports this season, which will be a notable improvement from 2016/17 season’s imports of 70 643 tonnes. The country could be a net exporter of 200 tonnes.
South Africa exported 7 tonnes of sunflower seed to Botswana in April 2017. This brought South Africa’s 2017/18 sunflower seed exports to 50 tonnes. About 70% went to Swaziland, 16% to Namibia and 14% to Botswana.
South Africa’s sunflower seed consumption (crushed oil and cake) fell by 39% in April 2017 to 37 309 tonnes, with most crushers/processors favouring soybeans due to improved profitability.
Also worth noting is that South Africa’s sunflower seed ending stocks were recorded at 339 464 tonnes in April 2017, up by 48% from the previous month and up four folds from the corresponding period last year due to a large crop.
The South African potatoes market ended the week in negative territory with the price down 0.03% from the previous day, closing at R28.91 per bag (10 kg bag). These losses were mainly on the back of large stocks.
At the start of the session, the stocks were at 924 690 bags (10 kg bags) which is 18% higher than the previous day. During the session, the market saw an increase in deliveries due to ongoing harvest activity, which subsequently led to a 20% uptick daily stocks to 1 108 745 bags (10 kg bags).
The fruit market ended the day mixed during Friday’s trade session. The apple price was up 3% from the previous day, closing at R6.62 per kilogramme. This was mainly on the back of 10% decline in daily stocks to 172 927 tonnes.
The oranges market gained 6% from the previous day, closing at R2.24 per kilogramme. These gains were also on the back of strong buying interest, as well as a 21% decline in daily stocks to 522 395 tonnes.
Meanwhile, the bananas market lost 1% from the previous day, closing at R5.72 per kilogramme. This came on the back of a 13% uptick in daily stocks to 203 438 tonnes.
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