Agbiz Morning Market Viewpoint on Agri-Commodities: 30 March 2017

Wheat:

After months of dry and warm conditions in the Western Cape province, the weather forecast shows signs of possible showers next week. The week of 06 April 2017 could see showers that vary between 25 and 60 millimetres. This adds to an already positive sentiment that was signalled by the South African Weather Services, indicating is a likelihood of above-normal rainfall for late autumn to mid-winter (June-July-August). Overall, this will be beneficial for winter wheat growing areas.

 

The forecast rainfall will also improve the dam levels that are critically low. Recent data from the department of Water and Sanitation shows that in the week that ended on the 27 March 2016, the Western Cape average dam levels were at 26% full, which is 6% lower than the corresponding period last year.

 

Worth noting, however, is that there are still some risks in the long run. The Weather Services recently indicated that there is the possibility of an El Niño event late this year. This could bring a dry spell across the country and negatively affect the crops.

 

While it would be premature to provide any certainty on this outlook, it is worth noting that the Australian Bureau of Meteorology concurs with our local Weather Services and has noted a 50% chance of El Niño development later in 2017. We will monitor the developments over the coming months.

 

Maize:

South African farmers continue to deliver the maize crop to commercial silos under the 2016/17 marketing year. In the week ending 24 March 2017, total maize producer deliveries were recorded at 76 354 tonnes (79% was white maize and 21% was yellow maize). This is 2% lower than the volume delivered the previous week.  The total maize producer deliveries for “week 1 to 47” currently stand at 6.87 million tonnes.

 

On the global front – this morning Chicago maize price was down by 0.56% from the level seen at midday yesterday due to large global maize supplies. Overall, the focus is on tomorrow’s data which will present US 2017/18 maize plantings prospects. Most analysts expect a decline of 3.00 million acres from the previous season to 90.97 million acres.

 

Elsewhere, weather forecast in Brazil shows a possibility of rainfall this week, which is supportive of the safrinha maize crop (second season maize crop).

 

Soybean:

The South African soybean market gained support during yesterday’s trade session and closed in positive territory. This was mainly on the back of a weaker Rand against the US Dollar.  With that said, these gains could be short-lived due to expectations of large supplies . Moreover, the expected recovery in soybean productions means that South Africa could be a net exporter of soybean this season, with exports estimated at 5 000 tonnes.

 

In global markets – this morning Chicago soybean price was down by 0.92% from the level seen at midday yesterday due to prospects of large global supplies and expectations of an increase in US soybean plantings in the new season.

 

The focus of the market is tomorrow’s USDA report which will show US 2017/18 soybean sowings.  A number of analysts expect the soybean area to increase by at least 6% from the previous season to levels above 35 million hectares. Alledale Inc and FC Stone have pencilled 35.9 million hectares and 35.3 million hectares for US 2017/18 soybean plantings, respectively. This is likely to be at the expense of maize area plantings.

 

Elsewhere, weather conditions in Brazil have changed significantly overnight. It currently shows a possibility of rainfall across maize areas of the country.  This holds a risk of slowing harvest processes and also disrupt the logistics activities. On the 29th March 2017, Brazil had harvested 75% of its soybean crop, which is still ahead of the corresponding period last year. Brazil’s 2016/17 soybean production is estimated at 108.0 million tonnes, which is 12% higher than the previous season.

 

RSA Potatoes:

Yesterday the South African potatoes market saw notable losses owing to higher stock levels.  At the start of the session, the stocks were estimated at 1 003 670 bags (10 kg bags), up by 18% from the previous day, due to ongoing harvest activity. 

 

Moreover, during the session, the market saw further increases in deliveries and that led to an 11% uptick in deliveries to 1 109 732 bags (10 kg bags).

 

SAFEX Beef:

Yesterday the SAFEX beef market saw a quiet day, with the price unchanged from the previous day’s level, closing at R44.50 per kilogramme. This was due to lower volumes traded on the stock exchange.

 

With that said, there is some bullish sentiment in the beef market which comes from softer slaughtering activity as farmers continue restocking their herds. This follows after recent rainfall led to a notable improvement in grazing fields, as well as relatively lower feed costs. Data from the Red Meat Levy Admin shows that in January 2017, South African farmers slaughtered 227 483 head of cattle, which is 28% lower than the previous month.

 

In the week ending 13 March 2017, slaughtering weekly activity was at 13 013 head of cattle which is 19% lower than the corresponding period last year .

 

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