Arithmus – Agri Limpopo

SA farmers increased summer crop area planting

Arithmus — Thu, 28 Feb 2019 06:22:18 +0000

The recently released first estimate for South Africa’s 2018/19 summer grains and oilseeds area plantings and production proved just how difficult it is to make predictions in a drier season. Fortunately, the numbers leaned more to the positive than the reduction that market analysts, ourselves included, previously feared. South African farmers planted 3.7 million hectares of all summer grains and oilseeds, up by 3% from the previous estimate, but still down by 3% from the 2017/18 season. From a yield perspective, the numbers are somewhat disappointing but not gloomier. For example, South Africa’s maize production is estimated at 10.5 million tonnes, slightly below the lower end of market expectations of 10.7 million tonnes. Given that South Africa consumes roughly 10.8 million tonnes a year, if the aforementioned harvest materialises, the country would have sufficient supplies in 2019/20 marketing year, accounting for an opening stock of 3.5 million tonnes which will add into the supplies.

To dive into more details, white maize area plantings were revised up to 1.3 million hectares from last month, while yellow maize area plantings were slashed from the previous estimate to 1.0 million hectares. This then boosted the production expectations to 5.2 million tonnes of white maize and 5.3 million tonnes of yellow maize. Although this will put South Africa in better footing than we previously feared, it is 16% lower than the 2017/18 harvest due to expectations of poor yields in some areas, following erratic rainfall at the start of the season.

Moreover, the 2018/19 soybean plantings were revised down from last month by 2% to 730 500 hectares. This is 8% lower than the 2017/18 production season. From a yield perspective, production could amount to 1.3 million tonnes, which is slightly below our expectations of 1.4 million tonnes, and 17% lower than the 2017/18 season. Sunflowers seed area plantings were revised up from last month, and that captures the increased activity after late rainfall in parts of the North West. Be that as it may, production is still set to be 16% less than the 2017/18 production season (Figure 1). Other small grains harvest, sorghum and dry beans could be up from last season.

Going forward, the weather will be an important determinate of whether South Africa receives a better harvest or not. At the moment, the outlook is favourable, with the South African Weather Service indicating a possibility of above-normal rainfall between February and April 2019 over most summer grains and oilseeds growing areas.

Click HERE to view the full report.

Sourced: Agbiz, Agribusiness Research

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SA food and non-alcoholic beverages inflation unchanged in January 2019

Arithmus — Wed, 20 Feb 2019 14:37:18 +0000

South Africa’s food and non-alcoholic beverages inflation remained unchanged in January 2019 at 3.0% y/y. But we think going forward there will be upside pressures which will emanate from a general increase in agricultural commodity prices, albeit having slowed somewhat from levels seen at the start of the year. The increases will, however, not be steep due to expectations of a decline in meat prices. We think South Africa’s food and non-alcoholic beverages inflation could average about 5% y/y in 2019.
Figures released this morning by Statistics South Africa show that food and non-alcoholic beverages inflation remained unchanged, at 3.0% y/y in January 2019. But the products price inflation movements within the basket were mixed. (See Figure 1). Bread and cereals; fish; vegetables; and non-alcoholic beverages, lifted from the previous month, whilst, meat; milk, eggs and cheese; sugar, sweets and desserts; and other foods price inflation slowed.
To highlight the key products – the deceleration in meat price inflation was partly driven by an increase in slaughtering activity, specifically sheep and cattle subsectors. South African farmers slaughtered 258 697 head of cattle in December 2018, up by 12% from the previous month and 8% from the corresponding period last year. In addition, about 547 952 head of sheep were slaughtered, up by 23% from the previous month, but still a percentage point lower than December 2017. Moreover, meat prices, which account for more than a third of the food inflation basket, are likely to be under pressure in the near term. This is due to expectations of an increase in domestic meat supplies as the recent outbreak of foot-and-mouth disease has led to a ban on South African red meat in key export markets.
In terms of grains and cereals, while the production season started on a bad footing and prices increased notably in January 2019, there has been some improvement in the recent weeks. Crop conditions have generally improved across the country following good rains in the first two weeks of February. The impact of improved weather conditions is illustrated by a widespread decline in SAFEX grain and oilseed prices from levels seen last month. Be that as it may, there is still uncertainty about the potential size of the maize crop. The estimates in the market currently vary between 10.5 and 11.3 million tonnes, which would make the country self-sufficient in the 2019/20 marketing year, when we account for an opening stock. There will be more clarity on this as the season progresses.

Click HERE for the full report.

Sourced: Agbiz, Agribusiness Research

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Weather and climate variability key factors underpinning SA agriculture

Arithmus — Mon, 18 Feb 2019 07:31:55 +0000

The widespread rainfall over the past two weeks has improved summer grain and oilseed crop conditions across the country. The precipitation outlook for the next couple of weeks is positive, according to a recent report from the South African Weather Service. All this has added pressure on SAFEX grains and oilseeds prices.

We also discuss weather shifts which have been a continuous challenge for farmers in terms of planning the planting periods.

Overall, what will be more important to keep an eye on in the near term in the SAFEX grains and oilseed market is the first production estimates data for a summer crop and oilseed which is due for release on 27 February 2019. Some crop observers such as the International Grains Council and the United States Department of Agriculture estimates that South Africa’s 2018/19 maize harvest could vary between 10.7 and 11.5 million tonnes.

From a winter grain perspective, the marginal downward revision of South Africa’s 2018/19 wheat production from December 2018 to 1.8 million tonnes does not change the fact that imports could fall by 36% year-on-year to 1.4 million tonnes. In the week of 08 February 2019, about 17% of this had already landed on South African shores.

Within the region, parts of Zambia, Zimbabwe and Malawi received good showers in the past couple of weeks, which led to a slight improvement in maize crop conditions. But, the outlook for Zimbabwe’s maize production remains bleak, while other countries are fairly positive.

Late last year, we presented Africa’s 2018/19 grain and oilseed production outlook, with estimates then pointing to a 154 million tonnes harvest, which was marginally lower than the previous season’s harvest of 155 million tonnes. The recent update shows a downward revision to 153 million tonnes, which is a percentage point lower than the previous season.

Click HERE for the full report.

Sourced: Agbiz, Agribusiness Research

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Slight improvement in SA agricultural jobs

Arithmus — Thu, 14 Feb 2019 10:10:54 +0000

Data released this morning by Statistics South Africa shows that the country’s primary agricultural sector created an extra 7 000 (+1%) jobs in the fourth quarter of 2018 to a total of 849 000 compared to the previous quarter, albeit remaining unchanged from the corresponding period in 2017. The quarterly uptick was boosted by increased activity in livestock, fisheries and forestry subsectors.

This was mainly spread across four provinces, namely; Western Cape, KwaZulu-Natal, Mpumalanga and North West, which showed 16% quarter-on-quarter (q/q), 13% q/q, 5% q/q and 4% q/q, respectively, improvement in employment. Meanwhile, the rest of the other provinces experienced a quarterly reduction.

About two-thirds of South Africa’s agricultural jobs are now in the field crop and horticultural sub-sectors. This suggests that if there is to be an increase in agricultural employment, these sub-sectors will have to be a priority from a policy perspective, and that is precisely what President Cyril Ramaphosa’s SONA prioritised.

From a regional perspective, given that the SONA noted a possibility to focus on underutilised land and communal land, KwaZulu-Natal, the Eastern Cape and Limpopo would potentially be focus areas for expansion and notable job creation in the South African primary agricultural sector. There is evidence that suggests that these provinces have vast tracts of unused arable land that could potentially boost the agricultural sector, and subsequently job creation. To achieve this, among things that are needed, is to bring underutilised land in communal areas and land reform farms into commercial production, improve land governance, and expand irrigation systems.

Overall, the near-term agricultural jobs prospects are positive despite the drier weather conditions in the western parts of South Africa, specifically North West and western Free State. These particular provinces mainly produce grains which are not as labour intensive as horticulture and other subsectors. Our optimism stems from improved agricultural conditions in the Western Cape, which accounts for 25% of South Africa’s agricultural jobs. The wine sector, which is currently at harvest time, is set to receive a slightly bigger crop compared to 2018, which will lead to increased activity. Moreover, KwaZulu-Natal, Mpumalanga, Eastern Cape, Limpopo and Gauteng have been receiving scattered showers lately and that could somewhat support agricultural activity in the first quarter of 2019.

Click HERE to view the full report.

Sourced: Agbiz, Agribusiness Research

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South Africa’s agricultural exports grew by 7% y/y in 2018

Arithmus — Mon, 11 Feb 2019 06:33:23 +0000

In 2018, South Africa’s agricultural exports grew by 7% y/y to US$10.6 billion, a record level in a dataset starting from 2001.

From a destination point of view, the African continent and Europe continued to be the largest markets for South Africa’s agricultural exports, collectively absorbing 66% of total exports in 2018, measured in value terms.

From a national policy perspective, in his 2019 State of the Nation Address, President Ramaphosa signalled that potential expansion in agricultural production would mainly be on export-oriented products. There is already a clear pathway for this initiative as South Africa is currently well-positioned in terms of export markets, and there is clarity about products that show a growing demand in the world market.

Although South Africa has an import substitution objective through its Industrial Policy Action Plan, the substitution of some of the key imported agricultural products is unlikely in the foreseeable future as South Africa does not have favourable agroecological conditions, specifically for the production of palm oil and rice.

From a production perspective, at first, it was the International Grains Council which placed its estimate for South Africa’s 2018/19 maize production at 10.7 million tonnes, the United States Department of Agriculture (USDA) has also joined in with an 11.5 million tonnes estimate. Both these estimates are well below 2017/18 production of 13.5 million tonnes (commercial and non-commercial production).

Although most areas of the country received rainfall in the past couple of weeks, there has not been any material improvements in summer grains conditions, particularly in the western parts of South Africa (more precisely North West and Free State).

Click HERE for the full report.

Sourced: Agbiz, Agribusiness Research

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SA agricultural machinery sales had a poor start into 2019

Arithmus — Fri, 08 Feb 2019 13:37:36 +0000

Figures released this morning by the South African Agricultural Machinery Association show that tractor sales fell by 26% y/y to 388 units in January 2019. This is the lowest sales volume for this particular month in a dataset starting from 2014, albeit unsurprising following robust sales in the past few months, as well as the fact that summer crop area planting for 2018/19 production season is down by 7% y/y, at 3.6 million hectares.
In terms of combine harvesters’ sales, January 2019 sales fell by 50% y/y to four units, which is also the lowest sales figure for the corresponding month in a dataset for the past five years. Similarly to tractors, some farmers made notable harvester sales over the past few months, hence there is a decline in last month’s sales. Moreover, the winter crop harvest process had generally been completed in major winter crop growing areas last month.
Overall, while we cannot deduce much about the agricultural machinery investment path from one month’s data, we suspect that the sales this year will generally be subdued due to expectations of a poor harvest on the back of unfavourable weather conditions and a reduction in area planted.

Click HERE for the full report.

Souurced: Agbiz. Agribusiness Research

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South African Agricultural Market Viewpoint: 04 February 2019

Arithmus — Mon, 04 Feb 2019 10:16:29 +0000

Agriculture has featured prominently in policy debates as one of the sectors that can potentially yield employment-creating growth in rural areas in South Africa. This is under the assumption that there could be potential expansion in area planted to the horticulture and field crop subsectors.

The focus areas for potential expansion, which we have also argued for are KwaZulu-Natal, the Eastern Cape and Limpopo which still have roughly 1.6 million to 1.8 million hectares of underutilised land.

But expansion in human settlement in most rural areas of the aforementioned provinces might hinder potential expansion of agriculture.

In terms of grains and oilseeds, the recent preliminary planting data provided an encouraging picture of higher than expected plantings, but it is important to stress that these are initial estimates, there could be a revision next month and our view still leans towards a possible downward adjustment.

In production seasons where grains and oilseeds plantings have occurred during optimal periods, the weather would be a key focus between October and February. But this time around, the planting process was quite late in some areas which means the need for rainfall will extend beyond the typical February pollination period.

On 01 February 2019, the South African Weather Service indicated a likelihood of above-normal rainfall conditions over the summer rainfall regions during early autumn (Feb-Mar-Apr).

Click HERE to view the full report.

Sourced: Agbiz, Agribusiness Research

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SA maize hectares could be revised down further in the coming months

Arithmus — Wed, 30 Jan 2019 13:40:32 +0000

Today the Crop Estimate Committee’s summer grains preliminary plantings data showed that the area planted to maize is 2.3 million hectares. About 1.3 million hectares is white maize, with 1.0 million hectares being yellow maize. This came as a surprise as we had projection of 1.98 million hectares. We suspect that the late plantings might have been more than anticipated following early January rainfall. While this a welcome development, it is important to stress that these are initial estimates, there could be a revision next month and our view still leans towards a possible downward adjustment.

The important question at the moment is, what size of maize crop will South Africa have in the 2018/19 production season? The estimates in the market currently vary between 10.4 and 12.0 million tonnes, which is plausible if one assumes the aforementioned area and average yields, although that is dependent on good rainfall which is still proving to be a challenge at the present moment in the western areas of the South African maize-belt.

Given that South Africa’s maize consumption is about 10.8 million tonnes a year, a harvest of at least 10.4 million tonnes or even as low as 8.0 million tonnes would still ensure sufficient supplies for the country, as there could be fairly large stocks of about 3.4 million tonnes at the beginning of the 2019/20 marketing year in May 2019. This is under the assumption that there could be minimal exports, which is yet to been seen as our neighbouring countries could experience a shortage. Essentially, today’s data does not change our food inflation outlook of a possible moderate uptick this year to an average of 5% despite the recent increase in maize prices (for more information on food inflation, see Consumers will feel the pinch … but not everywhere, 24 January 2019).

The other crop that came as a surprise was sunflower seed area plantings, at about 444 000 hectares down by 26% from the area planted in 2017/18 production year. Unlike the case of maize where we expected a decline in area planting, we had anticipated an uptick on sunflower seed following increased planting activity earlier this month. We foresee a possible upward adjustment when the Committee releases its revised estimates in February. Soybean plantings are estimated at 743 600 hectares, down by 6% from the previous season.

Click HERE for the full report.

Sourced: Agbiz, Agribusiness Research

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Western Cape drought had minimal impact on SA agricultural exports value

Arithmus — Mon, 28 Jan 2019 06:56:23 +0000

The impact of the recent Western Cape drought to South Africa’s 2018 agricultural exports is marginal when viewed in value terms. South Africa’s agricultural exports for the first 11 months of 2018 amounted to US$9.9 billion, which is 0.5% lower than 2017 exports.

The African continent and Europe continued to be the largest markets for South Africa’s agricultural exports, collectively absorbing 65% of total exports in the first 11 months of 2018, measured in value terms.

On Tuesday, 29 January 2019, the national Crop Estimate Committee will release its preliminary area planted estimate for 2018/19 summer grains and oilseeds. This will be the first official data since the release of the planting intentions data on 25 October 2018.

As indicated in our previous notes, we believe that the intended area of 2.44 million hectares for maize in the 2018/19 season could fall by 19% to 1.98 million hectares. This is slightly above Bloomberg’s consensus of 1.97 million hectares.

The International Grains Council recently revised its estimate for South Africa’s 2018/19 maize production down to 10.7 million tonnes, from 12.3 million tonnes in November 2018 (and 12.9 million tonnes in the 2017/18 production season).

From a global front, the 2018/19 global maize harvest could be the second largest on record, up by 3% y/y at 1.08 billion tonnes. This is according to recent data from the International Grains Council.

The 2018/19 global soybean production is set to increase by 6% y/y to 363 million tonnes on the back of expected large harvests in the US, Argentina, China, India, Ukraine, Russia and Uruguay, amongst others.

Click HERE to read the full report.

Sourced: Agbiz, Agribusiness Research

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The 2018/19 maize production prospects of South Africa’s neighbouring countries

Arithmus — Mon, 21 Jan 2019 09:18:01 +0000

Zimbabwe is likely to experience a shortage of maize supplies in the 2019/20 marketing year due to an expected poor harvest.

Zambia and Malawi’s maize harvest could fall double-digit from the 2017/18 production season, but the countries could still be self-sufficient in the 2019/20 marketing year (corresponds with 2018/19 production season), supported by fairly large stocks from the previous year.

Back in home soil, the western maize production areas of South Africa are now critically dry once again because of the hot and dry weather and relatively limited soil moisture leading into the week of 17 January 2019. The impact of this was reflected in maize prices which rallied to levels over R3 000 per tonne, particularly white maize which is planted in the western regions.

An important date to keep an eye on is 29 January 2019 when the national Crop Estimate Committee releases the preliminary planting data for South Africa’s summer grains and oilseeds.

The weather will continue to play a key role in the South African agricultural markets in the next three months. Thereafter, the focus will shift to winter crop producing areas. The near-term precipitation prospects are constructive (see page 6).

At the end of the week of 17 January 2019, SAFEX wheat prices were up by 17% from levels seen in the corresponding period last year, trading around R4 379 per tonne. This was driven by high international wheat prices and the relatively weaker domestic currency.

Overall, the tough production conditions in the grains and oilseeds subsectors will most likely add upward pressure on consumer prices, but we do not expect a notable uptick in headline food price inflation, as lower meat prices will somewhat overshadow the potential upswings.

Click HERE to view the full report.

Sourced: Agbiz, Agribusiness Research

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