Highlights in today’s morning note
The eastern, central and northern parts of South Africa could receive rainfall of between 16 and 50 millimetres within the next eight days (figure 1). This could benefit the summer crop growing areas. Meanwhile, a large part of the Western Cape province could remain dry and cool over the observed period which is not conducive for winter crops.
Apart from the weather, lower maize prices could present challenges for farmers, particularly the white maize producing regions. The large supplies from the 2016/17 production season could keep white maize prices under pressure for some time.
As a consequence, there are talks in the market that some farmers could reduce the area planted to white maize and switch to other crops such as oilseeds and yellow maize due to price competitiveness. More information on this will be available when the National Crop Estimate Committee releases its “intentions-to-plant” data next week, 26 October 2017.
On the global front – The expected rainfall across the north-eastern parts of the US Midwest could slow the harvest activity within the next eight days. At the beginning of this week, about 28% of the US maize crop had already been harvested, which is 16-points behind the corresponding period last year.
Overall, the USDA forecasts the country’s 2017/18 maize production at 363 million tonnes, down by 6% lower than the previous season’s harvest due to a decline in acreage and expected lower yields in some regions.
The weather forecasts show a possibility of the dry and cool conditions across the central and northern parts of the Western Cape province within the next two weeks. This is with the exception of the coastal areas which could receive light showers. On balance, the persistent dryness could potentially worsen the crop conditions, which are already not in good shape in large parts of the province.
More emphasis is placed in the Western Cape because the province produces almost half of South Africa’s wheat crop. This season’s national winter wheat crop is estimated at 1.7 million tonnes, down by 11% from the previous season. The National Crop Estimate Committee will release an updated estimate on 26 October 2017.
There are still no new developments on the wheat import tariff front. After triggering to R909.99 per tonne on 12 September 2017, the wheat import tariff again triggered to R716.33 per tonne on 10 October 2017. Both of these rates have not yet been published in the government gazette.
The wheat import tariff is still R752.40 per tonne. This means that the tariff will first increase to R909.99 per tonne, then be revised down to R716.33 per tonne. The timeframe for these adjustments is unclear at the moment.
The weather models show a possibility of rainfall in the eastern parts of the country within the next two weeks, which should improve soil moisture and benefit the new season crop. With that said, this could delay plantings but that is not much of an issue as the optimal planting window only closes at the beginning of December.
As we set out in yesterday’s note, the calendar for this week is light with no major data releases, the market performance will largely be guided by the Chicago soybean price and domestic currency movements.
In global markets – This morning the Chicago soybean prices lost ground with the price down by 0.60% from the previous day owing to expected large supplies.
The USDA forecasts the US 2017/18 soybean production at 120 million tonnes, up by 3% from the previous season due to an increase in acreage, as well as higher yields. However, a large part of the crop is not in good shape. Only 61% of the crop is rated good/excellent, which is 13-points lower than the same period last year.
The forecast rainfall in the north-eastern part of the Midwest could slow the soybean harvest process. At the beginning of last week, 49% of the US soybean had already been harvested, which is 10-points behind the corresponding period last year.
The South African potato market started the week on a negative footing due to large stocks of 986 753 pockets (10kg bag). The price was down by 5% from the previous trading session, closing at R45.22 per pocket (10kg).
However, during the session, the market saw a continued increase in commercial buying interest, coupled with a decline in deliveries on the back of slow harvest activity over the weekend. This subsequently led to a 27% drop in daily stocks to 718 115 pockets (10kg bag).
The fruit market saw widespread losses in yesterday’s trade session due to large stocks and increase commercial selling. The prices of apples and bananas were down by 9% and 4% from the previous day, closing at R6.83 and R6.19 per kilogram, respectively. These losses followed a 94% and 3% increase in stocks of apples and bananas to 263 592 tonnes and 223 956 tonnes, respectively.
The oranges market lost 27% from the previous day, closing at R4.33 per kilogram due to strong commercial selling. However, this could soon be reversed due to lower stocks of 40 704 tonnes.
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