Agbiz Morning Market Viewpoint on Agri-Commodities: 20 July 2017.

Highlights in today’s morning note

Maize:

The harvest process is in full swing across the country. Farmers delivered 1.09 million tonnes of maize to commercial silos in the week ending 14 July 2017. This is 2% lower than the previous week’s deliveries. About 66% of this was white maize and 34% was yellow maize.

This brought South Africa’s 2017/18 total maize deliveries for “week 1 to 11” to 10.6 million tonnes. Of this total, 57% is white maize and 43% is yellow maize.

The forecast dry and warm weather conditions in the maize belt within the next two weeks could add momentum to the harvest process.

On the global front – This morning the Chicago maize market was pulled back from higher levels seen in the previous day’s session, despite lingering fears for US crops from forecasts for continued dry weather across the Midwest.

Wheat:

The weather models show a possibility of continued dryness in the Western Cape province within the next two weeks. This is with the exception of coastal areas which could potentially receive light showers. The impact of the current dry weather conditions on crops will be reflected in the first production estimates data which is due for release next month, 29 August 2017. 

From there onwards, there will be a clear picture of whether South Africa will require large imports in the next season or will maintain the typical average annual imports of 1.5 million tonnes.

Some farmers continue to deliver the old-season wheat crop to commercial silos. In the week ending 14 July 2017, wheat deliveries were recorded 1 303 tonnes, which is 25% lower than the previous week’s volume. Overall, South Africa’s 2016/17 total wheat deliveries for “week 1 to 41” currently stand at 1.86 million tonnes.

On the global front – This morning the Chicago wheat price was down by 1.39% from levels seen at midday yesterday owing to large global supplies and stronger US Dollar against major currencies.

There are still lingering concerns that persistent dryness could damage the spring wheat crop in the US Midwest. That said, some areas are showing signs of improvement with prospects of light scattered showers, particularly in the east and southern areas.

Soybean:

With the harvest process complete, there is not much happening in the fields. The focus is on this month’s production estimates update which is due for release on Wednesday, 26 July 2017. The current estimate is 1.34 million tonnes, which is 81% higher than the previous season.

The harvest process finished on positive footing with exceptional yields reported in many areas. Therefore, we do not expect any meaningful adjustments in the current estimate, if there are any adjustments, it will most probably be an upward revision.

As noted in our previous note, these developments mean that South Africa could be a net exporter of soybeans this season (albeit being a net importer of soybean oil cake and oil). The exports are expected to reach 30 000 tonnes this season, from 6 745 tonnes in the 2016/17 season.

In global markets – This morning Chicago soybean price was up by 0.20% from levels seen at midday yesterday owing to lingering concerns about dryness in the US Midwest.

The weather remains a key focus in the US soybean market. Recent weather forecasts show some signs of improvement across the east and southern parts of the Midwest. If this forecast rainfall materialises, it could bring relief as crops urgently need moisture at this stage of development (approaching pollination stage).

The USDA forecasts a 1% decline in US 2017/18 soybean production to 115.9 million tonnes. This is partly due to expected lower yields in some areas on the back of drier weather conditions. 

RSA Potatoes:

The South African potatoes market lost ground in yesterday’s trade session with the price down by 3% from the previous day, closing at R26.31 per kilogramme. These losses were on the back of relatively large stocks of 995 316 bags (10kg bags) at the start of the session.

During the session, the market saw a further an increase in deliveries on the back of ongoing harvest activity. This subsequently led to an 8% uptick in stocks to 1.07 million bags (10kg bags).

RSA fruit:

Yesterday the fruit market ended the day mixed. The apple and bananas prices were down by 2% from the previous day, closing at R6.75 per kilogramme and R7.21 per kilogramme, respectively. This was due to large stocks.

Meanwhile, the oranges price was up by 13% from the previous day, closing at R3.15 per kilogramme. This was largely driven by strong buying interest. However, these gains could be short lived due to large stocks of 296 156 tonnes, up 38% from the previous.

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