Agbiz Morning Market Viewpoint on Agri-Commodities: 24 May 2017.

Highlights in today’s morning note

Wheat:

Western Cape an exception amid signs of recovery in agriculture: Business Day, 24 May 2017

With winter wheat planting activity underway, weather remains a key focus in South Africa’s wheat market. The weather forecast for the next two weeks shows a possibility of dry and warm conditions throughout the country which will delay wheat planting activity. 

The seriousness of the dry conditions is such that the Western Cape government has declared the entire province a disaster. 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.

Given the significance of the Western Cape to national winter crop production, prevailing conditions in the province suggest that winter crop area plantings could possibly fall substantially.

For instance, the National Crop Estimates Committee (CEC) had already indicated as far back as last month, that wheat farmers intend to plant 2.4% less area than the previous season’s 508 365 hectares. With recent events of sustained dryness, there are reports that early planted wheat in parts of Swartland has dried off. This could further re-enforce the already declining planting intentions over the course of the season.

From a trade perspective, South Africa imported 17 268 tonnes of wheat in the week ending 19 May 2017, about 95% from Poland and 5% from the Czech Republic. This brought South Africa’s 2016/17 total wheat imports to 469 657 tonnes, which is 32% of the seasonal import forecast (1.5 million tonnes).

Although a net importer of wheat, South Africa continues to export wheat to regional markets. The total exports reached 5 290 tonnes in the week ending 19 May 2017, all went to regional markets. South Africa’s 2016/17 total wheat exports currently stand at 76 381 tonnes. About 29% of this went to Zimbabwe, 9% to Namibia, 17% to Botswana, 21% to Lesotho, 4% to Mozambique, 18% to Zambia and 2% to Swaziland.

Maize:

Harvest is underway in many parts of the country. The expected warm conditions within the next two weeks should accelerate the crop drying process, which is particularly supportive for those areas that planted late.

Overall, the key focus this week in the maize market is crop production estimates data which is due for release on Friday. There is a lot of optimism in the market with some analysts suggesting that the crop could be revised up to 15 million tonnes. 

If this happens, it would not come as a surprise as reports from regions that have harvested suggest that farmers are getting yields which are well above the national average of 4.5 tonnes per hectare and market expectations. Last month, the National Crop Estimate Committee pegged South Africa’s average maize yield at 5.5 tonnes per hectare, which would be the highest on record.

South Africa’s maize exports are gaining momentum. Exports reached 9 612 tonnes in the week ending 19 May 2017. About 72% of this was white maize and 28% was yellow maize. The 2017/18 maize exports currently stand at 34 952 tonnes, which is just 1% of the seasonal export forecast (2.7 million tonnes).

As highlighted in yesterday’s note, this year’s maize exports will be the highest in two decades. The last time South Africa exported a volume of maize larger than the expected 2.7 million tonnes was in 1994/95 season – a volume of 4.7 million tonnes. The second biggest volume since then was in 1996/97 season – a 2.6 million tonnes, followed by 2.2 million tonnes in 2005/06 season.

Sunflower seed:

Sunflower seed harvest process is in full swing with farmers around the North West province reporting yields of 1.4 tonnes per hectare, which is relatively above South Africa’s average sunflower seed yield of 1.2 tonnes per hectare. If areas that are yet to be harvested within North West province also get yields at levels of 1.4 tonnes per hectare, then the expected 853 470 tonnes could materialise. The North West typically produces about a third of South Africa’s sunflower seed.

The weather forecast has changed drastically from what we reported yesterday. It currently shows a possibility of drier conditions across the country, which should accelerate the harvest process. With crops still drying off in the fields, the warm weather conditions will support harvesting in areas that planted late.

Earlier this month there were fears of possible frost which could have negatively affected the late planting areas. However, the past few weeks have turned out differently, with warm and favourable weather conditions.  If the warm conditions persist until the end of the month as forecasts suggest, then this season should finish off well.

Potatoes:

The South African potatoes market saw substantial gains during yesterday’s trade session with the price up 17% from the previous day, closing at R30.50 per bag (10 kg bag). This was mainly on the back of lower stocks, which were at 694 473 bags (10 kg bags) at the start of yesterday’s trade session, down 36% from the previous day.

With that said, during the session, the market saw an uptick in deliveries due to an increase in harvest activity as people returned to work after a weekend. Subsequently, the daily stocks recovered by 13% to 786 362 bags (10 kg bags).

SAFEX Beef:

It was again another quiet day in the SAFEX beef market due to limited participation in the stock exchange. That said, the market sentiment in the beef market is slightly bullish due to easing slaughter activity, as farmers continue to restock their herds after a drought spell.

The most recent data from the Red Meat Levy Admin shows that African farmers slaughtered 238 097 head of cattle in March 2017, which is 6% lower than the corresponding period last year.

SA Fruit:

The fruit market saw widespread losses during yesterday’s trade session owing to large stocks. The apple price was down 7% from the previous day, closing at R6.48 per kilogramme. This comes after daily stocks increased by 36% to 243 743 tonnes.

The bananas price lost 25% from the previous day, closing at R5.42 per kilogramme due to large stocks of 207 102 tonnes – a 43% daily uptick.

Lastly, the oranges market was down 6% from the previous day, closing at R2.31 per kilogramme owing to relatively large supplies of 390 641 tonnes compared to levels of 300 000 tonnes at the start of the previous week.

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