Dryness across winter wheat growing areas could lead to downward revision of current national crop estimate

Highlights in today’s morning note

 

Maize:

 

Although the focus in the South African maize market is shifting towards the new production season, some farmers continue to deliver old season maize to commercial silos. The total maize deliveries were reported at 29 753 tonnes in the week ending 29 September 2017, which is a 22% decline from the previous week’s deliveries. About 58% of this was white maize, with 42% being yellow maize.

 

Overall, South Africa’s 2017/18 total maize deliveries for “week 1 to 22” currently stand at 14.69 million tonnes. Of this total, 60% is white maize with 40% being yellow maize.

 

The most recent data from the South African Supply and Demand Estimates Committee shows that the country’s 2017/18 total maize supplies are at 17.1 million tonnes. This figure includes opening stock of 1.0 million tonnes, as well as commercial deliveries of 16.1 million tonnes. Overall, this is 40% higher than the previous season’s supplies.

 

The Committee does not expect any imports this season, whereas exports are set to reach 2.2 million tonnes. One of the key reasons for a relatively lower export estimate is an anticipated weak demand for white maize in the global market. Of the 2.2 million tonnes, white maize exports are set to only reach 870 000 tonnes (or 40%).

 

In essence, this could lead to a large carry-over stock of roughly 4.4 million tonnes, compared to 1.1 million tonnes in the 2016/17 season. These large stocks could keep maize prices under pressure for some time.

 

Wheat:

 

The most recent weather updates show a possibility of continued dryness across the winter wheat growing areas of the Western Cape within the next two weeks which is not conducive for the crop. More concerning is that this could worsen the crop conditions and thus lead to a downward revision of the current national crop estimate of 1.7 million tonnes.

 

In terms of dam levels – the recent update for the week ending 02 October 2017 shows that dams averaged 36% in the Western Cape province, unchanged from the previous week, but 26% lower than the corresponding period last year.

 

The most recent data from the South African Supply and Demand Estimate Committee suggests that the country’s wheat imports could increase by 94% year-on-year in the 2017/18 season to 1.8 million tonnes due to expected lower supplies.

 

Under this scenario, the committee assumes that production could reach 1.7 million tonnes. Therefore, in an event that production declines further, as we expect, the import estimate of 1.8 million tonnes could be revised up over the coming months. We will closely monitor these developments in order to ascertain the impact on prices.

 

Soybeans:

 

South Africa’s soybean supplies could reach 1.32 million tonnes in the 2017/18 season . This includes an opening stock of 84 792 tonnes for this season, commercial deliveries of 1.28 million tonnes and a small volume of imports. This is 27% higher than the previous season’s supplies due to large deliveries.

 

Moreover, the total domestic demand is projected at 1.16 million tonnes, up by 17% from the previous season. This includes 950 000 tonnes of soybean for crush for oil and meal (oil cake), with the remainder set to be utilised in the production of other products.

 

This also includes a 30 000 tonnes for the export market, which is well above the 2016/17 season’s exports of 6 745 tonnes. Last month, the country exported 99 tonnes of soybean, all went to Mozambique. In total, South Africa’s 2016/17 soybean total exports currently stand at 411 tonnes.

 

Apart from the aforementioned developments, the calendar for this week is light, and it is an off-season period with not much activity in the fields. The market performance will largely be guided by the Chicago soybean price and domestic currency movements within the next few days.

 

Sunflower seed:

 

The most recent data from the South African Supply and Demand Estimates Committee shows that the country’s sunflower seed supplies for the 2017/18 season could reach 1.05 million tonnes. This includes an opening stock of 163 086 tonnes for this season, commercial deliveries of 874 595 million tonnes and a small volume of imports. Overall, this is 18% higher than the previous season.

 

Moreover, the domestic demand is projected at 819 100 tonnes, up by 14% from the previous season. This includes 800 000 tonnes of sunflower seed for crush for oil and meal (oil cake), with the remainder set to be utilised in the production of other products.

 

This also includes a 300 tonnes for the export market, which is well above the 2016/17 season’s exports of 205 tonnes. So far, the country has only exported 121 tonnes of soybeans to regional markets.

 

RSA Potatoes:

 

The South African potatoes market lost ground in yesterday’s trade session with the price down by 1.27% from the previous day, closing at R46.70 per pocket (10kg). These losses were largely on the back of a recovery in stocks to 567 467 pockets (10kg bag) at the start of the trading session.

 

Moreover, during the session, the market saw an uptick in deliveries as harvest activity picks up after a quiet weekend. This subsequently led to a 12% increase in daily stocks to 636 226 pockets (10kg bag).

 

RSA Fruit:

 

The fruit market also ended the day mixed in yesterday’s trade session. The prices of apples and bananas were down by 11% and 6% from the previous day, closing at R6.74 per kilogramme and R5.99 per kilogramme, respectively. This was mainly on the back of large stocks in both apples and bananas markets.

 

Meanwhile, the price of oranges increased by 4% from the previous day, closing at R5.58 per kilogramme. These gains followed a 12% decline in daily stocks to 98 063 tonnes.

Click below to read more recent reports by Wandile Sihlobo.

Agbiz Morning Market Viewpoint on Agri-Commodities – 05 October 2017