Farmers’ assessments point to an improvement in soybean soil moisture

Highlights in today’s morning note

 

Maize:

The South African maize crop is still at growing stages that require moisture, particularly in the late planted areas in the western sections of North West and Free State provinces. Following a dry and cool Easter weekend, the maize-belt could receive light showers this week which should further improve soil moisture and crop conditions. Moreover, the week of 18 April 2018 promises higher rainfall of over 30 millimetres across the maize growing areas of the country.

These developments bode well with South Africa’s 2017/18 total maize production, which is currently estimated at 12.42 million tonnes, down by 26 percent from last season’s record harvest . Importantly, this is higher than South Africa’s annual maize consumption of roughly 10.50 million tonnes.

To recap from our previous note, the expected 12.42 million tonnes of maize harvest coupled with expected large carryover stock underpin the view that South Africa could remain a net exporter of maize in the 2018/19 marketing year which starts on 01 May 2018, with exports estimated at 2.2 million tonnes. This is slightly below the current marketing year export forecast of 2.4 million tonnes.

The aforementioned estimates are commercial production, South Africa’s subsistence farmers’ maize production is estimated at 770 000 tonnes, up by 5 percent from the 2016/17 production season according to recent data from the United States Department of Agriculture.

Overall, a large carry-over stock from the current marketing year, sluggish exports and a relatively large domestic production is suppressing domestic maize prices and will continue over the medium term.

 

Wheat:

The South African wheat market is currently at the tail-end of the off-season and is now entering the new season as planting is set to commence next month. The rainy season, which starts at the end of this month, promises to be much better than the previous one. The South African Weather Service indicated that between April and June 2018, parts of the south-western cape regions could receive above-normal rainfall.

Over the weekend, the major winter wheat production province, Western Cape, received light and scattered showers. While a welcome development, this did not make a meaningful improvement on dam levels, which remain critically low, estimated at 18 percent in the week of 26 March 2018, down by a percentage point from the previous week and 8-percentage points from the corresponding period last year.

Looking ahead, the next eight days could bring dry and cool weather conditions across the Western Cape province, with the exception of the coastal areas which should receive light showers. Light rainfall of about 16 millimetres should, however, return in the week of 18 April 2018.

Above all, the near-term weather expectations indicate above-normal rainfall in winter crop growing areas, which include the next three months that fall within the critical planting period. The farmers’ intentions to plant data for winter wheat will be released on 25 April 2018.

On the global front, the United States Department of Agriculture (USDA) forecasts a 3 percent increase in 2018 all-wheat plantings to 47.30 million acres. This includes winter wheat, durum wheat and spring wheat area plantings. This could boost the US wheat production in the 2018/19 production season.

 

Soybeans:

One factor that we are watching closely over the long weekend is weather as it could still affect the soybean crop, both late-planted and on-time-planted areas. In the last week of March 2018, there were fears that the rainfall could cause crop damage, as a large part of the crop has already matured.

Fortunately, farmers’ assessments point to an improvement in soil moisture, with no crop damage, which is conducive for the late-planted crop. The long Easter weekend brought a breather, as a number of areas experienced cool and drier weather conditions. The rainfall will, however, return within the next eight days, but could be light and possibly not lead to any crop damages.

Overall, these developments support the National Crop Estimates Committee’s view of a new record level of 1.39 million tonnes of soybean production. Moreover, this is 6 percent higher than the harvest in the 2016/17 production season. This improvement in production is underpinned by an increase in area planted and expectations of fairly good yields, about 1.77 tonnes per hectare.

As previously highlighted, the expected large harvest could lead to a decline in seasonal imports to levels around 20 000 tonnes. This will be a remarkable improvement following imports of 28 000 in 2017/18 marketing year and 271 098 tonnes in the 2016/17.

Furthermore, this could lead to a decline in soybean oil imports. In 2017, South Africa imported 191 255 tonnes of soybean oil down by 5 percent from the previous season. The leading suppliers were Argentina, Netherlands and Spain, amongst others. South Africa’s soybean oilcake imports could also decline. We estimate that 2018 soybean oilcake imports could decline by 17 percent from last year to 458 992 tonnes. This is a notable improvement from imports of close to a million tonnes in 2010.

 

Sunflower seed:

Although lifted by 2 percent from the initial estimate to 749 205 tonnes, South Africa’s 2017/18 sunflower seed production is still 14 percent lower than the previous season’s harvest. This is due to a 5 percent decline in area planted to 601 500 hectares, as well as expected lower yields. The yields are estimated at 1.25 tonnes per hectare, compared to 1.37 tonnes per hectare in 2016/17 production season.

These production dynamics suggest that South Africa could remain a net importer of sunflower seeds. The Supply and Demand Estimates Committee forecasts South Africa’s sunflower seed imports at 500 tonnes in the 2018/19 marketing year, down by 10 percent from the previous season. The decline in mainly on the back of the relatively large opening stock, which boosted the supplies.

It is also worth highlighting that South Africa could remain a net importer of sunflower seed oil (crude). Over the past five years, South Africa’s sunflower oil imports grew by an average 2 percent a year, reaching 144 783 tonnes in 2017. The leading suppliers were Bulgaria, Argentina, Romania, Spain, Netherlands and Portugal, amongst others .

Given the expected decline in sunflower seed production this season, we estimate that South Africa’s sunflower oil imports could at least reach 147 678 tonnes. The leading supplies will most likely remain unchanged, as it has been the case in the past five years.

 

RSA Potatoes:

To recap pre-Easter weekend market trends, the potatoes market pulled back on Thursday from the fairly higher price levels seen Wednesday, with the price down by a percentage point, settled at R45.87 per pocket (10kg). This was partially on the back of a large stock of 686 792 pockets (10kg bag) at the start of the session.

Nonetheless, towards the end of the trading session, the market saw an uptick in deliveries driven by an ongoing harvest activity in some parts of the country. This led to a 4 percent increase in daily stocks to 717 526 pockets (10kg bag).

 

 

Full report by Wandile Sihlobo attached below.

 

Agbiz Morning Market Viewpoint on Agri-Commodities 03 April 2018