Highlights in today’s morning note
Although the news of a record maize crop in the 2016/17 production season dominated the headlines in the past few days, the focus is now shifting to the new season which commences within the next two weeks.
The weather prospects remain positive with a possibility of widespread rainfall of between 20 and 80 millimetres across the South African maize-belt within the next eight days. This will potentially replenish soil moisture, which is conducive for the new season crop.
Also worth noting is that the South African Weather Services forecast a weak La Niña pattern in the early summer – that is between November 2017 and February 2018. This could lead to higher than average rainfall in many areas across maize-belt and bodes well for the new season crop. Unfortunately, the south-western parts of the country will remain dry and warm.
There are no new developments on the weather front. The current forecasts show a possibility of light showers along the coastal areas of the Western Cape province within the next eight days. However, this will not be sufficient to replenish soil moisture. Above all, persistent dryness could potentially worsen the crop conditions, which are already not in good shape in large parts of the Western Cape province.
After declining to the lowest level of R379.34 per tonne earlier in September 2017, the wheat import tariff has been revised up by 98% from the previous rate to R752.40 per tonne due to relatively lower global wheat prices.
Moreover, an even higher rate of R909.99 per tonne has already been calculated and could be published soon. This too has been driven by lower global wheat prices. On the one hand, an increase in wheat import tariff could ease the pressure on farmers, especially during this drought period in the Western Cape province, while pressuring the food processing companies on the other.
The data calendar for this week is fairly 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.
In global markets – This morning the Chicago soybean price was down by 1.04% from levels seen at midday yesterday as the harvest of a bumper US crop gathers pace amid reported higher yields.
At the beginning of this week, 22% of the US soybean had already been harvested, which is 11-points increase from the previous week. With that said, this was 2-points behind the corresponding period last year.
The weather forecast shows a possibility of showers across the central and northern parts of the US Midwest within the next eight days . This could potentially slow the maturation and harvest process. Overall, the International Grains Council forecasts a 2% uptick in the US 2017/18 soybean production to 120 million tonnes. This is on the back of expected higher yields in some parts of the country.
Elsewhere, Stratégie Grains forecasts the EU’s 2017/18 soybean production at 2.6 million tonnes, which is a 4% annual uptick. Moreover, this is slightly above the USDA’s estimate of 2.5 million tonnes.
Similar to the soybean market, it is still an off-season period in the South Africa’s sunflower seed market with not much activity in the fields, and this week’s calendar is light with no major data releases. Therefore, the market will largely be driven by the domestic currency movements and traded volumes in the local market.
In the global market – Yesterday the EU’s sunflower seed market withdrew its recent gains due to lower crude and vegetable oil prices, as well as harvest pressure. The price was down by 0.26% from the previous trading session, closing at US$386 per tonne.
In terms of production, Stratégie Grains lifted its EU’s 2017/18 sunflower seed production estimate by 100 000 tonnes from the previous month to 8.8 million tonnes. This is 5% higher than the previous season’s estimate due to an increase in area planted and expected higher yields.
Moreover, this is well above the European Commission’s production estimate of 8.7 million tonnes. The largest contributors to this expected harvest are Bulgaria, Romania, Hungary and France.
Yesterday the South African potatoes market started its trading session on a positive footing and maintained the gains throughout the day due to lower stocks of 819 228 pockets (10kg bag). The price up by 7% from the previous day, closing at R42.37 per pocket (10kg).
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 37% drop in daily stocks to 514 069 pockets (10kg bag).
The fruit market was once again mixed in yesterday’s trade session. The prices of apples and oranges were down by 2% and 15% from the previous day, closing at R7.51 per kilogramme and R3.94 per kilogramme, respectively. These losses were partially on the back of large stocks of both apples and oranges.
Meanwhile, the bananas market received support from strong buying interest with the price up by 1% from the previous day, closing at R5.96 per kilogramme. However, this could be short-lived due to a large stock of 276 477 tonnes, up by 9% from the previous day.
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