Highlights in today’s morning note
A recent poll of analysts from Reuters suggested that South Africa’s 2017/18 maize hectares could decline by 17% from the previous season to 2.18 million hectares. Meanwhile, Bloomberg’s survey of analysts showed that South Africa’s maize area plantings could decline by 9% from the 2016/17 production season to 2.39 million hectares. The notable decline in both surveys is expected to be on white maize hectares.
Overall, the expected decline in area planting is largely due to price competitiveness of other crops. The official estimate will be released by the National Crop Estimates Committee on Thursday, 26 October 2017.
The planting activity has already commenced in the eastern parts of South Africa but could be slowed within the next few days owing to expected rainfall. With that said, this could improve soil moisture, which will ultimately benefit the new season crop.
On the global front – At the beginning of this week, about 38% of the US maize crop had already been harvested, which is 21-points behind the corresponding period last year. At the same time, about 66% of the US maize crop was rated good/excellent, compared to 74% in the corresponding period last year. Thus, it is not surprising that the USDA expects a 6% year-on-year decline in the country’s 2017/18 maize production to 363 million tonnes.
Above all, the weather remains a primary focus in the US maize market as harvest process progresses. The expected rainfall within the next eight days across the eastern parts of the Midwest could slow the process.
The weather forecast shows a possibility of the dry and cool conditions across the Western Cape province within the next two weeks. This means the areas that planted late in the season and still need moisture could be strained for some time, particularly Southern Cape and Mossel Bay.
From a trade perspective, there are no new developments on the wheat import tariff front. The tariff has triggered two times without adjustments – it triggered to R909.99 per tonne on 12 September 2017, and to R716.33 per tonne on 10 October. Both of these rates have not yet been published in the government gazette.
At the time of writing, the wheat import tariff is R752.40 per tonne. This means that the tariff will first increase to R909.99 per tonne, then be revised down to R716.33 per tonne. The timeframe for adjustments is unclear.
On the global front – The expected rainfall within the next eight days in the eastern regions of the US Midwest could benefit the new season crop, albeit delaying planting processes. On 22 October 2017, about 75% of the intended winter wheat hectares had already been planted, which is 3-points behind the corresponding period last year.
Overall, the US 2017/18 all-wheat production is expected to decline by 25% from the previous season to 47 million tonnes, due to expected lower yields and a decline in area planted.
The eastern parts of the country could receive rainfall within the next two weeks, which should improve soil moisture and benefit the new season crop. With that said, this might delay plantings but that is not much of an issue as the optimal planting window only closes at the beginning of December.
As we set out in yesterday’s note, the focus this week is the National Crop Estimate Committee’s data which is due for releaseon Thursday. The data will give an indication of the potential size of the hectares to be planted in the upcoming season. In 2016/17 production season, South Africa planted 573 950 hectares of soybeans.
Moreover, SAGIS will also release its monthly data on Wednesday. This will give an insight on the current stock levels, as well as monthly soybean usage. In August 2017, South Africa’s 2017/18 soybean stocks were at 848 957 tonnes, up by 87% from the same period last year. Soybean monthly consumption (crushed oil and cake) was reported at 80 932 tonnes, up by 14% from August 2016.
The South African potato market started the week on a positive footing due to the relatively lower stock of 996 007 pockets (10kg bag). The price was up by 1% from the previous trading session, closing at R40.57 per pocket (10kg).
Moreover, 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 30% decline in daily stocks to 694 611 pockets (10kg bag).
The fruit market ended the day mixed in yesterday’s trade session. The prices of apples and bananas were down by 5% and 11% from the previous trading day, closing at R6.64 and R6.01 per kilogram, respectively. These losses followed an 85% and 5% increase in stocks of apples and bananas to 269 629 tonnes and 249 960 tonnes, respectively.
Meanwhile, the oranges market gained 4% from the previous day, closing at R6.26 per kilogram due to the relatively lower stock of 60 338 tonnes, as well as commercial buying interest.
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