Highlights in today’s morning note
The eastern parts of the South African maize-belt could receive good showers within the next eight days. This will replenish soil moisture, which is conducive for the new season crop. As we set out in our note yesterday, the long-term weather forecasts show that there is a possibility of above normal rainfall across the maize-belt between November 2017 and February 2018. This will support the new season crop.
From a trade perspective – South Africa exported 61 983 tonnes of maize in the week ending 06 October 2017, which is double the volume exported the previous week. About 87% of these exports were yellow maize, with 13% being white maize.
The leading buyer was Japan with a share of 83%, all yellow maize. Trailing Japan was Botswana with a share of 8%, largely white maize. This placed South Africa’s 2017/18 total maize export volume at 1.4 million tonnes, which equates to 64% of the season’s export forecast of 2.2 million tonnes. About 66% of the exported 1.4 million tonnes is yellow maize, with 34% being white maize.
On the global front – The forecast rainfall across the north-eastern parts of the US Midwest could slow the harvest activity within the next eight days. At the beginning of this week, about 22% of the US maize crop had already been harvested, which is 11-points behind the corresponding period last year. The International Grains Council forecasts the US 2017/18 maize production at 358, down by 7% from the previous season.
The most recent weather updates show a possibility of light showers across the coastal areas of the Western Cape province, which implies that a large part of the crop could be strained for some time. More concerning is that this could lead to a downward revision of the current national crop estimate of 1.7 million tonnes. An update of the potential size of the crop will be released on 26 October 2017.
In terms of dam levels – the recent update for the week ending 09 October 2017 shows that dams averaged 36% in the Western Cape province, which is unchanged from the previous week, but 26-points lower than the corresponding period last year.
From a trade perspective – South Africa imported 37 337 tonnes of wheat in the week ending 06 October 2017, all from Ukraine. This was the first batch of imports in the 2017/18 marketing season. This season’s imports are currently estimated at 1.8 million tonnes, up by 94% year-on-year.
This is under the assumption that domestic production will reach 1.7 million tonnes. Therefore, in the event that production declines further, as we expect; the import estimate of 1.8 million tonnes could be revised up over the coming months.
Although the planting window has already opened in Kwa-Zulu Natal province, the heavy rainfall could delay the process. In addition, the forecast for the next eight days shows that rainfall could continue across the eastern parts of the country.
However, this is not much of a concern, there is enough time for farmers to plant. The optimal planting window for Kwa-Zulu Natal province and other parts of the country only closes at the beginning of December.
In global markets – The forecast rainfall in the north-eastern parts of the US Midwest could slow the maturation and harvest process. At the beginning of this week, 36% of the US soybean had already been harvested, which is a 14-point increase from the previous week. With that said, this was 8-points behind the corresponding period last year. At the same time, 61% of the crop was rated good/excellent, which is 13-points lower than the same period last year.
There are ideas in the market that sunflower seed price competitiveness and good weather could entice farmers to switch some acreage from maize to this particular crop. With that said, clear indications will be revealed by end of the month when the National Crop Estimate Committee releases its “summer crop intentions to plant” data.
In terms of weather, the prospects are positive with possible widespread showers across the sunflower seed producing areas of South Africa within between November 2017 and February 2018.
Apart from this, this week’s calendar is light with no major data releases. Therefore, the market will again be driven by the domestic currency movements and traded volumes in the local market within the next few days.
The South African potatoes market received additional support in yesterday’s trade session with the price up by 8% from the previous day, closing at R55.79 per pocket (10kg). These gains were on the back of lower stocks of 449 556 pockets (10kg bag) at the start of the trading session.
However, during the session, the market saw an uptick in deliveries as harvest activity picks up after a quiet weekend. This subsequently led to a 17% increase in daily stocks to 524 473 pockets (10kg bag).
SAFEX beef carcass:
It is more of the same in the SAFEX beef carcass market. The prices remained flat in yesterday’s trade session, at R46.00 per kilogramme due to thinly traded volumes. This basically implies that the SAFEX beef carcass prices might differ from the physical market, which continues to show solid activity and higher traded volumes.
The South African cattle industry is normalising after the 2015-16 drought. The most recent data from the Red Meat Levy Admin shows that farmers slaughtered 228 632 head of cattle in August 2017, up by 12% from the previous month, but still down by 5% from the same period last year. That said, it is unclear whether this will be a temporary blip or full recovery. We will closely monitor the developments over the coming months.
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