Soybean crop expectations of above-average yields in some areas

Highlights in today’s morning note

 

Maize:

A large part of the South African maize belt started this week with dry and cool weather conditions, with light and scattered showers only in a couple of regions within Mpumalanga province. The areas that are somewhat moisture-stressed following dryness in the past few days could soon see some relief, as the weather forecasts for the next two weeks show a possibility of rainfall of over 30 millimetres.

Last week’s maize exports were again disappointing. South Africa exported 14 010 tonnes, down by 5 percent from the volume exported in the week of 02 March 2018. About 68 percent of these exports were white maize, with 32 percent being yellow maize. This placed South Africa’s 2017/18 maize marketing year exports at 2.0 million tonnes, which equates to 83 percent of the season’s export forecast of 2.4 million tonnes.

Within the region, the 2017/18 maize production season started on a bad footing in Zimbabwe with limited soil moisture in the latter part of December 2017 into the start of 2018. But, at the beginning of last month, the maize producing regions received good showers which improved soil moisture and benefited the crop.

The reports we are getting from analysts on the ground in the country point to a possibility of average yields in most areas, which is well below the 2016/17 production season’s bumper harvest of 2.2 million tonnes. We will closely monitor the developments in the coming weeks as this could have implications on regional maize demand. In the case of South Africa, these developments will have implication on export activity for the 2018/19 marketing year which starts in May 2018.

 

Wheat:

As highlighted in yesterday’s note, South Africa’s wheat market is currently off-season, and therefore, most activity is in import trading. However, the recent developments in the major wheat production province, Western Cape, are worth mentioning. The weather charts for the next two weeks show a possibility of light showers of between 16 and 20 millimetres across the coastal areas of the province.

While a welcome development, this will nonetheless not make a meaningful improvement on dam levels which are critically low, estimated at 20 percent in the week of 05 March 2018, down by 10 percentage points from the corresponding period last year.

There are no new developments on the wheat import tariff. The newly calculated trigger rate is R394.84 per tonne, down by 45 percent from the current active level. This new rate will only be applicable after its publication on the government gazette. The timeframe for this process is unclear, but previous adjustments took more than three weeks.

With that said, the import activity has slowed. South Africa imported 55 958 tonnes in the week ending 09 March 2018, down by 46 percent from the previous week. About 51 percent came from Romania, 31 percent from Latvia and 18 percent from Argentina. This placed 2017/18 marketing year’s wheat imports at 1.14 tonnes, which equates to 62 percent of the seasonal import forecast of 1.85 million tonnes.

 

Soybeans:

The soybean crop is generally in good condition with expectations of above-average yields in some areas. This supports the National Crop Estimates Committee’s view of a new record level of 1.4 million tonnes this season, up by 5 percent from the 2016/17 production season.

Although soil moisture is in good condition, the crop could still benefit from additional rainfall, especially the late planted areas. The expected showers have not yet materialised in most areas. It is only areas around Graskop, Middelburg, Morgenzon, Witbank and Wonderfontein that received light showers on Monday night.

The next two weeks, however, promise the possibility of rainfall of over 50 millimetres in soybean growing regions of the country . This should further improve soil moisture and benefit the crop.

From a demand front, the 2017/18 soybean imports are estimated at 151 million tonnes, up by 5 percent from the previous season. China, the EU, Japan and Mexico are set to be the key buys. China alone accounts for two-thirds of global soybean imports. This is driven by growing demand from the animal feed industry.

 

Sunflower seed:

The weather remains a primary focus in the sunflower seed market as the crop is still at its early stages of development. The expected rainfall has not yet materialised in most areas of the country. However, the crop that is slightly moisture-stressed following dryness in the past few days should soon recover as weather conditions promise rainfall within the next two weeks.

As highlighted in our previous notes, the medium-term weather forecast promises a possibility of above normal rainfall in summer crop growing areas of South Africa between this month and May 2018. This should provide sufficient moisture for crop development throughout the season.

In the global market – The 2017/18 sunflower seed harvest process is not yet complete in Russia. According to SUNSEEDMAN, about 7 percent of the area planting is yet to be harvested. The USDA placed Russia’s 2017/18 sunflower seed production at 10.4 million tonnes, down by 5 percent from the previous day.

In Argentina, the sunflower seed harvest process is underway but could slow within the next few days due to expected rainfall. On 13 March 2018, about 45% of this season’s crop had already been harvested. The USDA forecasts the country’s 2017/18 sunflower seed crop at 3.6 million tonnes, up by 6 percent year-on-year.

 

RSA Potatoes:

The potatoes market had a good run in yesterday’s trade session underpinned by lower stocks of 644 269 pockets (10kg bag) at the start of the session. The price was up by 7 percent from the previous day, closing at R35.51 per pocket (10kg).

However, in yesterday’s trading session, the market saw an uptick in deliveries as harvest activity picked up after a quiet period in the weekend. This led to a 21 percent increase in daily stocks to 780 197 pockets (10kg bag).

 

RSA fruit:

The fruit market ended yesterday’s session on a mixed footing. The apples and bananas market managed to claw back the recent losses with the prices up by 11 percent and 12 percent from the previous day, closing at R8.12 and R8.06 per kilogram, respectively. These gains followed a respective decline in daily stocks of apples and bananas to 183 000 tonnes and 237 000 tonnes.

Meanwhile, the price of oranges experienced extended losses of 29 percent from the previous day and settled at R5.47 per kilogram. We maintain that this will be short-lived because of fairly lower stock of 55 000 tonnes, compared to levels of over 70 000 tonnes in the past few days.

 

Click below for the full report by Wandile Sihlobo:

Agbiz Morning Market Viewpoint on Agri-Commodities 14 March 2018