Highlights in today’s morning note
The expected rainfall in the eastern parts of the country should improve soil moisture, which will ultimately benefit the new season crop. The market expectations are that the 2017/18 maize hectares could decline, with some farmers opting to plant other crops due to price competitiveness. Both Reuters and Bloomberg surveys put the expected decline at a range of 9% and 17% from the 2016/17 production season (see Agbiz Morning Market Viewpoint: 24/10/2017)
From a trade perspective, last week’s maize exports were again disappointing. South Africa exported only 11 927 tonnes of maize, which is well below the levels of 61 777 tonnes seen in the first week of October 2017. About 81% of these exports were white maize, with 19% being yellow 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 65% of the exported 1.4 million tonnes is yellow maize, with 35% being white maize.
A recent poll of analysts from Bloomberg suggested that South Africa’s 2017/18 third wheat production estimate could remain unchanged from the previous estimate, at 1.7 million tonnes. We think this is a bit more optimism, given that a large part of the crop is not in good shape in the Western Cape province due to persistent dryness.
The areas that planted late in the season, particularly Southern Cape and Mossel Bay, could still benefit from rainfall as the crop is at grain filling stages of development. Unfortunately, the weather forecast presents a possibility of continuous dryness across the Western Cape province within the next two weeks, which increases a chance of below average yields in many parts of the province.
From a trade perspective – South Africa imported 129 940 tonnes of wheat in the week ending 20 October 2017, 77% from Russia and the balance from Romania and the Ukraine. This is 56% higher than the volume imported last week and placed the total imports for the 2017/18 season at 248 148 tonnes. This equates to 14% of the seasonal import forecast of 1.8 million tonnes.
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 upwards over the coming months.
SAGIS monthly data will take a spotlight today. This data will give some 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. Consumption was at 80 932 tonnes, up by 14% from August 2016.
Aside from this, weather remains a primary in the market as planting progresses in the eastern parts of the country. Fortunately, the outlook for the next two weeks remains favourable with chances of rainfall which should improve soil moisture, albeit planting delays .
In global markets – The US soybean farmers have made notable progress in harvest activity, with 70% of the crop already collected at the beginning of this week, which is almost in line with last season’s pace. However, the pace could slow this week due to expected rainfall in the eastern parts of the Midwest.
Elsewhere, the 2017/18 soybean planting activity is underway in Brazil. The most recent data from AgRural shows that on 20 October 2017, about 20% of the intended area had already been planted. This is 9-points behind the corresponding period last year. The progress has been delayed by dryness in some parts of Brazil.
The focus today is on SAGIS monthly data, which will present an indication of the domestic sunflower seed usage, as well as the current stock levels. In August 2017, the stocks were at 639 064 tonnes, up by 29% from the corresponding period last year. In the same month, consumption was at 87 596 tonnes, up by 28% the corresponding period last year.
In the global market – The European Commission forecasts the region’s 2017/18 sunflower seed production at 9.2 million tonnes, up by 8% from the previous season due to expected higher yields and an increase in area planted.
Elsewhere, the Black Sea sunflower oil market gained ground with the price up by 0.13% from the previous day, closing at US$759 per tonne due to strong global demand, and higher crude oil prices. Data from Russia’s Federal State Statistics Service shows that the country exported 266 000 tonnes of sunflower seed between January and September 2017, well above the corresponding period last year.
The South African potato market received additional support in yesterday’s trade session with prices up by 5% from the previous day, closing at R40.57 per pocket (10kg). The lower stocks of 694 611 pockets (10kg bag) at the start of the trading session were the key underlying driver behind these gains.
With that said, during the session, the market saw an uptick in deliveries as harvest activity picks up after a quiet weekend. This subsequently led to an 18% increase in daily stocks to 820 538 pockets (10kg bag).
The fruit market ended the day mixed in yesterday’s trade session. The prices of apples and bananas were up by 8% and 3% from the previous trading day, closing at R7.17 and R6.20 per kilogram, respectively. These gains were mainly on the back of large commercial buying.
Meanwhile, the oranges market lost 14% from the previous day, closing at R5.37 per kilogram. With that said, this could soon be reversed due to lower stocks of 56 760 tonnes.
Click below to read more recent reports by Wandile Sihlobo.