RSA fruit: Yesterday the fruit market managed to claw back some of its recent losses with support coming from strong buying interest. The price of apples was up by 9% from the previous day, closing at R6.91 per kilogramme. The bananas and oranges prices were, respectively, up by 0.14% and 11% from the previous day, closing at R7.01 per kilogramme and R3.09 per kilogramme. 

Maize: The National Crop Estimate Committee (CEC) revised its maize production estimates up by 2% from the previous month to 15.97 million tonnes. This is above the market expectations of 15.80 million tonnes and doubles the previous season’s production of 7.78 million tonnes.

Wheat: The CEC’s preliminary wheat planting data shows that farmers reduced the area planted in 2017 by 2% from the previous season to 498 850 hectares. This decline in the area was due to some farmers switching to barley and canola owing to profitability reasons.  

Click here to read the Morning Market Viewpoint on Agri-Commodities for today.

Soybeans: In its sixth production estimate, the CEC maintained its soybean production estimate unchanged from last month at 1.34 million tonnes. This is 81% higher than the previous season and the biggest crop on record. 

Sunflower seed: The CEC left its production estimate unchanged from the previous month at 821 970 tonnes. This is 9% higher than the previous season due to expected higher yields. The harvest process is virtually over with above average yields reported in many areas of the country. This supports the CEC’s view of a relatively large crop this season. 

RSA Potatoes: The South African potatoes market lost ground in yesterday’s trade session and closed in negative territory due to relatively large stocks of 846 765 bags (10kg bags). The price was down by 5% from the previous day, closing at R28.67 per kilogramme.

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The National Crop Estimate Committee revised its maize production estimates up by 2% from the previous month to 15.97 million tonnes. This means South Africa would, ideally, export roughly 4.0 million tonnes of total maize this year. However, weak global demand for white maize could lead to relatively lower exports of 2.2 million tonnes – leaving a large carry-over stock.

Figures released this afternoon by the National Crop Estimate Committee shows that 2017 total summer grains production could reach 18.44 million tonnes, which is a 96% annual increase. White and yellow maize production estimates were revised up, respectively, by 0.43% and 4.83% from the previous estimate to 9.51 million and 6.46 million tonnes. In total, reaching a record level of 15.97 million tonnes.

Apart from the dry beans production estimate which was revised up by 1.87% from last month, all other estimates were left unchanged. The harvest process is virtually over across the country and many areas reported exceptional yields, particularly on soybeans and maize, which support the CEC’s view of record crops.

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In terms of winter crops – the preliminary area estimate for wheat shows that farmers planted 498 850 hectares, which is 1.87% less than the previous season. Today’s data shows that South Africa will be well supplied this season and maize prices could remain at relatively lower levels for some time.  

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The most anticipated of all was the National Crop Estimate Committee’s sixth production estimate which showed a 2% m/m upward revision in maize production estimate to an all-time high of 15.97 million tonnes. Other commodities were left unchanged from the previous month.

In terms of market performance, all grain and oilseed commodities were under pressure with the exception of sunflower seed. For fruits and vegetables, the week has been fairly volatile, driven by changes in volumes traded.

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The annual food producer price inflation decelerated to 4.7% y/y in June 2017, from 5.7% y/y in May 2017. This shows the benefits of the higher agricultural output this year following good summer rainfall across the country. The deceleration was largely in grain, sugar, dairy, starches, and vegetable and fruit products. Meanwhile, meat and meat products accelerated due to on-going cattle herds restocking process resulting from the 2015-16 drought, as well as low base factors.

The general deceleration in food producer inflation is due to the recovery in agricultural production. The total production of summer grains and oilseeds is estimated at 18.44 million tonnes, which is a 96% annual increase. This has led to a widespread decline in agricultural commodity prices. White maize spot price currently trades at levels around R1 768 tonnes, which is 59% lower than the same period last year. Yellow maize spot price is trading at levels around R1 889 per tonne, which is 42% lower than the same period last year. Soybean spot price is at a level around R4 711 per tonne, which is a 31% annual decline. The decline in yellow maize and soybean prices will also benefit other sectors, such as the livestock and poultry.

While meat price inflation increased at the fastest pace of 17% y/y, there seems to be some level of improvement in slaughtering which could lift meat supply. The most recent data from the Red Meat Levy shows that farmers slaughtered 202 886 head of cattle in May 2017, up by 5% from the previous month.

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Looking ahead – the large agricultural output will keep agricultural commodity prices under pressure over the short-to-medium term. This essentially means that food inflation also could remain at relatively lower levels. With that said, the recent outbreak of avian influenza in the poultry sector remains a risk. The virus has been reported in isolated farms in Mpumalanga, Free State and Gauteng. We will closely monitor the developments within the poultry industry in order to ascertain the impact on food inflation in the coming months.

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Maize:

Interesting to note is that the International Grains Council (IGC) is even more optimistic on South Africa’s maize production, estimating the overall crop at 16.4 million tonnes, compared to 7.8 million tonnes in the previous season. The harvest process is in full swing with reports of exceptional yields across the country. The process could gain momentum within the next two weeks due to expected warm weather conditions in the maize belt.

Wheat:

The South African Weather Service noted that there is a possibility of wetter conditions in the south western parts of the country between August and October 2017. This will be a welcome relief after weeks of dryness in the Western Cape province during the first half of their traditional rainy season.

Soybeans:

As indicated in our note yesterday, South Africa’s soybean supplies for 2017/18 season could reach 1.41 million tonnes. This includes an opening stock of 84 792 tonnes, as well as commercial deliveries of 1.31 million tonnes and a small volume of imports. This is 30% higher than the previous season.

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Sunflower seed:

Although South Africa generally expects a good sunflower seed harvest this season, the areas that planted late in a season received lower yields of between 0.6 and 0.7 tonnes per hectare. The country’s sunflower seed production estimate is 821 970 tonnes, up 9% from the previous season.

RSA Potatoes:

Yesterday the South African potatoes market managed to claw back some of its recent losses with support coming from lower stock levels. The price was up by 0.49% from the previous day, closing at R28.45 per 10kg bag.

RSA fruit:

The fruit market started the week on a mixed footing. The prices of apples and bananas were up by 9.37% and 0.15% from the previous day, closing at R7.59 per kilogramme and R6.86 per kilogramme, respectively. The apples stocks were down by 9% from the previous day easing at 215 990 tonnes. At the same time, the bananas daily stocks fell by 23% to 157 050 tonnes. Meanwhile, the price of oranges fell by 16% from the previous day, closing at R2.79 per kilogramme. 

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RSA Potatoes:

The South African potatoes market saw additional gains in yesterday’s trade session with the price up by 5% from the previous day, closing at R29.82 per 10kg bag. These gains were on the back of lower stocks of 826 523 bags (10kg bags) at the start of the session.

Maize:

South African maize exports fell by 43% in the week ending 28 July 2017 from the previous one and eased at 87 577 tonnes. This was mainly due to a decline in activity in the Kenyan market. About 60% of these exports were yellow maize, with 40% being white maize.

Wheat:

The southern parts of the Western Cape province could receive light showers this week, whereas other parts of the province could remain dry and cool. However, the week ending 17 August 2017 could bring rainfall of between 16 and 30 millimetres across the province which will possibly improve crop conditions and soil moisture.

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Soybeans:

The harvest process is complete with exceptional yields which support the National Crop Estimate Committee’s view of a record crop of 1.34 million tonnes – an 81% annual increase.

RSA fruit:

The prices of apples and bananas retracted from the previous day’s highs due to large stocks, closing at R6.92 per kilogramme and R5.79 per kilogramme, respectively. The apples stocks were up by 27% from the previous day easing at 274 368 tonnes. At the same time, the bananas daily stocks increased by 79% to 280 678 tonnes.

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Food inflation decelerated to 6.8% y/y in July 2017, from 6.9% y/y in the previous month. This mirrors the benefits of the higher agricultural output following good summer rainfall across the country.

Although we expect further moderation in the next few months, the picture of the food basket is mixed. Most food products have decelerated, with the exception of meat which is proving stickier than expected, recording 14.4% y/y in July, which is the highest level since December 2011. This is on the back of an outbreak of avian influenza and cattle restocking process after the 2015-16 drought.

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Africa remained South Africa’s largest market, accounting for 44% of agricultural exports – which is 9% below the 5-year average share. The EU accounted for 26% of South Africa’s agricultural exports in 2016, with Asia taking up 22%. Americas and the rest of the world (ROW) accounted for 5% and 3%, respectively.

Despite the worst drought in more than a decade, the South Africa’s agricultural sector recorded a positive trade balance of US$2.3 billion in 2016. This was boosted by growth in exports of edible fruits, beverages, spirits and vegetables, with the total agricultural export value amounting to US$8.6 billion, up 6% from 2015. These products are mainly grown in the Western Cape province, which was not as severely affected by the 2016 drought as the rest of the country. Meanwhile, imports also increased by 26% y/y reaching US$6.3 billion – driven by a notable uptick in grain imports on the back of the drought.

Looking ahead – Given the recovery in agricultural production, we expect the South African agricultural trade balance to remain positive in 2017. This will essentially support the country’s current account. 

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Wheat:

The weather remains a primary focus in the domestic wheat market. Unfortunately, there has not been any improvement over the past few days. The light showers that were received in some parts of the Western Cape were not sufficient to replenish soil moisture.

Maize:

This is a data-packed week, with the National Crop Estimates Committee’s final maize production estimates, SAGIS monthly and weekly data due for release. Any major changes in these particular data points could lead to notable movements in the maize markets.

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Soybeans:

On 28 September 2017, the National Crop Estimates Committee will release its final soybean production estimates for 2017. The current estimate is 1.32 million tonnes, up 77% from the previous season’s production.

Sunflower seed:

This week the National Crop Estimates Committee will release its final sunflower seed production estimates for 2017. The current estimate is 870 095 tonnes, up by 15% from the previous season.

RSA Potatoes:

The South African potatoes market had a good run during Friday’s trade session with the price up by 1% from the previous day, closing at R34.96 per pocket (10kg). This was partly on the back of strong commercial buying interest.

RSA Fruit:

The fruit market ended the day mixed on Friday’s trade session. The prices of apples and oranges were up by 0.4% and 54.3% from the previous day, closing at R7.51 per kilogramme and R3.98 per kilogramme, respectively. Meanwhile, the price of bananas fell by 12.6% from the previous day, closing at R5.20 per kilogramme. 

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Maize:

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.

Wheat:

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.

Soybeans:

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.

Sunflower seed:

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.

RSA Potatoes:

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).

RSA Fruit:

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. 

Click below to read more recent reports by Wandile Sihlobo.

Agbiz Morning Market Viewpoint on Agri-Commodities – 03 October 2017

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