Weather will remain a primary focus in the market

Highlights in today’s morning note

 

Maize:

 

With the new season planting activity underway in the eastern parts of the country, the weather will remain a primary focus in the market for some time. The expected rainfall across the eastern parts of the South African maize belt within the next two weeks could improve soil moisture, albeit slowing the planting process.

 

However, this will not be an issue as the optimal planting window for maize only closes around mid-November in the eastern parts of the country. In the western parts, the optimal maize planting window only opens in mid-November and closes around mid-December.

 

On the global front – The wet weather conditions in the US Midwest have slowed the harvest process. At the beginning of this week, only 54% of the US maize crop had already been harvested, which is 19-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.

 

Elsewhere, the European Commission revised its 2017/18 maize production estimate down by 600 000 tonnes from the previous month to 59 million tonnes. This is 3% lower than the previous season’s harvest and also in line with the International Grains Council’s estimate.

 

Wheat:

 

After weeks of persistent dryness, the Western Cape province could receive light showers this week. This might slow harvest process in areas that have already started, particularly the Southern Cape and Swartland regions. Meanwhile, the areas that planted late in the season could still benefit from expected rainfall as the crop is at grain filling stages of development.

 

More emphasis is placed in the Western Cape because the province produces almost half of South Africa’s wheat crop.  Last week, the National Crop Estimate Committee revised its production estimate for the province down by 8% from the previous month to 749 800 tonnes.

 

Not of urgency but worth noting is that Ethiopia is still in the market looking for 400 000 tonnes of milling wheat from the optional origin. This has been upgraded from the last week’s volume of 200 000 tonnes.

 

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 the 29th of October 2017, about 84% of the intended winter wheat hectares had already been planted, which is 1-points behind the corresponding period last year.

 

The International Grains Council forecasts a 25% year-on-year decline in US 2017/18 all-wheat production to 47 million tonnes. This is a result of an expected decline in area plantings, and anticipation for lower yields in some regions

 

Soybeans:

 

The weather models show a possibility of rainfall in the eastern parts of the country within the next two weeks, which should improve soil moisture and subsequently benefit the new season crop. With that said, this could delay planting activity, but that is not much of an issue as the optimal planting window only closes in December.

 

As we set out in yesterday’s note, the calendar for this week is light with no major data releases, the market performance will largely be guided by the Chicago soybean price and domestic currency movements.  

 

In global markets – At the beginning of this week, about 83% of the US soybean had already been harvested, which is 2-points behind the corresponding period last year. The weather remains a primary focus in the US soybean market. The expected rainfall within the next two weeks in the eastern parts of the Midwest could slow the harvest and maturation process of the soybean crop.

 

The International Grains Council forecasts the US 2017/18 soybean production at 121 million tonnes, up by 3% from the previous season due to expected higher yields and an increase in are planted.

 

RSA Potatoes:

 

The South African potato market started the week on a negative footing with the price down by 2% from the previous trading session, closing at R35.85 per pocket (10kg). This was mainly due to large stocks of 1.19 million pockets (10kg bag) at the start of the trading session.

 

However, during the session, the market saw strong commercial buying interest, coupled with a decline in deliveries on the back of slow harvest activity over the weekend. This subsequently led to a 32% decline in daily stocks to 804 965 pockets (10kg bag).

 

SAFEX Beef carcass:

 

Yesterday’s trade session presented more of the same in the SAFEX beef carcass market. The prices remained flat at R46.00 per kilogram due to thinly traded volumes. This implies that the SAFEX beef carcass prices might differ from the physical market, which continues to show solid activity and higher traded volumes.

 

The most recent data from the Red Meat Levy Admin shows that farmers slaughtered 209 322 head of cattle in September 2017, down by 12% from the previous month, and the corresponding period last year. This proves that August 2017 uptick in slaughtering activity was somewhat a temporary blip. We will closely monitor the data in the next few months in order to ascertain the impact on prices.

 

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Agbiz Morning Market Viewpoint on Agri-Commodities – 31 October 2017