Highlights in today’s morning note
The most recent weather updates show that a large part of South Africa could receive rainfall of between 20 and 80 millimetres within the next eight days (figure 1). This could benefit the summer crop growing areas, ahead of a planting period which starts around mid-October. Meanwhile, the Western Cape province could receive only light showers of between 7 and 16 millimetres, which will not be sufficient to improve soil moisture.
The planting process has already started in some areas around the eastern regions of the country. In addition, the planting window will remain open until mid-November for this particular region.
The western areas will only start planting next month as the planting window opens around mid-November and closes at the end of the year (December). Also worth noting is that the western parts of South Africa predominantly produce white maize and the eastern areas largely produce yellow maize.
However, the upcoming season could potentially bring a slight shift towards oilseed or yellow maize due to price competitiveness of the crops. White maize is likely to remain under pressure for some time due to large supplies and slow exports on the back of weak regional demand.
South Africa imported 24 074 tonnes of wheat in the week ending 29 September 2017, all from the Romania and Ukraine. This is well below the previous week’s import volume of 72 401 tonnes.
Moreover, this was the last batch of imports for the 2016/17 marketing season and overall wheat imports totalled 930 728 tonnes, which is marginally lower than seasonal expectations of 1.0 million tonnes. More importantly, the 2016/17 import volume was the lowest in 10-years. Thanks to a good production harvest in the 2016 season, which boosted the domestic supplies.
However, the 2017/18 marketing season might not be as rosy as the previous one. As indicated in the aforementioned section. The crop is not in good shape in the Western Cape province and that could potentially lead to a downward revision of the current production estimate of 1.7 million tonnes over the coming months.
Even under the assumption that 1.7 million tonnes of production were to materialise, South Africa’s wheat imports could still increase by roughly 77% y/y in the 2017/18 marketing season to 1.65 million tonnes.
While a net importer of wheat, South Africa continues to export wheat to regional markets. The total exports were recorded at 379 tonnes last week, all went to Namibia and Botswana. This brought the country’s 2016/17 total wheat exports to 92 893 tonnes.
Everything remains the same in the domestic soybean market. The calendar for this week is 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 up by 0.10% from levels seen at midday yesterday following a sale of 132 000 tonnes of US soybeans to China.
The weather remains a primary focus in the US soybean market as it could potentially impact the maturation and harvesting process of the crop. The forecast for the next eight days shows a possibility of showers across the north-western parts of the Midwest , which could slow the harvest process in this particular region.
In addition, INTL FCStone lifted its 2017/18 US soybean production estimate to 120.4 million tonnes, which is marginally higher than the International Grains Council’s estimate of 119.5 million tonnes. This is 3% higher than the previous season. The uptick was largely on the back of expected higher yields in most parts of the US.
The South African potatoes market had a good run in yesterday’s trade session with the price up by 12% from the previous day, closing at R47.30 per pocket (10kg). These gains were partly on the back of lower stocks of 514 069 pockets (10kg bag) at the start of the trading session.
With that said, during the session, the market saw an uptick in deliveries as harvest activity picks up after a weekend. This subsequently led to a 10% increase in daily stocks to 567 467 pockets (10kg bag).
The fruit market saw widespread gains in yesterday’s trade session due to strong commercial buying interest. The prices of apples and bananas were down by 1% and 7% from the previous day, closing at R7.61 per kilogramme and R6.35 per kilogramme, respectively. In addition, the price of oranges was up by 36% from the previous day, closing at R5.34 per kilogramme.
However, the buying interest coincided with an increase in deliveries which boosted the daily stocks of apples and bananas by 33% and 1% to 320 880 tonnes and 280 165 tonnes, respectively. The oranges stock almost doubled, closing at 11 169 tonnes from the previous day. This essentially means that the current gains in the fruit market could be short-lived.
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