Agbiz Morning Market Viewpoint on Agri-Commodities: 17 July 2017.

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Agbiz Morning Market Viewpoint on Agri-Commodities: 17 July 2017.

Highlights in today’s morning note

Wheat:

Over the weekend, some parts of the Western Cape province received light showers of between 10 and 20 millimetres. Although this rainfall is a welcome development, it is not sufficient to make a notable improvement in soil moisture. The crops, however, are reportedly in a fair condition across the province and could improve if there could be consistent rainfall over the coming weeks.

Unfortunately, this week could see drier and cool conditions with light showers of between of 7 and 15 millimetres in the southern parts of the Western Cape province.

In terms of dam levels – the recent update for the week ending 10 July 2017 shows that dams were at 24% full, compared to 45% in the same period last year. The other wheat producing provinces, such as the Free State and Northern Cape, are mostly irrigation and will benefit from higher water levels in the dams, currently above 80% full.

On the global front – This morning the Chicago wheat price was up by 2.02% from levels seen at midday Friday, also supported by unfavourable weather conditions and a relatively weaker US Dollar.

The persistent drier wheat conditions in some parts of the US continue to threaten the US wheat crop, particularly spring wheat. At the beginning of last week, only 35% of spring wheat was rated good/excellent, compared to 70% in the same period last year. An update will be released this evening as part of the USDA crop progress report and could paint a bleak picture given that there hasn’t been significant rainfall since the last crop assessment.

Maize:

Maize harvest process is in full swing across the country with excellent yields. This supports the National Crop Estimate Committee’s (CEC) view of a possible record crop of 15.63 million tonnes. An update will be released on the 26th of July 2017. The forecast warm and drier weather conditions across the maize belt within the next two weeks could add momentum to the harvest process.

On the global front – This morning the Chicago maize market was up by 3.05% from levels seen at midday Friday as drier weather conditions in the US continue to threaten the new season crop.

With the crop still at early growing stages, the weather will remain a key focus in the US maize market for some time. The past few weeks have not been favourable, characterised by persistent drier and warm weather conditions. Evidently, at the beginning of last week, only 65% of maize crop was rated good/excellent, which is 11% below the corresponding period last year.

An update of crop conditions data will be released this evening by the USDA and will most likely paint a similar picture as the weather hasn’t improved much since the last assessment.

Moreover, this week could bring little improvement as the weather forecast still shows a possibility of drier conditions across the northern and central parts of the Midwest. The USDA forecasts the US 2017/18 maize production at 362.09 million tonnes, down by 6% from the previous season.

Soybean:

On Friday, there was not much happening in the domestic soybean market. Harvesting is over across the country with yields above average. This supports the National Crop Estimate Committee’s (CEC) view of a record crop of 1.34 million tonnes, which is 81% higher than the previous season. An update of this will be released on 26 July 2017.

In global markets – This morning Chicago soybean price was up by 1.34% from levels seen at midday Friday due to unfavourable weather conditions in the US Midwest.

The latest weather models paint a mixed picture for the US soybean market. The central and northern parts of the Midwest are set to remain dry and warm over the next few days, whereas the eastern and southern areas could receive light showers.

The crops are generally not in good shape due to the dryness that was seen in the past few days. At the start of last week, about 62% of the crop was rated good/excellent, which is 7% lower than the same period last year. The update will be released this evening as part of the USDA’s weekly crop progress report.

Interestingly, last week the USDA revised its estimate for US 2017/18 soybean production up by 0.1% from the previous month to 115.9 million tonnes. However, this is 1% lower than the previous season. Also worth noting is that this is slightly higher than the IGC’s estimate of 115.5 million tonnes.

Sunflower seed:

Sunflower seed harvesting is virtually over in many parts of the country, with the exception of the areas that planted late in the season, particularly the North West province. This past weekend saw dry and warm weather conditions across many parts of the country which is conducive for harvesting.

Looking ahead, the forecast warm and drier weather conditions within the next two weeks could add momentum to the harvest process. If conditions remain favourable, the process could be over by the end of this month.  South Africa’s sunflower seed production is estimated at 821 970 tonnes, which is 9% higher than the previous season. The update will be released next week, 26 July 2017.

From a global perspective – There was nothing much happening in the EU sunflower seed market on Friday’s trade session. Prices remained unchanged from the previous day, closing at S$400 per tonne.

In terms of production, the weather will remain a key focus in the market as the crop is still at early stages of development. There are still lingering concerns of dryness in some parts of the EU. However, the European Commission remains optimistic that this year’s sunflower seed production could increase by 5% from the previous season to 9.0 million tonnes.

SAFEX Beef carcass:

On Friday, the SAFEX beef carcass market ended the week on a quiet note, with the price unchanged from the previous day, closing at R46.00 per kilogramme . This was due to thinly traded volumes at the stock exchange.

Worth noting is that the beef market is showing some levels of normalisation after the 2015-16 El Nino-induced drought. Data from the Red Meat Levy Admin shows that South African farmers slaughtered 202 886 head of cattle in May 2017, up by 5% from the previous month.

With that said, this is still 18% lower than the corresponding period last year (drought year with higher slaughtering rate). We will monitor the developments closely to determine the impact on prices.

RSA Potatoes:

The South African potatoes market lost ground in Friday’s trade session with the price down by 2% from the previous day, closing at R25.91 per bag (10 kg bag). These losses followed a 13% uptick in stocks at the end of the previous day’s session to 1.35 million bags (10 kg bags).

However, in Friday’s session, the market saw a strong buying interest which subsequently led to a 1% decline in stocks to 1.33 million bags (10kg bags). This implies that the potatoes prices could see extended losses in today’s session.

RSA fruit:

On Friday, the fruit market ended the day mixed. The apple price was up by 3% from the previous day, closing at R6.50 per kilogramme. These gains were largely on the back of strong buying interest, as well as lower stocks of 181 839 tonnes.

The bananas price was up by 9% from the previous day, closing at R7.24 per kilogramme, also supported by strong buying interest.

Meanwhile, the oranges price was down by 1% from the previous day easing at R2.70 per kilogramme. These losses followed a 22% uptick in stocks to 333 254 tonnes.

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