Agbiz Morning Market View Point on Agri-Commodities 27 March 2017

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Agbiz Morning Market View Point on Agri-Commodities 27 March 2017

Highlights in today’s morning note
 
Weather:
 
The weather forecast for the next eight days shows a possibility of dry and warm weather conditions across South Africa, with light showers along the coast of Kwa-Zulu Natal (figure 1). Warm weather bodes well with the majority of summer crops as they are at maturing stages of growth.
 
Maize:
 
The maize crop is in good condition across South Africa which supports the National Crop Estimate Committee’s view of a possible bumper crop. Tomorrow, the Committee will release its second production estimate. Reuters poll of analysts placed South Africa’s 2017/18 maize production estimate at 14.35 million tonnes, up 3% from the Committee’s first estimate of 13.92 million tonnes and 84% higher than the previous season. Meanwhile, Bloomberg’s poll of analysts suggests that the Committee could keep the estimates unchanged at 13.92 million tonnes.
 
Weather forecast for this week shows a possibility of dry and warm weather conditions across South Africa’s maize belt. This bodes well with the crop that is already maturing or at early harvesting stages, particularly the irrigation areas.  With that said, the western parts of the North West province planted late and still needs rainfall to ensure that the area gets good yields. Therefore, this forecast dryness does not bode well with that particular area. Broadly speaking, conditions are well across South Africa’s maize growing areas.
 
On the global front – this morning Chicago maize price was up by 0.28% from the level seen at midday Friday, mainly supported by the weaker US Dollar against major currencies. Moreover, weekly sales data also added support to the market. Last week, the US weekly maize export sales were reported at 1.35 million tonnes, well above market expectations of 1.20 million tonnes.
 
Looking ahead, FC Stone forecasts the US 2017/18 maize area plantings at 37.1 million hectares, which is 2% below the previous season. This loss will be for the benefit of the soybean crop, which is set to see gains in the area due to better profitability status.  We will get the official USDA estimates on Friday.
 
Wheat:
 
Dry weather outlook across many parts of South Africa remains a concern as farmers will soon start preparing soils for the new season wheat crop. 
 
Worth noting is that this is typically a dry period for the winter wheat growing areas such as the Western Cape. However, what has raised concerns are talks of possible prolonged dry spell this season. The South African Weather Services and Australian Bureau of Meteorology forecasts a possibility of an El Niño weather event later this year. This weather phenomenon is typically associated with hot and dry weather conditions. If this materialises, it could negatively affect the winter wheat growing areas of South Africa.
 
Sunflower seed:
 
There are still reports of sclerotinia disease in the western parts of the North West province. This could lower the crop yields, but the extent of it is still unclear. The 2016/17 sunflower seed production forecast for the North West province is 304 500 tonnes, which is roughly 33% of the national production forecast.  Tomorrow, we will get an update when the National Crop Estimate Committee releases its second production forecast. Perhaps, this could also give us an indication of the potential impact of the sclerotinia disease in the overall crop.
 
The weather forecast for this week shows a possibility of dry and warm conditions across the country. On the one hand, this bodes well with the crop that is already maturing. On the other, the areas that planted late, particularly the western parts of the North West province, will suffer from dryness, as they still need wet conditions to boost the yields. 
 
Soybean:
 
In global markets – this morning Chicago soybean price was down by 1.12% from the level seen at midday yesterday due to prospects of large global supplies. 
 
With that said, the focus is on Friday’s USDA data which will give us a view of US 2017/18 prospective crop plantings. A number of private analysts expect the soybean area to increase by at least 6% from the previous season to levels above 35 million hectares. Alledale Inc and FC Stone have pencilled 35.9 million hectares and 35.3 million hectares for US 2017/18 soybean plantings, respectively. This is likely to be at an expense of maize area plantings.
 
In South America, the weather forecast shows a possibility of wet weather conditions this week.  This could potentially delay harvest processes in Brazil and potentially disturb logistical activities (and export activity). On the 24th March 2017, Brazil had harvested 72% of its soybean crop, still ahead of the corresponding period last year. The country’s 2016/17 soybean production is estimated at 108 million tonnes, which is 12% higher than the previous season.
 
In Argentina, the Buenos Aires Grains Exchange has lifted its 2016/17 soybean production estimate to 56.5 million tonnes, up by 1.7 million tonnes from the previous estimate. That said, this is still 2.3 million tonnes less than the previous season due to reduced area plantings and unfavourable conditions earlier in the season
 
Potatoes:
 
On Friday, the South African potatoes market ended the week in negative territory, with bearish pressure coming from higher stock levels. At the start of the session, the stocks were estimated at 1 130 884 bags (10 kg bags), which is 16% higher than the previous day.
 
Moreover, during the session, the market saw an increase in deliveries and that boosted stocks to 1 157 813 bags (10 kg bags), which is 2% higher than the starting level. As a result, potatoes price fell by 1.82% from the previous day, closing at R25.94 per 10 kilogrammes.
 
SA fruit:
 
On Friday, the Johannesburg Fresh Produce Market ended the week mixed. The apple price was down by 1.81% from the previous day’s level, closing at R7.06 per kilogramme due to weak buying interest.
 
Meanwhile, the oranges market gained 3.21% from the previous day, closing at R3.54 per kilogramme, due to a 31% decline in daily stock levels to 117 436 tonnes. The bananas market also closed in positive territory, gaining 5.83% from the previous day’s level and closed at R9.81 per kilogramme. These gains were on the back of a 42% decline in daily stock levels to 131 379 tonnes.
 
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