Agbiz Morning Market Viewpoint on Agri-Commodities: 03 April 2017

SA’s wheat import tariff revised down: 31 March 2017
March 31, 2017
Sonkrag in dam los probleme op
April 3, 2017

Agbiz Morning Market Viewpoint on Agri-Commodities: 03 April 2017

Highlights in today’s morning note

Weather

The weather forecast for this week shows a possibility of light showers across South Africa. The forecast rainfall varies between 16 and 35 millimetres. On the one hand, the wet conditions do not bode well with summer crops that are maturing, as they need dry and warm conditions at these stages of development. On the other, winter crop growing areas will benefit from wet conditions, with plantings set to commence over the next few weeks.

 

Maize:

South African maize crop is in good condition across the country. The forecast rainfall will not be of much influence as the crop is already maturing. If anything, it could cause harvest delays in areas that have already started with the process, particularly the irrigation areas.

On the global front – this morning Chicago maize price was up by 2.51% from the level seen at midday Friday. These gains came after the USDA indicated that US farmers intend to plant 90.0 million acres, which is 4.0 million acres below the area planted last year and slightly below market expectations of 90.9 million acres. This decline was mainly due to expected expansion in soybean acreage.  

Elsewhere, the International Grains Council forecasts 2016/17 global maize production at 1.053 billion tonnes, up by 8% from the previous season. This is primarily tied to production increases in South Africa, Brazil, India, Ukraine the US and Russia.

In the same season, global consumption is set to reach 1.038 billion tonnes, up by 7% from the previous season, largely driven by expected uptick in global feed demand and industrial use. Overall, the 2016/17 global ending stocks are estimated at 225 million tonnes, which is an 8% annual increase.

 

Wheat:

South Africa’s wheat import tariff has been revised down to R1 190.19 per tonne, which is a 25% decline from the rate of R1 591.40 per tonne. This new duty was calculated on the 09 February 2017 following an upsurge of the international wheat prices but only published in the Government Gazette to make it official the 31st March 2017 (See: SA’s wheat import tariff revised down, 31 March 2017). 

Overall, this will lower the cost of wheat imports to South Africa. The 2016/17 wheat imports are forecast at 1.5 million tonnes and so far, South Africa has only imported 26% of this estimated volume. 

Weather forecasts show a possibility of rainfall across the wheat producing areas of the country within the next two weeks. This will be beneficial as plantings activity is set to commence over the coming weeks. Moreover, this adds to an already positive sentiment that was signalled by the South African Weather Services, indicating is a likelihood of above-normal rainfall for late autumn to mid-winter (June-July-August).

Although this is encouraging, it is worth noting that there are still some risks in the long run. The Weather Services recently indicated that there is the possibility of an El Niño event late this year. This could bring a dry spell across the country and negatively affect the crops.

 

Soybean:

In eastern parts of South Africa, some farmers have started harvesting their soybean crop and yields are reportedly above average which supports the National Crop Estimate’s view of a possible record crop this season. However, the forecast rainfall this week could cause harvest delays.

In global markets – this morning Chicago soybean price was down by 1.56% from the level seen at midday Friday. This follows the USDA report which indicated that US farmers intend to plant 89.5 million acres of soybeans this season, well above average analyst expectations of 88.2 million acres. Moreover, this is 6.1 million acres higher than the area planted the previous season. This increase is set to come at the expense of maize acreage, due to profitability levels.

Elsewhere, the International Grains Council forecasts 2016/17 global soybean production at 341 million tonnes, which is 8% higher than the previous season. Moreover, the 2016/17 soybean ending stocks are estimated at 38 million tonnes, which is 15% higher than the previous season. The key contributors to this increase are the US, Brazil, China, India, Paraguay and Ukraine.

 

Sunflower seed:

This week promises light showers across the country, which should be beneficial for sunflower seed crop that was planted late, particularly the western parts of the North West province. Overall, South Africa’s sunflower seed market are still well supplied, despite the downward revision of the crop estimate. The ending stocks were recorded at 162 439 tonnes in February 2017, which is treble the volume seen the in the corresponding period last year.

 

SA beef:

The SAFEX beef market saw a quiet day during Friday’s trade session, with the price unchanged from the previous day’s level, closing at R44.50 per kilogramme. This was due to lower volumes traded on the stock exchange.

With that said, there is some bullish sentiment in the beef market which comes from softer slaughtering activity as farmers continue restocking their herds. This is after recent rainfall led to a notable improvement in grazing fields, as well as relatively lower feed costs. Data from the Red Meat Levy Admin shows that in February 2017, South African farmers slaughtered 192 186 head of cattle, which is 7% lower than the previous month and 17% lower than the same period last year.

 

Potatoes:

On Friday, the South African potatoes market saw notable losses owing to higher stock levels.  At the start of the session, the stocks were estimated at 1 273 763 bags (10 kg bags), up by 15% from the previous day, due to ongoing harvest activity. 

Moreover, during the session, the market saw further increases in deliveries and that led to a 3% uptick in deliveries to 1 316 278 bags (10 kg bags).

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