Highlights in today’s morning note
South Africa’s winter wheat planting typically starts around April and continues until July. So far, there’s been little activity in the fields. Moreover, dam levels in the province are also low, estimated at 21% full in the week ending 24th April 2017, compared to 30% in the corresponding period last year. Fortunately, nearly half of South Africa’s wheat crop is under irrigation in the Northern Cape and Free State province, which should thrive well as dam levels in these respective provinces benefited from summer rainfall, currently above 80% full.
More concerning is the report from the World Meteorological Organisation which indicated a 60% probability of El Nino weather phenomenon later this year. This means that there is a higher chance that dryness could return to South Africa later this year.
This view concurs with the estimates released a few weeks ago by the South African Weather Services, the Australian Bureau of Meteorology and the Earth Institute at Columbia University. If this materialises, the late wheat plantings could be negatively affected, as most forecasters expect this weather phenomenon to intensify as early as August 2017.
Yesterday the South African maize market maintained the previous day’s gains and closed in positive territory. The support was on the back of higher Chicago maize prices, strong buying interest, as well as the weaker Rand against the US Dollar.
With that said, we still believe that these gains could be short lived due to expected large maize supplies this season. Harvest is currently underway in areas that planted early in the season. So far, yields are reportedly above average, which supports the National Crop Estimate Committee’s view of a possible second-biggest crop on record. Maize is still wet in some areas around the Free State province, but harvesting should start by end of May. In addition, forecast drier weather conditions for the next two weeks presents conducive condition for the harvest process.
Of less importance to the market, but worth noting are reports that the Fall Armyworm has spread across the southern provinces of Angola, which is a key maize producing area. The extent of the damage is still unknown. More information will unfold over the coming weeks.
Soybean harvesting is in full swing across South Africa and set to gain momentum over the next two weeks due to expected drier conditions. In most areas yields are above the 1.6 tonnes per hectare average, which supports the National Crop Estimate Committee’s view of a record crop.
After being a net importer of 271 098 tonnes of soybeans in the 2016/17 season that ended in February 2017, South Africa is set to be a net exporter this season. Exports are estimated at 65 000 tonnes in the 2017/18 season.
Moreover, soybean processing (crush and meal) is set to increase by 15% from the previous season to 980 000 tonnes in the 2017/18 season, owing to expected large domestic supplies.
Sunflower seed harvest is underway and the expected drier conditions in the central and western parts of South Africa within the next two weeks could accelerate the process. Meanwhile, in areas that planted late, warm conditions could support the maturation process of the crop.
Although conditions are largely favourable, frost remains a key concern that could potentially reduce the yields further. However, if there is no frost until mid-May, the sunflower seed crop could finish off well this season. Overall, we believe that the National Crop Estimate Committee could revise its sunflower seed production estimate further downward from the current level of 853 470 tonnes.
In global markets – yesterday, the EU’s sunflower seed market gained ground from the previous day’s level, with the price up by 0.50%, closing at US$405 per tonne. This was on the back of strong global demand for sunflower seed and products (oil and meal).
The International Grains Council forecasts 2016/17 global sunflower seed exports at 2.1 million tonnes, up 3% from the previous season. The key exporters are set to be the EU, Moldova, Ukraine, China and Russia. This is on the back of higher production volumes. Worth noting is that these countries continue to also export large volumes of sunflower oil and meal. From an import perspective, Turkey, Iran, Egypt and Uzbekistan remain key buyers of sunflower seed in the 2016/17 season.
Yesterday the South African potatoes market saw substantial gains, with the price up 12.25% from the previous day, closing at R31.61 per bag (10 kilogrammes). This is the highest price level since 09 March 2017.
These gains were largely on the back of lower stock levels due to reduced harvest activity, following a long weekend. The stocks fell by 24% from the level seen on Friday to 836 090 (10 kg bags).
Yesterday the Johannesburg Fresh Produce Market ended the day mixed. The apple price was down 6% from the previous day, closing at R6.39 per kilogramme, owing to higher stocks of 385 293 tonnes (a 50% uptick from the previous day).
Meanwhile, the bananas market gained 9% from the previous day, closing at R7.80 per kilogramme due to strong buying interest.
The oranges market also closed in positive territory, with the support coming from relatively lower stock levels of 344 291 tonnes, down 10% compared to the previous day.
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