Highlights in today’s morning note
The weather forecast shows a possibility of light showers across many areas of South Africa within the next eight days. These expected showers vary between 16 and 50 millimetres and could slightly improve soil moisture and dam levels, and in turn, benefit summer crops. This is with the exception of the western parts of the Western Cape and Northern Cape province which could remain dry and warm over the observed period (see figure 1).
South African farmers continue to deliver the previous production season’s (2015/16) maize crop to commercial silos. In the week ending 03 February 2017, total maize producer deliveries were recorded at 11 007 tons (59% was yellow maize and 41% was white maize). This was well below the previous week’s volume of 32 453 tons. Overall, South Africa’s total maize producer deliveries for “week 1 to 40” currently stand at 6.49 million tons.
On the global front – this morning Chicago maize price was up by 0.27% from the level seen at midday yesterday, partly on the back of a relatively weaker US Dollar against major currencies.
In the absence of major news in the global market, the key focus has been this evening’s USDA monthly World Agricultural Supply and Demand Estimates report. Last month, the Agency placed 2016/17 global maize production forecast at 1 billion tons, which is 8% higher than the previous season’s output. Moreover, 2016/17 global maize ending stocks were estimated at 220.98 million tons, which is 5% higher than the previous season.
At the same period, the Agency placed South Africa’s 2016/17 maize production estimate at 13 million tons (compared to 7.5 million tons in 2015/16 production season). This is higher than our estimate of 11.9 million tons. The upward swing is largely driven by an increase in area, as well as expected higher yields in most parts of South Africa.
South African farmers continue to deliver wheat to commercial silos. In the week ending 03 February 2017, wheat deliveries were recorded at 8 071 tons, which fell well below the previous week’s volume of 19 134 tons. This brought South Africa’s 2016/17 total wheat deliveries for “week 1 to 18” to 1.75 million tons.
On the global front – this morning Chicago wheat price was up by 0.23% from the level seen at midday yesterday, also supported by the weaker US Dollar against major currencies.
In the absence of fresh news, the market is currently focusing on this afternoon’s USDA World Agricultural Supply and Demand Estimates report. Last month, the USDA placed 2016/17 global wheat production at 752.69 million tons, which is 2% higher than the 2015/16 output. The upward revision was mainly in the EU countries, with an overall production estimate currently at 144.32 million tons, from the previous estimate of 143.97 million tons. Argentina saw a 1 million ton upward revision from the previous estimate to 15 million tons. In addition, the 2016/17 global ending stocks were set to reach 253.29 million tons, which is 0.5% higher than the previous estimate and 5% higher than the previous season’s one.
In global markets – this morning Chicago soybean price was up by 0.38% from the level seen at midday yesterday, largely driven by strong soybean demand in China.
The USDA’s monthly Word Agricultural Supply and Demand Estimates report will be released this evening. In January 2017, the Agency placed their 2016/17 global soybean production at 337.85 million tons, up by 7% from the 2015/16 output. Moreover, the 2016/17 global ending stocks were estimated at 82.32 million tons, also up by 7% from the 2015/16 ending stock levels.
In the same report, the USDA will release its view on South America’s soybean production estimates. Of late, a number of private analysts signalled an optimistic view of Brazil’s 2016/17 soybean crop. The most recent one is Soybean & Corn Advisor, which placed the country’s production estimate at 104 million tons, up by 9% from the previous season. This followed Safras & Mercado Consultancy and Informa Economics’ estimates, which placed their production estimates at 107.1 million tons and 106.5 million tons, respectively (compared to 95.4 million tons in 2015/16).
In global markets – yesterday the EU’s sunflower seed market saw marginal losses of 0.47% from the previous day’s level, closing at US$421 per ton. This comes on the back of large supplies, with the region’s (EU) production estimated at 8.6 million tons, which is 6% higher than the previous season’s crop.
Meanwhile, the Black Sea region’s sunflower seed oil market gained 0.26% from the previous day’s level, closing at US$761 per ton. These gains were on the back of strong demand for sunflower oil.
Elsewhere, data from Sunseedman showed that on the 8th of February 2017, Argentina‘s sunflower seed harvest was estimated at 36% complete, which is well ahead of the progress seen in the corresponding period last year. With that said, weather forecasts for most parts of the country show a possibility of rainfall this week, which could possibly slow the harvest process.
Argentina’s 2016/17 sunflower seed crop is estimated at 4.0 million tons, from 2.9 million tons in 2015/16. This comes on the back of a 48% annual increase in area plantings to 2.0 million hectares. The key driver behind the increase in area planted was largely the removal of export taxes, which provided an incentive for farmers.
The South African potatoes market lost ground during yesterday’s trade session, with the price down by 3% from the previous day level, closing at R39.93 per bag (10 kilograms). These losses were largely on the back of higher stocks level that was seen at the start of the session.
Additionally, during yesterday’s trade session, the market saw a slight uptick in producer deliveries and that led to a 7% increase in daily stock level to 709 889 bags (10 kg bags).
South African Fruit:
Yesterday the Johannesburg Fresh Produce Market saw widespread losses. The apple price was down by 1% from the previous day’s level, closing at R7.71 per kilogram, mainly pressured by relatively large stock levels of 137 078 tons.
The bananas price saw marginal losses of 0.12% from the previous day’s level, closing at R8.09 per kilogram due to relatively lower buying interest.
Lastly, the oranges market saw substantial losses of 25% from the previous day’s level, closing at R6.56 per ton. It is unclear what the key driver of the market was, as the daily stocks declined substantially to 8 245 tons (compared to 18 644 tons the previous day).
The SAFEX beef market saw a fairly quiet day, with prices unchanged from the previous day’s level, closing at R42.00 per kilogram.
The South African beef market has generally been under pressure since July 2015 due to large supplies. This comes on the back of higher slaughtering rate as farmers were unable to maintain their herds due to drier grazing fields and elevated feed costs. Recent data from the Red Meat Abattoir Association showed that 16 975 head of cattle were slaughtered in the week ending 27 January 2017 . This was still 5% higher than the same period last year, but well below the higher levels that were seen the previous months.
Looking ahead, a recovery of the South African beef industry is dependent on weather conditions. Over the past few weeks, South Africa received moderate rainfall. Vegetation is improving and grazing fields are already replenished. Moreover, the weather forecast suggests South Africa could receive rainfall over the coming weeks, which bodes well with the much-needed improvement in grazing fields. Against this background, we anticipate that farmers will soon start to rebuild their herds, which in turn will lead to a decline in slaughtering rate to the normal levels of 6 500 herd of cattle a week.
Click here to read the full report: Agbiz