Agbiz Morning Market Viewpoint on Agri-Commodities: 13 July 2017.

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Agbiz Morning Market Viewpoint on Agri-Commodities: 13 July 2017.

Highlights in today’s morning note

Maize:

The USDA remains upbeat on South Africa’s maize production, forecasting total production at 16.40 million tonnes, which is more than double the previous season’s crop. This comes on the back of an increase in area plantings, as well as expected higher yields due to favourable weather conditions.

It is worthwhile to note that the USDA’s crop estimate is not directly comparable to the South African Crop Estimate Committee’s figures due to two basic reasons: (1) the marketing years are different, (2) the USDA estimates the overall national maize production, while the Crop Estimate Committee focuses only on commercial maize production. Differences aside, both agencies are painting an optimistic picture for South Africa’s maize supplies this year. 

The harvest process is in full swing across the country. Farmers delivered 1.1 million tonnes of maize to commercial silos in the week ending 07 July 2017. This is 25% lower than the previous week’s deliveries. About 64% of this was white maize and 36% was yellow maize. This brought the country’s 2016/17 total maize deliveries for “week 1 to 6” to 9.3 million tonnes.

On the global front – This morning the Chicago maize market was down by 4.11% from levels seen at midday yesterday owing to profit-taking following higher price levels in the past few days.

The drier conditions in the US have strained the new season maize crop. However, the USDA remains optimistic about the total harvest. The agency revised its 2017/18 US maize production estimate up by 1% from the previous month to 362.09 million tonnes. However, this is 6% lower than the previous season.

Wheat:

The most recent weather updates show a possibility of light showers across the western parts of the Western Cape and Northern Cape provinces within the next eight days. These showers will most probably vary between 13 and 25 millimetres, which will not be sufficient to improve soil moisture and crop conditions.

Some farmers continue to deliver the old-season wheat crop to commercial silos. In the week ending 07 July 2017, wheat deliveries were recorded 1 741 tonnes, which is 58% lower than the previous week’s volume. Overall, South Africa’s 2016/17 total wheat deliveries for “week 1 to 40” currently stand at 1.86 million tonnes.

On the global front – This morning the Chicago wheat price was down by 3.55% from levels seen at midday yesterday due to profit-taking following a good performance in the past few days.

The persistent drier wheat conditions in the US continue to threaten the US wheat crop, particularly spring wheat . Evidently, the USDA has slashed its US wheat production estimates for 2017/18 season by 4% from the previous month to 47.89 million tonnes. This is 24% lower than the previous season. Moreover, this is slightly below the International Grains Council (IGC) estimate of 48.6 million tonnes.

In terms of global production, the USDA revised its estimate down by 0.2% from the previous month to 737.83 million tonnes. This is 2% lower than the previous season, with notable decline set to be in the US, Canada and Australia. Meanwhile, other areas such as the EU region, and Argentina could see a recovery in production this season.

Soybean:

In global markets – This morning Chicago soybean price was down by 0.29% from levels seen at midday yesterday owing to an upward revision in US soybean production estimate. 

The USDA revised its estimate for US 2017/18 soybean production up by 0.1% from the previous month to 115.9 million tonnes. Nonetheless, 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.

The weather remains a key focus in the US soybean market. The latest weather models show some improvements in some parts of the Midwest, with prospects of light scattered showers within the next eight days. With that said, the region needs effective rainfall to improve soil moisture as the crop approaches the pollination stage of growth.

In terms of global production, the USDA forecasts 2017/18 global soybean production at 345.09 million tonnes, up by 0.1% from the previous month, but 2% lower than the previous season. This is well below IGC’s production estimate of 348.00 million tonnes. Moreover, the USDA forecasts the 2017/18 soybean ending stocks at 93.53 million tonnes, up 1% from the previous month, but down by 1% from the previous season. 

RSA Potatoes:

The South African potatoes market lost ground in yesterday’s trade session with the price down by 6% from the previous day, closing at R26.95 per bag (10 kg bag). These losses followed a 17% uptick in stocks at the end of the previous day’s session.

In yesterday’s session, the market saw an increase in deliveries on the back of ongoing harvest activity.  This subsequently led to an additional 10% in stocks to 1.20 million bags (10kg bags). This implies that the potatoes prices could see extended losses in today’s session.

RSA fruit:

The fruit market ended the day on firm footing in yesterday’s trade session. The apple price was up by 1% from the previous day, closing at R6.78 per kilogramme. These gains were largely on the back of strong buying interest, which subsequently led to an 11% decline in daily stocks to 201 536 tonnes.

The banana and orange prices were up by 19% and 16% from the previous day, closing at R6.76 per kilogramme and R2.82 per kilogramme, respectively. These gains were due to strong buying interest, but will most likely be short lived due to large stocks of both bananas and oranges.

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