Agbiz Morning Market Viewpoint on Agri-Commodities: 13 March

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Agbiz Morning Market Viewpoint on Agri-Commodities: 13 March

Highlights in today’s morning note

Maize:

The USDA, in its World Agricultural Supply and Demined Estimate (WASDE) report, placed South Africa’s 2016/17 maize production estimate at 14.6 million tonnes, up by 12% from the previous month’s estimate and up by 78% from the previous season. This comes on the back of an increase in area plantings, as well as expected higher yields due to favourable weather conditions.

Worth noting is 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 (in other words, the months selected are not the same), (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.

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.

However, there is still some bearish sentiment in the market which emanates from large global maize supplies. The USDA forecasts 2016/17 global maize production at 1.049 billion tonnes, which is 9% higher than the previous season. The key contributors to this season’s global maize crop are the US, Argentina, Brazil and South Africa, with production estimated at 384.78 million tons (+11% y/y), 37.5 million tons (+29% y/y), 91.5 million tons (+37% y/y), and 14.6 million tons (+78% y/y).

Wheat:

On the ground, conditions remain unfavourable regarding prospects for the new season’s wheat production, particularly in the Western Cape. The province has not received much rainfall lately and water levels are critically low – threatening the new season if this dry spell continues for some time.

On the 06 March 2017, the Western Cape’s average dam level was estimated at 30% full, which is 7% lower than the corresponding period last year. In addition, the weather forecast for the next few weeks shows a possibility of dry and warm conditions .

On the global front – this morning Chicago wheat price was down by 0.70% from the level seen at midday Friday due to large global supplies. This comes after the USDA’s WASDE report indicated that 2016/17 global wheat production could reach 751.07 million tonnes, which is 2% higher than the previous season. The key contributors to this season’s global crop are US, Argentina, Canada, Australia and Russia, with production estimated at 62.9 million tons (+12% y/y), 16 million tons (+42% y/y), 31.7 million tons (+15% y/y), 35 million tons (+44% y/y) and 72.5 million tons (+19% y/y).

Soybean:

The crop is in good condition across South Africa. The central and the eastern parts of the country could receive light showers this week, which should enhance crop development, particularly in areas that planted later in the season.

In global markets – this morning Chicago soybean price was up by 0.20% from the level seen at midday Friday owing to the weaker US Dollar against major currencies.

With that said, there is still some bearish sentiment in the market due to large global supplies. The USDA forecasts 2016/17 global soybean production at 340.79 million tonnes, up by is 9% higher than the previous season’s output.

The key contributors to this season’s global soybean crop are the US, Brazil, Argentina, Paraguay and China, with production estimated at 117.2 million tons (+10% y/y), 108 million tons (+12% y/y), 55.5 million tons (-2% y/y), 9.2 million tons (+2% y/y) and 12.9 million tons (+9% y/y).

From the demand perspective, China is set to remain a key buyer of soybeans in the global market, accounting for a share of over 60% in 2016/17 global soybean demand. The country’s 2016/17 soybean import are estimated at 87 million tonnes, up by 5% from the previous season.

RSA Potatoes:

On Friday, the South African potatoes price was down by 8.67% from the previous day due to large stock levels. The increase in stock level is mainly on the back of ongoing harvest activity.

At the start of Friday’s trade session, the stocks were at 1 111 000 bags (10 kg bags), which was the largest volume in the past seven trading days. Towards the end of the session, the market saw an increase in deliveries and that led to a 3% uptick in daily stocks to 1 139 194 bags (10 kg bags) – the largest volume last week.

SAFEX Beef:

The SAFEX beef market ended the week on a quiet note, with the price unchanged from the previous day’s level, at R44.00 per kilogramme. This was largely on the back of reduced activity at the stock exchange.

The weekly slaughtering activity shows a slowing trend which suggests that farmers have started restocking their herds. This comes after recent rainfall led to a notable improvement in grazing fields, as well as relatively lower feed costs. In the week ending 24 February 2017, slaughtering activity was at 14 638 head of cattle which is 8% lower than the corresponding period last year.

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