Highlights in today’s morning note
This will likely be a quiet week in the maize market with farmers and other role players attending the NAMPO harvest festival in Bothaville, Free State. Other than that, drier weather presents conducive conditions for harvest activity and likely to remain this way throughout the month.
Zambia has lifted the maize export ban, following a 29% annual uptick in maize production to 3.6 million tonnes in the 2016/17 production season.
Zambia, Zimbabwe and Malawi are set to receive bumper harvests. It appears that the Fall Armyworm had minimal impact on crops. This means that Southern Africa will be well supplied with maize this season, which therefore raises a concern about South Africa’s white maize exports activity.
We believe that South Africa will have 1.3 million tonnes of white maize for export markets this year, but it’s unclear if there will be enough appetite in the world market for this volume. Mexico, which is also a key consumer of white maize, is well supplied and unlikely to import notable volumes of white maize this season. Other African markets which face shortages such as Tanzania, Burundi and Kenya have restrictions on genetically modified (GM) maize imports which will probably lock South Africa out of those markets, as roughly 85% of the country’s maize in GM.
The National Crop Estimate Committee placed South Africa’s 2016/17 final wheat production estimate at 1.9 million tonnes, which is a 33% uptick from the previous season. This was on the back of an increase in area planting, as well as favourable weather conditions.
That said, the dynamics in the 2017/18 season are quite different, characterised by harsh drier conditions. Weather forecast presents a possibility of dry and warm conditions this month, which will possibly slow winter wheat planting activity around the Western Cape province. With that said, there is still time as the planting window runs from April to July.
In some areas around Swartland, farmers planted few hectares following light showers in the past few weeks, but the emerged grain plants are reportedly dying off due to dryness. In other areas that have planted, there are risks that crops could fail to germinate due to dryness.
While the current dryness is concerning, it is worth noting that nearly half of South Africa’s wheat crop is planted under irrigation areas of the Northern Cape and Free State province, which should thrive well as dam levels in these respective provinces benefited from summer rainfall .
On the global front – this morning, the Chicago wheat market was down 1.40% from the previous day’s level with easing concerns about crop damage in the US underpinning the market.
With winter crops still at early growing stages and spring wheat at planting stages across the US, the weather has become an important factor in the market. The forecast for the week shows a possibility of wet conditions which should low planting activity and negatively affect the winter wheat crop.
US farmers had planted 78% of the targeted area for this season’s spring wheat crop on the 14 May 2017, which is 9% behind the corresponding period last year.
In global markets – this morning Chicago soybean price was up 0.10% from the level seen at midday yesterday due to the weaker US Dollar against major currencies.
Weather forecast for the US Midwest shows a possibility of wet conditions within the next eight days, which could slow planting activity. US farmers had planted 32% of the targeted acreage on the 14 May 2017, which is 2% behind the same period last year.
There are positive prospects for US 2017/18 soybean crop, despite the plantings delays. Informa Economics estimates that the area plantings could reach 36.3 million hectares, which is a 7% annual uptick
Elsewhere, South American farmers are still harvesting the 2016/17 crop. Argentinian farmers had harvested 71% of the crop on the 15 May 2017, ahead of the corresponding period last year. That said, harvest could be delayed this week due to expected wet weather conditions across the country.
Argentina’s 2016/17 soybean production is estimated at 57.5 million tonnes, which is slightly below the previous season’s crop of 58.8 million tonnes.
The harvest is underway in some sunflower seed producing provinces. The forecast drier conditions within the next two weeks could add momentum to the process and also benefit the areas that planted late, with the crop still drying up.
On the negative side, farmers in some areas that have harvested are reporting yields lower than expectations due to the sclerotinia disease. The key risk on the horizon is a possibility of frost. So far, the weather has been fairly favourable and if it remains this way until the end of this month, the crop could finish off well.
In global markets – yesterday the EU’s sunflower seed market gained ground with the price up 0.5% from the previous day, closing at US$405 per tonne. These gains were on the back of spillover support from the vegetable oil market, particularly palm oil.
The South African potatoes market extended its losses during yesterday’s trade session with large stocks still underpinning the market. At the start of the session, the stocks were at 1 239 318 bags (10 kg bags), up 3% from the previous day.
However, during the session, the market saw moderate buying interest, coupled with lower deliveries following a weekend. As a result, stocks fell 18% from the previous day and eased at 1 019 337 bags (10 kg bags).
There was no activity in the SAFEX beef market during yesterday’s session owing to limited participation in the stock exchange. With that said, the market sentiment in the beef market remains slightly bullish due to easing slaughter activity, as farmers continue to restock their herds after a drought spell.
The most recent data from the Red Meat Levy Admin shows that African farmers slaughtered 238 097 head of cattle in March 2017, which is 6% lower than the corresponding period last year.
The fruit market trade was mixed during yesterday’s trade session, but mostly under pressure due to higher stocks. The apples market lost 7% from the previous day, closing at R6.47 per kilogramme due to a 6% increase in daily stock level to 225 553 tonnes.
The bananas market was down 6% from the previous day, closing at R8.11 per kilogramme. The support was on the back of higher stock levels of 139 986 tonnes, which is also a 6% uptick from the previous day.
Whereas, the apple market gained 4% from the previous day, closing at R2.87 per kilogramme due to relatively lower stocks of 272 153 tonnes.
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