Agbiz Morning Market Viewpoint on Agri-Commodities: 18 July 2017.

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Agbiz Morning Market Viewpoint on Agri-Commodities: 18 July 2017.

Highlights in today’s morning note

Maize:

The next two weeks could experience dry and cool weather conditions across the South African maize belt which will most likely add momentum to the harvest activity. The areas that have completed the harvest process received exceptional yields. This supports the National Crop Estimate Committee’s (CEC) view of a possible record crop of 15.63 million tonnes .

On the global front – This morning the Chicago maize market was up by 2.41% from levels seen at midday yesterday owing to rising fears of possible crop losses on the back of drier conditions.

The past few weeks have been dry and warm across the US Midwest which is not favourable for the new season crop. Evidently, at the beginning of this week, only 64% of maize crop was rated good/excellent, which is 12% below the corresponding period last year.

There could be little to no improvement this week as the weather forecast shows a possibility of continuous dryness in some parts of the US Midwest. The USDA forecasts the US 2017/18 maize production at 362.09 million tonnes, down by 6% from the previous season.

Elsewhere, some parts of the EU are reportedly dry and that could strain the new season crop. The International Grains Council forecasts the EU’s 2017/18 maize production at 60.2 million tonnes, which is 1% lower than the previous season. An update of this estimate will be released later this month and that will account for the potential impact of the continuous dryness.

Wheat:

The weather forecasts have changed drastically, it now shows a possibility of cool and dry conditions throughout the country within the next two weeks. This is with the exception of the western areas of the Western Cape province which could receive light showers in the week ending 02 August 2017

This essentially means the domestic wheat crop could be strained within the next two weeks as it urgently needs rainfall. Also worth noting is that this season’s wheat crop is about a month and a half behind schedule due to delayed plantings earlier in the season.

Next week, 26 July 2017, the National Crop Estimate Committee will release its preliminary area planting estimate. Farmers intend to plant 2.4% less area than the previous season’s 508 365 hectares. The first assessment of the impact of the current drier conditions will be reflected in the production estimates which are due for release next month, 29 August 2017

On the global front – This morning the Chicago wheat price was up by 1.58% from levels seen at midday yesterday, also supported by fears of possible crop losses due to drier weather condition.

At the beginning this week, only 34% of spring wheat was rated good/excellent, compared to 69% in the same period last year. This reflects the impact of the persistently drier weather conditions across the US Midwest.

Soybean:

In the absence of major data releases, the market will largely be driven by domestic currency fluctuations and changes in international soybean prices this week.

Harvesting is over across the country with yields above average. This supports the National Crop Estimate Committee’s (CEC) view of a record crop of 1.34 million tonnes, which is 81% higher than the previous season. An update of this will be released on 26 July 2017.

In global markets – This morning Chicago soybean price was up by 0.51% from levels seen at midday yesterday owing to unfavourable weather conditions in the US Midwest.

The US soybean crops are not in good shape due persistent the dryness across the fields. At the start of this week, only 61% of the crop was rated good/excellent, which is 10% lower than the same period last year.

Looking ahead, the weather models paint a mixed picture for the US soybean market. The central and northern parts of the Midwest are set to remain dry and warm within the next few days. This is not conducive for crops which urgently needs moisture at this stage of development. Meanwhile, the eastern and southern areas could receive light showers.

Elsewhere, recent reports from Brazil suggest that the BR-163 highway, which was blocked by protests last week, has been cleared. This is a major road for transporting commodities, including soybeans, from production areas to the northern ports.

RSA Potatoes:

The South African potatoes market saw extended losses in yesterday’s trade session with the price down by 4% from the previous day, closing at R24.85 per bag (10 kg bag). These losses were largely on the back of large stocks of 1.33 million bags (10kg bags) at the start of the session.

However, in yesterday’s session, the market saw a decline in deliveries due to slow harvest activity after the weekend. In addition, there was also an increase in buying interest. This subsequently led to a 22% decline in stocks to 1.04 million bags (10kg bags).

RSA fruit:

The fruit market started the week on firm footing with lower stocks driving the market. The apple price was up by 2% from the previous day, closing at R6.64 per kilogramme. These gains were largely on the back of strong buying interest, as well as a 14% decline in daily stocks to 156 653 tonnes.

The bananas price was up by 6% from the previous day, closing at R7.69 per kilogramme. This followed a 27% decline in daily stocks to 130 301 tonnes. Lastly, the orange market gained 14% from the previous day, closing at R3.09 per kilogramme, also supported by a 6% decline in daily stocks to 312 214 tonnes.

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