Highlights in today’s morning note
The weather forecast for the week shows a possibility of dry and warm conditions across South Africa (see figure 1). This is with the exception of the western parts of the Western Cape and Northern Cape provinces which could receive light showers of 10 millimetres. In addition, Limpopo province could also receive light showers. This will have minimal impact on summer crops but will be beneficial for winter crop growing areas, ahead of the planting period.
Tomorrow, the National Crop Estimate Committee (CEC) will release its third production estimates. Last month, the Committee placed its estimated at 14.3 million tonnes, which is an 83% increase from the previous season. About 8.5 million tonnes was white maize and 5.8 million tonnes was yellow maize.
Both Bloomberg and Reuters analysts survey forecast a 1% decline in South Africa’s 2016/17 maize production from the previous month estimate to 14.2 million tonnes. This decline will most likely be on white maize due to persistent dryness across the late planting areas in the past few weeks.
Regionally, recent media reports indicate that the Zambian President has announced that a temporary ban on maize exports would be lifted this year, as production surplus is expected. Zambia’s 2016/17 maize production is set to exceed 3 million tonnes, which would be a notable uptick from the previous season’s crop of 2.87 million tonnes. Zambia’s prospects of returning to the export market, together with expected increase in Malawi’s supplies, could present competition for South Africa’s maize exports in the region .
On the global front, this morning Chicago maize price were up by 0.28% from the level seen at midday Friday due to the weaker US Dollar against major currencies.
The expected warm and dry weather conditions in the US this week could accelerate planting activity. Last week, US farmers had planted 6% of the intended acreage, which is 6% behind the corresponding period last year. The US 2017/18 maize plantings are estimated at 36.4 million hectares, which is 4% lower than the previous season. The plantings progress update will be released this evening.
With winter wheat planting season fast approaching, weather becomes an important factor in the South African wheat market. The weather forecast for the next eight days presents a possibility of light rainfall across the western parts of the Western Cape, which bode well with the planting season.
Tomorrow, the CEC will release the intentions to plant data for wheat. Bloomberg’s poll of analysts’ forecasts the area at 477 075 hectares in 2017, which is a 6.2% decline from the previous season.
From a trade perspective, South Africa’s wheat import tariff could soon increase by 13%, from the current level of R1 190 per tonne to levels around R1 350 per tonne. This comes after the international wheat prices US No2 HRW (fob) deviated by US$10 below the base price of US$205.33 for three consecutive weeks. Global wheat prices have been pressured by large supplies.
The newly calculated import duty will not be active until published in the Government Gazette. Meanwhile, there is an ongoing review of import tariffs by the National Treasury, with the outcome expected at any moment.
On the global front, this morning Chicago wheat price was up by 0.25% from the level seen at midday Friday, with support also on the back of a relatively weaker US Dollar against major currencies.
With spring wheat plantings underway, weather becomes an import factor in the US wheat market. Fortunately, the forecast for the week shows a possibility of dry and warm conditions, which should accelerate the plantings. Last week, the US had planted 13% of the targeted area, which is 12% behind the corresponding period last year. We will receive an update this evening.
Elsewhere, data from Statistics Canada shows the 2017/18 season’s all wheat acreage at 23.2 million acres, down 0.1% from last season, but above market expectations of 22.4 million acres.
Soybean harvest activity is almost in full swing across the eastern parts of South Africa. The activity (harvest) could gain further momentum this week, with weather conditions expected to be dry and warm for the most part of the week. So far, the yields are reportedly above average, which supports the CEC’s view of a possible record crop of 1.2 million tonnes.
Tomorrow, 25th April 2016, the CEC will release its updated production estimates. Crop conditions have remained fairly favourable since last month’s estimate. As a result, we believe that the Committee will keep its production estimate unchanged.
In global markets, this morning Chicago soybean price was up by 0.84% from the level seen at midday Friday, largely driven mainly by US Dollar weakness.
Recent reports that from the Commerce Department indicated that the US would act to restrict imports of biofuels from Argentina. The move is supportive of US soybean market, as it would increase demand for US produced fuels that use vegetable oils.
Weather remains a key focus in the US soybean market, as planting activity is currently underway. The weather forecast for the week shows a possibility of dry conditions, which could accelerate planting activity. The US 2017/18 soybean acreage is estimated at 36.2 million hectares, a 7% annual increase.
Although there are areas that could possibly see damages or lower yields due to persistent dryness over the past few weeks in the western parts of the North West province, most parts of the crop are in good condition. The crop benefited from the recent rainfall and is currently in the maturation process.
Looking ahead, frost will remain a key concern over the next few weeks. That said, if there is no frost until mid-May, the sunflower seed crop could finish off well this season. Tomorrow, 25th April 2017, the CEC will release its third assessment for the crop. Last month’s estimate was 896 060 tonnes, which is 19% higher than the previous season’s estimate.
In global markets, on Friday, the EU’s sunflower seed market gained ground, with the price up by 0.5% from the previous day, closing at US$399 per tonne due to strong global demand for sunflower seed products (oil and meal).
According to ProAgro, in March 2017, Ukraine’s sunflower oil exports reached 683 000 tonnes, which is a record monthly volume.
Moreover, data from UkrAgroConsult shows that from 1 to 19 April 2017, Ukraine’s sunflower oil and meal exports reached 226 000 tonnes and 137 100 tonnes, respectively.
Despite this strong buying interest, the Black Sea sunflower oil market saw another quiet day, with the price unchanged from the previous day’s level, closing at US$719 per tonne.
On Friday, the Johannesburg Fresh Produce Market saw widespread gains. The apple price was up by 4% from the previous day, following a 2% decline in stock levels to 262 679 tonnes.
The bananas market gained 10% from the previous day, closing at R8.56 per kilogramme, largely supported by a 17% decline in stock levels to 164 860 tonnes.
Lastly, the oranges market gained 2% from the previous day, closing at R3.13 per kilogramme. This was on the back of strong buying interest and relatively lower stock levels of 297 621 tonnes, from levels around 300 000 tonnes at the start of the week.
On Friday, the South African potatoes market lost ground and closed in negative territory, with bearish pressure coming from higher stock levels. At the start of the session, the stocks were at 890 000 bags (10 kg bags), which is 21% higher than the previous trading day.
During the session, there was an uptick in deliveries on the back of increasing harvest activity, after a long weekend. This led to a 21% uptick in daily stock levels 1 076 185 bags (10 kg bags).
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