Agbiz Morning Market Viewpoint on Agri-Commodities: 28 March 2017

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March 28, 2017

Agbiz Morning Market Viewpoint on Agri-Commodities: 28 March 2017

Highlights in today’s morning note
 
Wheat:
 
Recent reports from the South African Weather Services suggest that there is a likelihood of above-normal rainfall for late autumn to mid-winter (June-July-August). If this materialises, it would benefit the winter wheat growing areas of South Africa.
 
With that said, the Weather Services also indicated that the possibility of an El Niño event late this year has risen significantly and could lead to dry and warm weather conditions. Although it would be premature to provide any certainty on this outlook, it is worth noting that the Australian Bureau of Meteorology concurs with our local Weather Services and has noted a 50% chance of El Niño development later in 2017.
 
Winter wheat farmers are currently off season and set to commence with new season plantings late next month. If the forecast rainfall in the period between June and August materialises, then the crop could be in better growth stages by the time El Niño intensifies later in the year. We will monitor the developments over the coming months.  
 
SAGIS reported South Africa’s monthly wheat demand at 231 895 tonnes in February 2017 – down by 5% from the previous month and down by 7% from February 2016. Additionally, South Africa’s wheat ending stocks were reported at 1.66 million tonnes in February 2017, up by 1% from the previous month and up by 6% from the corresponding period last year. 
 
Maize:
 
Yesterday the South African maize market gained ground and closed in positive territory due to the weaker ZAR/USD exchange.  Moreover, there was also some bargain hunting that provided support to the market. This came after lower maize prices that were seen at the start of the session sparked buying interest amongst participants. Despite these gains, there is still some bearish sentiment in the market which emanates from positive prospects about the new season crop.
 
Recent data from SAGIS showed that in February 2017, South Africa’s total maize (monthly) demand was at 746 807 tonnes, with a 56% share being yellow maize and 44% being white maize. Overall, this was 7% lower than the volume consumed in January 2017 and 14% lower than the corresponding period last year.
 
In addition, South Africa’s total maize ending stocks were at 1.92 million tonnes in February 2017, with 46% share being yellow maize and 54% being white maize. This is 23% lower than the previous month and 33% lower than February 2016.
 
Sunflower seed:
 
South Africa imported 30 015 tonnes of sunflower seed in February 2017, well above the previous month’s volume of 22 tonnes.  All of this came from Romania. This brought South Africa’s 2016/17 total sunflower seed imports to 70 643 tonnes, well above market expectations of 66 000 tonnes. About 54% of this came from Bulgaria, 42% from Romania and the rest from Botswana, Malawi, and Argentina.
 
At the same time, South Africa exported 5 tonnes of sunflower seed to Botswana. The 2016/17 sunflower seed exports reached 205 tonnes. About 52% went to Swaziland, 23% to Namibia, 20% to Botswana and 5% to Zimbabwe.
 
From a consumption perspective, South Africa saw a 12% increase in consumption (crushed oil and cake) when compared to the January 2017 and double the volume seen in a corresponding period last year (February 2016), with overall volume reaching 69 299 tonnes.
 
Also worth noting is that South Africa’s sunflower seed ending stocks were recorded at 162 439 tonnes in February 2017, down by 18% from the previous month on the back of increasing consumption. However, this was treble the volume seen the in the corresponding period last year.
 
Soybean:
 
South Africa imported 2 103 tonnes of soybeans in February 2017, which is well above the previous month’s imports of 204 tonnes. About 82% of this came from Zambia and the 18% from Ethiopia. Overall, the country imported 271 098 tonnes of soybeans in the 2016/17 marketing year, slightly above market expectations of 270 000 tonnes. About 97% came from Paraguay and the rest from Zambia, Ethiopia and Nigeria.
 
Moreover, South Africa exported 80 tonnes of soybean to Mozambique in February 2017. Overall, the country’s 2016/17 soybean exports stand at 6 745 tonnes. About 61% went to Zimbabwe and 39% to Mozambique.
 
From a consumption perspective, South Africa’s soybean consumption (crushed oil and cake) reached 35 887 tonnes in February 2017, down by 36% from January 2017, and down by 42% from the corresponding period last year.  Using an estimate of 2.2 million tonnes of South Africa’s soybean crushing capacity, which then translates into 183 333 tonnes per month, the country utilised only 20% of its soybean processing capacity in February 2017.
 
Overall, South Africa’s soybean ending stocks were at 89 134 tonnes in February 2017, down by 30% from the previous month due to an increase in consumption and lower production. That said, this was 0.01% higher from the corresponding last year.
 
Potatoes:
 
Yesterday the South African potatoes market lost ground and closed in negative territory, owing to large stock levels. At the start of the session, the stocks were estimated at 1 157 813 bags (10 kg bags), which is 2% higher than the previous day.
 
However, during the session, the market saw a decline in deliveries owing to slow harvest activity over the weekend and led to 27% reduction in stock levels to 850 392 bags (10 kg bags).
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