Spotlight on the wheat market

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Spotlight on the wheat market

Agrilimpopo wheat
  • South Africa is a net importer of wheat, which means that developments in the global environment tend to influence the local market. Yesterday’s trade session was no different, the SAFEX wheat spot price recorded good gains in line with the Chicago wheat prices, closing at R4 393 per tonne. Moreover, the relatively weaker rand against the US dollar also supported the domestic market.
  • The gains in the Chicago wheat market were driven by renewed concerns about tight global wheat supplies in the 208/19 season. This is on the back of an expected decline in production in the EU and Black Sea region, as well as India, Australia, Ukraine and China. The most recent data from Russia’s Agricultural Ministry shows that 2018/19 wheat production could amount to 61 million tonnes, down by 18 percent from the previous season.
  • Most importantly, this evening the USDA will release an update of its view of 2018/19 global wheat market through a detailed supply and demand estimate. Last month, the agency placed its 2018/19 global wheat production estimate at 730 million tonnes, which is 4 percent lower than the previous season.
  • This will most likely be revised down as crop conditions deteriorated in parts of Australia and the EU region over the past couple of weeks. This was the key reason other global observers such as the International Grains Council recently slashed their forecasts to 716 million tonnes, which is the lowest harvest in the past six seasons.
  • While South Africa wheat prices will continue to be partially driven by the aforementioned developments, the country’s reliance on imports could lessen somewhat. The 2018/19 imports are estimated at 1.4 million tonnes, down by 33 percent from the previous season due to an anticipated recovery in local production.
  • To reiterate a point made yesterday, the Crop Estimate Committee forecasts an 18 percent annual uptick in South Africa’s 2018/19 wheat production to 1.8 million tonnes. This is on the back of an expansion in area planted and improved weather conditions in the Western Cape province. The most recent data from the Department of Water and Sanitation shows that the Western Cape provincial dam levels averaged 61 percent in the week of 10 September 2018, up by 3 percentage points from the previous week and 26 percentage points higher than the same period last year.

Read the full report by Wandile Sihloho HERE