Wandile Sihlobo, head of economic and agribusiness intelligence at Agbiz, shares highlights in his update on agricultural commodity markets.
This past weekend (2 – 4 February 2018) brought good showers in most parts of the South African maize belt. The western regions received rainfall varying between 10 and 57 millimetres, which mainly benefited white maize crops. The eastern regions of the maize belt received rainfall of between 10 and 47 millimetres, which largely benefited yellow maize crops.
The rainfall received in the past few weeks is starting to yield positive results. Crop conditions have improved slightly in the western areas of the maize belt. The eastern regions were already in good condition due to a fair amount of rainfall since the start of the season.
It is also encouraging to see that the weather forecast for the next two weeks (up to 16 February) presents a possibility of good rainfall across the maize belt. This should further improve soil moisture and therefore benefit crops.
As noted in previous reports, the movements of the international wheat prices will be of importance in the local market this season, partly due to expected large import volume of 1.9 million tonnes, as well as the impact on the import tariff (see Agbiz Morning Market Viewpoint on Agri-Commodities, 5 February 2018).
The global wheat market is generally well supplied. The International Grains Council forecasts the 2017/2018 global wheat production at 757 million tonnes, up by 1% from the previous season. This is also in line with the United States Department of Agriculture’s (USDA’s) production estimates.
The expected decline in production in key wheat producing countries such as the United States, Australia, Ukraine, Argentina, Canada and Kazakhstan is compensated by an uptick in production in Russia, the European Union, China and India. Russia and India are expected to record the most significant annual percentage increases of 17% year-on-year (y/y) and 14% y/y to 85 million tonnes and 98 million tonnes, respectively.
The 2017/2018 global wheat stocks are also solid, estimated at 254 million tonnes, which is a 6% annual increase. Given that this information has been priced in already, the global wheat prices could trade sideways at levels around US$220 per tonne in the short to medium term. In such a scenario, there would not be many changes in the current wheat import tariff rate of R716.30 per tonne in the near term (also see Agbiz Morning Market Viewpoint on Agri-Commodities, 5 February 2018).
From a regional demand perspective, sub-Saharan Africa’s 2017/2018 wheat imports are set to reach 22.6 million tonnes, up by 10% y/y due to a decline in the region’s production, as well as an uptick in consumption. The key buyers will be Nigeria, Sudan, Kenya, South Africa and Ethiopia.
Although the optimal planting window for sunflower seed closed on 20 January 2018, planting activity in some areas around the northwest parts of the Free State and North West province is still underway. This follows good rainfall which motivated farmers to continue planting.
The ongoing planting activity is an encouraging development, but planting outside the optimal planting window implies that crops could be negatively affected by frost later in the season, which will, in turn, lower the yields. If the shifts in weather patterns could delay the cold conditions later in the season, then the late planted crops could produce a better harvest.
This also means that the National Crop Estimates Committee could potentially revise its preliminary planting estimate up from the current level of 560 100 hectares when they release the revised area estimate at the end of February. The current estimate of 560 100 hectares is down by 12% from the area planted in the 2016/2017 season.
Bothaville, Hoopstad, Orkney, Viljoenskroon, Derby, Klerksdorp, Regina and Ventersdorp in the western Free State and North West provinces received good rainfall over the weekend (2 – 4 February 2018), varying between 10 and 57 millimetres. This will benefit the newly planted regions.
Looking ahead, weather forecasts indicate that there is an increased chance of additional rainfall of between 20 and 90 millimetres during the next eight days ( 7 – 14 February 2018). This will improve soil moisture and subsequently benefit the sunflower seed crops.
On 5 February 2018, the South African potato market managed to claw back its recent losses with support emanating from lower stocks of 804 451 pockets (10kg) at the start of the session. The price was up by 2% from the previous day (4 February 2018), closing at R41.38 per pocket.
The market experienced commercial buying interest, coupled with relatively lower deliveries on the back of slow harvest activity during the weekend (2 – 4 February 2018). This subsequently led to a 29% decline in daily stocks to 569 540 pockets.
The fruit market started the week of 5 February 2018 on a mixed footing, partially driven by an increase in producer deliveries at the fresh produce market. The prices of apples and bananas were down by 5% and 14% from the previous day (4 February 2018), closing at R9.10 and R5.08 per kilogramme, respectively. These losses followed 45% and 50% respective increases in apples and bananas stocks to 171 000 tonnes and 322 000 tonnes.
The price of oranges was up by 7%, closing at R8.10 per kilogramme due to lower stocks of 28 000 tonnes at the end of yesterday’s session (5 February 2018).