Wandile Sihlobo, head of economic and agribusiness intelligence at Agbiz, shares highlights in his update on agricultural commodity markets.
To reiterate a point made in our note on 16 January 2018, the movements of the international wheat prices will be of importance in the local market this season, not only because of their influence on local wheat prices but also their implications on the import tariff.
South Africa is a generally a net importer of wheat but, what distinguishes the 2017/2018 marketing year is that the imports will double the previous year’s volume, estimated at 1.9 million tonnes. Moreover, this is the second largest import volume on record (footnote in the full report).
The wheat import tariff rate is currently at R716.30 per tonne, down from R910.00 per tonne on 12 December 2017. The downward revision was largely underpinned by the higher global wheat prices.
In the short to medium term, the global wheat prices could trade sideways at levels around US$220 per tonne due to solid global supplies (footnote in the full report). The United States Department of Agriculture (USDA) forecasts the 2017/2018 global wheat production at 757 million tonnes, which is a 1% uptick from the previous season. Therefore, the wheat import tariff could remain at current levels for some time unless there a sustained notable uptick or decline in global wheat prices from the aforesaid level.
For South African maize the weather will remain a key factor in price movements at least until March 2018 when the crop passes the pollination stage of development. Although the past few weeks presented erratic rainfall across the maize belt with the western regions experiencing extremely warm conditions, the past few days brought some showers.
In addition, the weather forecast for the next two weeks shows a possibility of over 30 millimetres of rainfall across the maize belt. This could further improve soil moisture and therefore benefit the crop.
The expected decline in South Africa’s 2017/2018 maize production will not significantly change the supply dynamics in the market. The two major reasons for this is the fact that the production estimate of 11.2 million tonnes is still above the annual consumption of 10.5 million tonnes (footnote in the full report).
Secondly, the total maize carryover stock in the 2017/2018 marketing year is estimated at 4.2 million tonnes, up four-fold from the previous year. All this will boost supplies in the 2018/2019 marketing year which starts on 1 May 2018.
The 2017/2018 soya bean marketing year will end on 28 February 2018, but on a better footing than the 2016/2017 marketing year. The ending stock is estimated at 340 862 tonnes, which is treble the volume seen in the 2016/2017 marketing year. This will boost South Africa’s soya bean supplies in the 2018/2019 marketing year.
As we set out in our note on 1 February 2018, the preliminary area plantings of 701 000 hectares could potentially lead to 1.2 million tonnes of production, which would be 9% lower than the 2016/2017 production season (footnote in the full report). This is under the yield assumption of 1.7 tonnes per hectares, which is an average for the past five seasons, as well as expectations of good weather conditions.
South Africa’s soya bean crop is generally in good condition across the country despite unfavourable weather conditions in the past few weeks. The soya bean fields could receive rainfall of over 30 millimetres this week, which bodes well for the crop as it needs moisture at the current stage of development.
The South African potato market lost ground in Friday’s (2 February 2018) trade session owing to a large stock of 824 236 pockets of 10kg bags at the start of the session. The price was down by 1% from the previous day (1 February 2018), closing at R40.41 per pocket.
However, during the day, the market experienced commercial buying interest, coupled with relatively lower deliveries on the back of slow harvest activity. This subsequently led to a 2% decline in daily stocks to 804 451 pockets.
The fruit market ended Friday’s (2 February 2018) trade session on a mixed footing. The prices of apples and bananas were down by 2% and 1% from the previous day (1 February 2018), closing at R9.53 and R5.92 per kilogramme, respectively. These losses were mainly underpinned by commercial selling but could soon be reversed owing to lower stocks of 118 000 tonnes of apples and 214 000 tonnes of bananas.
The price of oranges was up by 6% from the previous day (1 February 2018), closing at R7.59 per kilogramme due to lower stocks. At the end of Friday’s session (2 February 2018), the oranges stock was at 24 000 tonnes, down by 35% from the previous day (1 February 2018).