Livestock and Fibre Markets

Transcription

1 Agri-Weekly Livestock and Fibre Markets 5 August 216 Beef market trends (Graph 1) Weekly country update: US prices fell sharply under pressure due to slow seasonal demand. Trading activity on the import market was reportedly slow. The US Department of Agriculture (USDA) reached an agreement with their counterparts in Brazil for access of US beef and beef products for the first time since 23. This follows the determination that their animal health and food safety protocols meet the requirements of the World Organization for Animal Health s (OIE) scientific Graph 1: Beef price trends (SA c/kg) 4,38 4,12 3,86 3,6 3,34 3,8 2,82 2,56 2,3 2,4 1,78 1,52 7-Aug Dec Apr Aug-16 Class A Class C NZ Cow import parity,d/bn * last two data points are preliminary Contract Weaner calf international animal health guidelines. We see a divergence in domestic cattle prices for Australia and the US during the past few months in graphs 1a and 1b. The seasonal increase in domestic supplies kept cattle prices in check with all categories trending mostly sideways. In the case of Australia, the trend has been upwards due to the reduced cattle slaughter which is reportedly down by 3%. Graph 1a: US Cattle price trends Graph 1b: Australian cattle price trends (US /kg cwt) Cutter 9% lean, US /kg cwt Feeder - CME Index, US /kg lwt Choice Fed, US /kg lwt Heavy steer Medium cow Trade steer Source: MLA,

2 FNB Agri-Weekly Page 2 Graphs 1c to 1d illustrate the extent of beef production across the world. Beef production is expected to recover in 216 while stocks continue to decline as exports are ramped up. 61, 6, Graph 1c: World beef and veal production trends ( tons) 12, Figure 1d: World beef import, export & stock trends (' tons) Imports Exports Ending Stocks, RHS 8 59, 58, 57, 1, 8, , 6, 4 55, 54, 53, 4, 2, Source: USDA, PSD The beef market saw modest gains on limited supplies and marginal improvement in demand. Weekly Class A beef prices gained.9% w/w and 12% y/y at R38.36 per kg. Contract Class A beef prices increased by 2.8% w/w and 11.6% y/y at R38.35 per kg. Class C beef gained 1.6% w/w and 9.3% y/y at R3.65 per kg. In the weaner market, prices trended sideways due to limited availability. Weekly weaner calf prices finished the week unchanged at R2.13 per kg live weight but still down 3.9% y/y. Beef futures on the JSE seem to be confined to a sideways trend as volumes remain low. The Dec-16 delivery contract is currently trading at R41.25/ kg, which is unchanged from the previous week with no daily changes. Cattle slaughter came in down 14% w/w but still remains way above the levels seen in the last four years due the ravaging drought. The relatively weaker rand in 216 has helped lift up exports with latest figures for April showing a 7% y/y increase in shipments. Nonetheless, this is likely to change in the medium term should the rand maintain the current rally of below R14 to the US dollar. Graph 1e: JSE BEEF CARCASS FUTURES (R/KG Graph 1f: South Africa's beef export trends (tons) Dec-16 5, 4,5 4, 3,5 3, 2,5 2, 1,5 1, Source: JSE, Trade Map

3 FNB Agri-Weekly Page 3 Producer prices The beef market - South Africa Date 8-Jul Jul Jul Jul-16 5-Aug-16 Class A (R/kg) Class C (R/kg) Contract: A (*Incl.5thQ)(R/kg) Import parity price (R/kg) Weaner calves OUTLOOK It is expected that beef prices will rebound in the short to medium term as supplies tighten due to the improved production conditions following recent rains. 24, 21, 18, 15, 12, 9, 6, 3, Graph 1g: Weekly commercial cattle slaughter trends (head) Source: RMMA; Hides: the August 216 figure is preliminary Graph 1h: Average hide prices per kg JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC Sheep market trends (Graph 2) (SA c/kg) Graph 2: Sheep price trends In New Zealand (NZ), domestic farm gate 7,12 prices trended mostly sideways across the 6,58 most categories with the 17.5kg lamb 6,4 5,5 closing unchanged w/w but still down 4% 4,96 y/y at NZ$9.5/ head. Mutton prices also 4,42 steadied at NZ$5.9/ head, but still down 3,88 3,34 by 5% y/y. 2,8 On the export front, volumes out of NZ are 2,26 7-Aug Dec Apr Aug-16 reportedly tight and prices have started to Lamb Class C trend upwards. Nonetheless, these price C o nt ract lamb N Z Lamb p arit y ZN M ut t on parit y gains are offset by a stronger currency. * Last two data points are preliminary In the US, lamb prices saw further gains on the back of reduced supplies. The lamb carcass cutout values gained 1.5% w/w but still down.7% y/y at US$317.9/ cwt. The estimated weekly sheep slaughter fell by 7.5% w/w but unchanged y/y at 37, head, with the year-to-date number reaching 1.2m head almost unchanged y/y. This translates into 1,17 tons for the week (-3.7% w/w and 14.8% y/y) and 37,89 tons for the year to date (-1.3% y/y). Prices ended mixed with the biggest gainer being mutton due to tightening supplies tightened coupled with a slight pickup in demand during month-end. Weekly mutton prices gained 2.8% w/w and were 3% higher compared to last year at R47.21 per kg.

4 FNB Agri-Weekly Page 4 Class A lamb also posted good gains, up 1.5% w/w and 9% y/y at R6.13 per kg. Contract Class As were the exception, finishing down.5% w/w at R57.49 per kg, but slightly higher by 1% y/y. Feeder lamb prices trended sideways with most of support underpinned by reduced availability across markets. Weekly feeder lamb prices steadied at R3.6 per kg live weight, up 4% y/y. Sheep slaughter continued to increase with latest figures up 9% from the week earlier and 44% higher compared to last year this time. Sheep slaughter in 216 is substantially higher compared to last year. The cumulative sheep slaughter numbers are now closer to the 212 and not far off the 213 levels. The implications are that supplies will tighten further in the medium to longer term and will exert upward pressure on prices. Producer prices The beef market - South Africa Date 8-Jul Jul Jul Jul-16 5-Aug-16 Class A (R/kg) Class C (R/kg) Contract: (*Incl.5thQ) (R/kg) Import parity price (R/kg) Weaner calves OUTLOOK With the braai months are around the corner, the demand for lamb and mutton is expected to rebound providing support for prices. Supplies are expected to come under pressure as pasture conditions improve. Graph 2a: Weekly commercial sheep slaughter trends (head) Graph 2b: Cummulative sheep slaughter trends (head) , 1,4, 5, 1,2, 4, 1,, 3, 8, 6, 2, 4, 1, 2, Source: RMMA

5 FNB Agri-Weekly Page 5 Pork market trends (Graph 3) Graph 3: Pork price trends (SA c/kg) In the US market, pork prices fell sharply on 3,56 softer demand. The pork carcass values 3,18 dropped by 6.6% w/w at US$77.97/ cwt, which 2,8 is 12.4% lower y/y. 2,42 The estimated weekly US pig slaughter dropped further to 2.2m head, marginally up on last week and 3.2% higher y/y. The year to 2,4 1,66 1,28 9 date estimated pig slaughter reached 67.85m 7-Aug Dec Apr-16 head with pork production was however still Po rker B aco ner 19-Aug-16 Imp o rt p arit y Exp o rt p arit y marginally down on last year at 6.9m tons. * last two data points are preliminary In China, the market remains concerned about flooding conditions that occurred in large parts of the country. A lot of animals have reportedly been washed away which is devastating for producers. China is the biggest producer and so far accounts closer to 5% of world production as illustrated in graph 3a. It is also the biggest consumer of pork, so far accounts for 18% of world imports. 2, 1, Source: USDA, Graph 3a: World pork production trends World beef production (tons, LHS) China-share of world production, RHS 52% 5% 48% 46% 44% 42% 8, 7, 6, 5, 4, 3, 2, 1, The pork and baconer market showed a mixed trend during month-end with porkers finishing a tad firmer. Porker prices gained 2.4% w/w and 3.7% y/y to R25.2 per kg. Baconer prices moved slightly lower by 1.4% w/w at R23.59 per kg, but still up 9.8% y/y. In the monthly pork import update, the monthly SARS figures showed a sharp drop in volumes during June 216. Pork imports dropped by 28% m/m and were down 56% y/y at 1,812 tons. In spite of a weaker rand untill June 216, the year-to-date pork imports are sharply down by 33% y/y at 12,4 tons. OUTLOOK Prices are expected to trend sideways in the short term but with some upward potential in the medium term as demand picks up in the warmer months ahead. Graph 3b: Worl pork import, export & stock trends (' tons) Exports Imports Ending Stocks, RHS , Graph 3c: Pork Import Trends (tons) Year-to-date: June 216 7, 6, Graph 3d: Pork Monthly Import Trends (tons) 216 2, 1, 5, 4, 3, 2, , JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC Source: SAPPO, SARS, Own Calculations; *Excludes BNLS countries

6 FNB Agri-Weekly Page 6 Poultry market trends (Graph 4) Graph 4: Poultry price trends (c/kg) 2,5 Weekly prices in the US broiler complex 2,38 trended mostly sideways to lower across 2,26 2,14 the board. 2,2 Leg quarters and whole birds were a bit 1,9 firmer for the week but still down by 3% 1,78 1,66 and 32% respectively y/y. 1,54 Breast cuts and wings were the losers for 1,42 the week and were down 27% and 11% 1,3 respectively y/y. 1,18 7- A ug D ec A p r A ug - 16 Drumsticks were the exception, posting Frozen whole Fresh whole Imported Leg Quarter (US) IQF gains of 1.3% w/w but still down by 34% * last two data points are preliminary y/y. According to the USDA, the United States has been restricted from the Chinese market since January 215 due to highly pathogenic avian influenza (HPAI) outbreaks. Brazil is reportedly the top beneficiary from the absence of US suppliers. The US Attache in China revised the 216 broiler meat import forecast downward to 35, tons, an increase of 82, tons compared to the USDA s 215 official figure. China s 217 broiler meat consumption was forecast up 13% y/y from the USDA estimate to 11.6m tons. 1, 8, 6, 4, 2, Source: USDA, PSD Graph 4a: World broiler meat production trends ( tons) Prices were down across the board with market activity remaining relatively subdued amidst strong inventory so far. The domestic supply fundamentals are increasingly changing as margin squeeze force marginal producers to exit the industry amidst rising imports from all over the world. Weekly medium frozen whole bird prices eased to R2.3 per kg, down.7% w/w and 1.1% y/y. Fresh whole bird prices closed at R21.6 per kg, down 1.5% w/w and.6% y/y. The Individually Quick Frozen (IQF) prices also weakened on increased availability. Weekly IQF prices were marginally down by.4% w/w at R16.96 per kg, which is 4.9% lower y/y. OUTLOOK The short term price outlook remains bearish on the back of high stocks and increased competition from imports as the rand continues to appreciate. Nonetheless, demand is expected to improve in the medium term as warmer weather returns and the seasonal outdoor activities increase. 4,5 4, 3,5 3, 2,5 2, 1,5 1, 5 Graph 4b: Major broiler meat exporters (' tons) Brazil United States European Union

7 FNB Agri-Weekly Page 7 3, 24, 18, 12, 6, Graph 4c: Poultry Import Trends Year-to-date: June , 6, 5, 4, 3, 2, 1, Graph 4d: Poultry Monthly Import Trends (tons) JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC Source: SARS, Own Calculations; *Excluding BNLS Producer prices for selected livestock commodities 5 August 216 Beef Mutton Pork Poultry Class A/ Porker/ Fresh Whole birds (R/kg) Class C/ Baconer/ Frozen Whole birds (R/kg) Contract: A2/A3 (Incl.5thQ)/ Baconer/ IQF (R/kg) Import parity price (R/kg) Weaner Calves/ Feeder Lambs (R/kg) Wool and cotton market trends (Graph 5) Cotton futures rallied on improved export 2,17 Wool Cotton 3,2 demand from other countries with the 18,89 exception of China. 17,61 2,7 Meanwhile, the government cotton auctions 16,33 in China continued with the daily rate 15,5 2,2 13,77 reported at 3, tons per day on the 12,49 domestic market. Plans are to increase the 11,21 1,7 daily rate and extend sales into September 9,93 8,65 1,2 as China sits with a huge amount of cotton 7-Aug Dec Apr Aug-16 according to reports. SA Wool Aus Wool Cotton A-Index ICE Futures In India, and Pakistan, the monsoon has reportedly improved but earlier dry weather conditions had delayed planting in some areas. * last two data points are preliminary US crops in the southern and western Great Plains were reportedly facing stressful conditions in Texas with all parts of the western Great Plains remaining warm and dry. After slow start to the week, cotton futures on the InterContinental Exchange (ICE) rebounded and trended upwards with the Oct-16 contract finishing up 3.3% at US76.64 c/lb. The Dec-16 cotton futures rose by 3.6% w/w at US76.74 cents/lb. ICE Cotton Futures 5 August 216 Source: InterContinental Exchange (ICE) Graph 5: Cotton & w ool prices (SA c/kg) Dec-16 Mar-17 May-17 Jul-17 Oct-17 Cotton (US c/lb) % Change w/w 3.6% 4.1% 3.7% 3.6% 3.4%

8 FNB Agri-Weekly Page 8 Graph 5a: World cotton production trends (' 48-lb bales) Graph 5b: World major cotton importers (' 48-lb bales) 14, 12, 1, 8, 6, 4, 2, 9, 8, 7, 6, 5, 4, 3, 2, 1, 214/ /216 Graph 5c: World cotton imports (' 48-lb bales) Graph 5d: World cotton ending stocks (' 48-lb bales) 6, 5, 4, 12, 1, 8, Ending Stocks, LHS Stock to Use (%), RHS , 6, 6 2, 4, 4 1, 2, 2 Source: USDA, PSD; Wool market: The Australian wool market is currently on a three week recess. The closing sale before the recess saw the AWEX Eastern Market Indicator (EMI) closing at AU$13.2 per kg clean wool with a sales reached 96% of 39,152 bales offered. The wool market is currently on recess and the closing sale for the season saw the Cape Wools Merino indicator easing to R152.6 clean wool. At this level, the indicator was up 7% compared to the season to date average, and 17.7% higher from the opening sale of the season. Fibre market prices 5 August 216 SA prices (R/kg) Australian prices (R/kg) Australian futures Jul-16 (AU$/kg) Australian futures Oct-16 (AU$/kg) Wool market indicator (R/kg) long length wool (R/kg) long length wool (R/kg) long length wool (R/kg) Fibre market prices 2 May 216 SA derived Cotton (R/kg) New York A-Index (US$/kg) Cotton Futures Dec-16 (US$/kg) Cotton Futures Mar-17 (US$/kg) Cotton Prices (R/kg) Cotton Futures - InterContinental Exchange (ICE); SA Wool currently on recess

9 FNB Agri-Weekly Page 9 FNB Business - Agriculture Meet our dedicated team of Agricultural Managers in various regions of South Africa Name Location Cell phone no: Add Grewar, Oosthuizen EASTERN CAPE -Port Elizabeth grewar.oosthuizen@fnb.co.za Edmund, De Beer EASTERN CAPE -Port Elizabeth edebeer1@fnb.co.za David, Dobrowsky FREE STATE -Bethlehem ddobrowsky@fnb.co.za Martin, Louw FREE STATE -Theunissen mlouw1@fnb.co.za Chris, Bekker FREE STATE -Bloemfontein cbekker@fnb.co.za Jan, Theron GAUTENG -Pretoria jantheron@fnb.co.za Greg, Sparrow KwaZulu-Natal -Pietermaritzburg greg.sparrow@fnb.co.za Jurgens, KwaZulu-Natal -Newcastle mschulze@fnb.co.za Herman, Claassens LIMPOPO -Tzaneen herman.claassens@fnb.co.za Adolf, Grobler LIMPOPO -Bela-Bela agrobler@fnb.co.za Stephan, Scheepers MPUMALANGA -Nelspruit sscheepers2@fnb.co.za Theo, Verwey MPUMALANGA -Pretoria tverwey@fnb.co.za Pedrie, Van der Merwe NORTHERN CAPE -Kimberly pedrie.vandermerwe@fnb.co.za Frik, Coetzee NORTHERN CAPE -Upington frik.coetzee@fnb.co.za Johan, De Klerk NORTH WEST -BRITS jdeklerk2@fnb.co.za Johan, Strydom NORTH WEST -Potchefstroom cstrydom@fnb.co.za Johan, Beukes WESTERN CAPE -Caledon jbeukes@fnb.co.za Lize, Morris WESTERN CAPE -Willowbridge lmorris@fnb.co.za Arno, Cloete WESTERN CAPE -Willowbridge arno.cloete@fnb.co.za Disclaimer: This report may contain certain opinions, predictions and assumptions and has been compiled from a variety of sources. Accordingly, you use the information in this report ( this information ) at your own risk and should not rely on it as a substitute for obtaining any specific professional advice you require. Accordingly, First National Bank, a division of FirstRand Bank Limited ( FNB ) provides no warranties or undertakings of any kind, whether express, implied or otherwise, concerning this information, its accuracy and/or reliability. Neither FNB nor its holding company, subsidiaries or other group companies will be liable to you for any claims, demands, expenses, losses