RSA Agricultural Commodities Weekly Wrap 23 September 2016

Transcription

1 AGBIZ RESEARCH AGRI-COMMODITIES WEEKLY WRAP RSA Agricultural Commodities Weekly Wrap 23 September 2016 This season South Africa is a net importer of grains and oilseeds. Therefore, the price movements of these commodities are largely influenced by the fluctuations of the South African Rand against the US Dollar, as well as Chicago grains and oilseeds market. This week was no exception, the currency movement dominated the market. In fact, at the time of writing, the South African Rand strengthened by 4% against the US Dollar, from last week s average of R14.19 to R13.67 this week (see Chart 2). Meanwhile, Chicago grains and oilseeds prices saw marginal gains on the back of rising fears that forecast rainfall in the US Midwest could slow maturation and harvest process of the crop. That said, these gains were overshadowed by the currency (ZAR/USD) movements, thus leaving SAFEX grains and oilseeds prices in negative territory this week. RSA maize market Production: RSA maize industry is approaching the 2016 planting period. Traditionally, maize plantings in the eastern parts of the country start at the beginning of October, whereas in the western parts plantings only commence a month later. The eastern parts of RSA include the predomenantly yellow maize producing provinces, which are Mpumalanga, Kwa-Zulu Natal and eastern Free State. Prices: Average weekly white maize spot price dropped by 6%, from last week s average of R4 091 per ton to R3 830 per ton. At the same time, average weekly yellow maize spot price fell by 2%, from R3 200 per ton to R3 132 per ton (see Chart 1). Trade: RSA maize imports for the week ending 16 September 2016 came in at tons, all yellow maize, with 92% from Argentina and the balance from Brazil. This placed RSA 2016/17 yellow maize imports at tons, which is 24% of the seasonal import forecast of 2.7 million tons. Meanwhile, RSA 2016/17 white maize imports stand at tons, which is 29% of the seasonal import forecast of 1.1 million tons. Producer deliveries: In the week ending 16 September 2016, total maize producer deliveries were at tons, down by 35% from the previous week. RSA s 2016/17 maize producer deliveries for week 1 to 20 currently stand at 6.1 million tons, which suggest that more maize will be delivered in the coming weeks. Chart 1: RSA maize prices Source: JSE, Agbiz Research Chart 2: US maize prices and Rand/USD exchange Source: IGC, Bloomberg and Agbiz Research 1

2 RSA wheat market Production: Wheat crop is still in good condition throughout the country, with rainfall forecast for the weekend across the Free State and southern parts of the Western Cape province. RSA 2016 wheat crop is estimated at 1.7 million tons, up by 17% year-on-year, due to an increase in area plantings across the Western Cape and Free State provinces. The National Crop Estimate Committee will release their second production forecasts on Tuesday, 27 September Prices: This week RSA wheat market saw marginal gains owing to relatively higher Chicago (wheat) prices, as well as domestic buying interest. More specifically, RSA average weekly wheat spot price was up by 0.05%, at R4 100 per ton from R4 098 per ton last week (see Chart 3). In the global front, Chicago wheat price (HRW) gained 7%, from last week s average price of US$195 per ton to US$195 per ton this week. Trade: RSA continues to receive wheat imports (see Chart 4). In the week ending 16 September 2016, RSA imported tons of wheat, up by 38% from the previous week. All imports came from Russia. This brought RSA s total 2015/16 wheat imports to 1.99 million tons, almost in line with the seasonal import estimate of 2 million tons. This marketing year will end next week Friday, 30 September 2016, which means that there is a chance that 2015/16 wheat imports might slightly exceed the seasonal estimate. Despite being a net importer of wheat, RSA continues to export wheat to regional markets. The weekly exports were recorded at tons, double the previous week s volume. All exports went to Namibia. Overall, RSA 2015/16 wheat exports currently stand at tons. Producer deliveries: In certain regions of South Africa wheat farmers continue to deliver old wheat crop to commercial silos. In the week ending 09 September 2016, wheat deliveries were recorded at 424 tons, up by 4% from the previous week. Global wheat conditions: The Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) forecasts 2016/17 global wheat crop at 743 million tons, up by 2% from their previous estimate. However, this is still below the USDA s estimate of reach million tons. Moreover, ABARES raised concerns of lower quality crop in many areas, across Europe and Asia. In the US, winter wheat plantings are progressing well, with planting pace estimated at 17% complete at the beginning of this week, up by 1% from the corresponding week last year. Elsewhere, the Egyptian government announced that they would reinstate a 0.05% tolerance level for ergot on wheat imports. This follows a period of uncertainty and shipments rejections, when the government announced last month that they would institute a zero tolerance level policy on ergot (grain fungus). Chart 3: RSA and US wheat prices Source: JSE, IGC and Agbiz Research Chart 4: RSA 2015/16 MY monthly wheat imports Source: SAGIS and Agbiz Research 2

3 RSA oilseeds market RSA soybean and sunflowerseed market lost some ground this week, with pressure largely emanating from a relatively stronger Rand against the US Dollar, as well as domestic selling pressure. SOYBEANS Weekly average soybean spot price was down by 4% from last week s level, at R6 333 per ton from R6 567 per ton last week (see Chart 5). The 2015/16 soybean production is estimated at tons, down by 30% from the previous season due to a 27% decrease in area plantings, as well as lower yields. Going into the new season, RSA 2016 soybean planting period is set to commence around mid-october in the eastern regions of the country. In the global markets, Chinese National Grain and Oils Information Centre estimates their 2016/17 soybean production at 13.1 million tons, up by 13% from the previous season. Moreover, the Centre estimates their 2016/17 soybean imports to stand at 85 million tons, up by 2% from the previous season. This import estimate is slightly below the USDA s view of 86 million tons for Chinese 2016/17 soybean imports. However, it is well above the Chinese Agriculture Outlook Committee import forecast of 83.5 million tons. In South America, unfavourable weather conditions delayed the soybean planting process, particularly in Brazil. Currently, weather forecasts indicate that the next few weeks could remain dry. Some analysts suggest that drier weather conditions represent signs of La Niña weather patterns, with some institutions such as the Australian Bureau for Meteorology indicating that there is a 50% chance of occurrence later this year. That said, more will unfold as the season progresses. SUNFLOWERSEED RSA weekly average sunflowerseed spot price saw marginal losses of 1% from the previous week s level, at R6 275 per ton from R6 326 per ton (see Chart 6). In the global front, sunflowerseed harvest is underway across Europe and continues to benefit from drier weather conditions across a number countries. This week, Turkish s sunflowerseed harvest was estimated at 90% complete, with the overall crop estimated at 1.3 million tons, 9% higher than the previous season. In addition, Bulgarian sunflowerseed harvest was seen at 85% complete, with the overall 2016 crop estimated at 1.8 million tons, down by 14% from the previous estimate. Romanian sunflowerseed harvest was also seen at 85% complete, with the overall 2016 crop seen at 1.9 million tons, also down by 14% from the previous estimate. Romania and Bulgaria have significant influence in the South African sunflower seed and sunflower seed oil market because they are amongst the key suppliers (when import needs arise). Chart 5: Soybean prices Source: JSE, IGC and Agbiz Research Chart 6: Sunflower seed prices Source: JSE, IGC and Agbiz Research 3

4 RSA beef market This week there was some activity in the SAFEX beef market, with December 16 contract month price gaining 0.24% from the previous week s level and closing at R41.50 per kilogram. This year RSA beef industry took a knock, due to drought conditions. Moreover, the drought led to higher slaughtering rate, which were seen at cattle in the third week of September 2016, up by 33% from the corresponding week last year and subsequently putting downward pressure on prices (see Chart 7). Looking ahead, a recovery of the beef industry will be dependent on weather conditions. Currently, the Australian Bureau of Meteorology indicates that there is 50% chance of La Niña occurrence towards late spring to summer season. If this materialises, there could be some improvement of grazing fields across the country. Against this background, we maintain our view that livestock farmers could soon start to rebuild their herds and that might lead to a decline in slaughtering rate, which in turn, could support beef prices. Chart 7: RSA s weekly number of slaughtered cattle Source: RMAA, Agbiz Research RSA potatoes market RSA potatoes market gained some grounds this week, owing to relatively lower stock levels. More specifically, RSA potato price was up 3% from the level seen on Thursday last week, closing at R41.85 per 10 kilograms. Yesterday, RSA potatoes stock levels were recorded at bags (10 kg bags), down by 12% from the same period last week, but the third highest stocks level in the past six days. We continue to anticipate downward movements in RSA potato prices over the medium term due to increasing domestic supplies on the back of the ongoing harvest process. With that said, we remain cautious that consumer demand could also lead to short term volatility in domestic potatoes market. 4

5 RSA weather conditions North West, Free State, Mpumalanga, Kwa-Zulu Natal, coastal regions of the Eastern Cape and the Western Cape province might receive light showers within the next eight days. Meanwhile, the northern regions of the Eastern Cape and Western Cape, Northern Cape, Gauteng and Limpopo province could remain fairly dry (see Chart 8). Wheat crop is at pollination stages and currently in good condition, therefore the expected rainfall around Free State province and certain parts of the Western Cape could further improve crop conditions. At the time, this bodes well with 2016 summer crops planting season, which is set to commence in October. The long term precipitation forecast presents a possibility of drier and warm temperatures across the southern and northern parts of South Africa. This is with the exception of the northern parts of the Free State province, Mpumalanga, Kwa-Zulu Natal and coastal areas of the Eastern Cape and Western Cape province, which could possibly see light showers (see Chart 9). Chart 8: Next 8-days precipitation forecast Source: wxmaps Chart 9: Next 16-days precipitation forecast Source: wxmaps 5

6 Chart 10: Precipitation forecast Source: wxmaps Week ahead: Key data releases in agricultural markets: SAGIS weekly grain trade data: 27/09/2016 National Crop Estimate Committee s monthly data: 27/09/2016 SAGIS weekly producer deliveries data: 28/09/2016 USDA crop progress data: 26/09/2016 USDA weekly export sales data: 29/09/2016 Wandile Sihlobo Agbiz Head of Agribusiness Research (Tel: , Disclaimer: Everything has been done to ensure the accuracy of this information, however Agbiz takes no responsibility for any losses or damage incurred due to the usage of this information. 6