Although it is still early to be certain about the potential size of South Africa s 2017/18 maize crop, international

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1 01 December 2017 South African Agricultural Commodities Weekly Wrap There were numerous data releases this week in the domestic grain and oilseeds market, with the most notable one being the National Crop Estimate Committee s winter wheat fourth production estimate. The winter wheat crop was revised down by 4% from the previous estimate to 1.58 million tonnes, in line with market expectations given the ongoing drought in the Western Cape. However, this failed to uplift the wheat prices, which ended the week in negative territory. Other commodity Wandile Sihlobo +27(0) prices such as maize, soybeans and sunflower seed were under pressure this week due to the stronger domestic currency, lower international prices, as well as favourable outlook for the new season. Fruit and vegetable prices were volatile during the week with lower stock levels underpinning the market. The calendar for next week is light with only weekly grain trade and deliveries data due for release. Maize market Although it is still early to be certain about the potential size of South Africa s 2017/18 maize crop, international observers such as the International Grains Council and the United State Department of Agriculture forecasts a 28% y/y decline in maize production to 12.5 million tonnes. This is in line with the long-term average production, and slightly above our estimate of 12.0 million tonnes. If this were to materialise, the impact on prices will be minimal as it s above the annual maize consumption of 10.5 million tonnes. Moreover, the expected carry-over stocks of over 4.0 million tonnes from the 2017/18 marketing year will boost maize supplies in the 2018/19 marketing year, thus keep prices contained at relatively lower levels. Overall, white and yellow maize spot prices averaged R2 038 per tonne and R1 927 per tonne this week, down by 3% and 4% from the previous week, respectively (Chart 1). At the same time, the Chicago maize price lost 1%, averaging US$155 per tonne due to large global supplies and harvest pressure in the US market (Chart 2). Chart 1: South African maize prices Source: JSE, Agbiz Research Chart 2: US maize prices and ZAR/USD exchange Source: IGC, Bloomberg, and Agbiz Research 1

2 Wheat market The National Crop Estimate Committee revised its production estimate down by 4% from last month to 1.58 million tonnes. This is 17% lower than the previous season s harvest. The notable decline was in the Western Cape province, which is not surprising given the ongoing drought. With that said, the province remains a key producer of South Africa s wheat with a lion share of 43%. Trailing the Western Cape is the Free State and Northern Cape provinces with a combined share of 38%. These particular provinces are mainly irrigation dominated, whereas the Western Cape is largely rain-fed. The winter wheat harvest process is virtually over in the Western Cape 1 and Limpopo provinces thanks to cool and dry weather conditions. About tonnes of wheat were delivered to commercial silos in the week ending 24 November This is down by 29% from the previous week as the crop from most areas in the abovementioned provinces has already been delivered. Overall, this placed the country s producer deliveries for week 1 to 8 of the 2017/18 marketing year at tonnes. The other provinces, mainly Northern Cape and Free State, should make good progress within the next few weeks. The weather forecast presents a possibility of dry and cool weather conditions across the Western Cape and Northern Cape provinces within the next eight days, which is supportive of the harvest activity. With that said, expectations of persistent dryness also mean that the Western Cape province s dam levels could remain critically low. The update for the week ending 27 November 2017 shows that the province s dams averaged 35%, which is 20% lower than the same period last year. In terms of trade, South Africa imported tonnes of wheat in the week ending 24 November 2017, placing the 2017/18 marketing season s wheat total imports at tonnes. This equates to 29% of the seasonal import forecast of 1.8 million tonnes (Chart 4). Overall, the domestic wheat spot price was down by 1% from the previous week, averaging R4 142 per tonne, partly due to a stronger domestic currency. The Chicago wheat price was also down by 1% from the previous week, averaging US$217 per tonne due to relatively large global supplies (Chart 3). Chart 3: South Africa and US wheat prices Source: JSE, IGC, and Agbiz Research Chart 4: South Africa s monthly wheat imports Source: SAGIS and Agbiz Research 1 This is with the exception of few areas such Mossel Bay where the harvest process is still halfway through. 2

3 Soybean market Most soybean growing areas of South Africa received light showers this week, which were not sufficient to replenish soil moisture. With that said, this is a welcome development and additional showers are predicted within the next two weeks. This essentially means the planting activity could soon accelerate if the forecast rainfall materialises in the next few weeks. At the moment, the planting activity is still at initial stages, with only Kwa-Zulu Natal province which has planted over half of its intended crop for this season. As we indicated earlier this week, the large soybean harvest of 1.32 million tonnes received in 2016/17 production season implies that South Africa could receive minimal imports in the 2017/18 marketing year. This is a remarkable improvement following imports of tonnes in the previous marketing year. The country imported 733 tonnes of soybean in October 2017, which is well below the previous month import volume of tonnes. This placed the country s total soybean imports to tonnes, which equals to 90% of the seasonal import forecast of tonnes. This 2017/18 soybean marketing year ends in February There were no exports last month. The last exported volume was 99 tonnes in August South Africa s 2017/18 soybean total exports currently stand at 411 tonnes. With that said, the country s seasonal soybean exports are estimated at tonnes. Overall, the spot price down by 3% from the previous week, averaging R4 955 per tonne. Meanwhile, the Chicago soybean price gained 1%, averaging US$383 per tonne (Chart 5). Sunflower seed market There was not much progress in planting this week due to warm and dry weather conditions. However, this is not much of a concern, there is still enough time as the optimal sunflower seed planting window only closes in early January In terms of current supplies -- South Africa s sunflower seed ending stocks were recorded at tonnes in October 2017, up by 38% from the corresponding period last year. Above all, the sunflower seed market was on a rollercoaster ride this week, with the spot price down by 6% from the previous week, averaging R4 518 per tonne due to fairly large supplies and stronger domestic currency, amongst other factors (Chart 6). Meanwhile, the EU s sunflower seed price was up by 1% from last week, averaging US$394 per tonne (Chart 6). Chart 5: Soybean prices Source: JSE, IGC, and Agbiz Research Chart 6: Sunflower seed prices Source: JSE, IGC, and Agbiz Research 3

4 Beef market It was again a quiet week in the SAFEX beef carcass market, with the price unchanged from the previous week, averaging R46.00 per kilogram due to thinly traded volumes. This suggests that the SAFEX beef carcass prices might differ from the physical market, which continues to show solid activity and higher traded volumes. Also worth noting is that the data from the Red Meat Levy Admin shows that farmers slaughtered head of cattle in October 2017, up by 3% from the previous month, but still 7% lower than the corresponding period last year (Chart 7). These next two months are likely to show a solid uptick in slaughtering, ahead of the festive season with higher demand for meat. Fruit market The fruit market ended the week in positive territory. The price of apples was up by 1% from the previous week, averaging R7.79 per kilogram (Chart 8). This was due to lower stocks of tonnes. Moreover, the prices of banana and oranges gained 4% and 8% respectively this week, averaging R6.42 and R7.17 per kilogram (Chart 8). These gains were on the back of lower stocks of tonnes of bananas and tonnes of oranges. Chart 7: Monthly cattle slaughtering activity Source: Red Meat Levy Admin, Agbiz Research Chart 8: Apple and Banana prices Source: Johannesburg Fresh Produce Market, Agbiz Research 4

5 Potato market The South African potato market ended the week in positive territory, with the price up by 22% from Thursday last week, closing at R49.65 per pocket (10kg bag). These gains were mainly on the back of relatively lower stocks of pockets/10kg bags, down by 6% from Thursday last week (Chart 9). Chart 9: South Africa s average potato prices and stocks Source: Potato SA Weather conditions ahead of the weekend The central, eastern and northern parts of South Africa could receive rainfall of between 20 and 80 millimetres within the next eight days, which should improve soil moisture and benefit the new season summer crop (Chart 10). Meanwhile, the Northern Cape and Western Cape provinces could remain cool and dry, which is supportive of the winter crop harvest process. The long-term weather forecast also paints a picture of heavy showers across the country, which bodes well for the new season crop (Chart 11). With that said, this could slow the winter crop harvest process in the Northern Cape and Free State provinces. Chart 10: Next 8-days precipitation forecast Source: wxmaps Chart 11: Next 16-days precipitation forecast Source: wxmaps 5

6 Chart 12: Precipitation forecast Source: wxmaps Key data releases in the South African agricultural market SAGIS weekly grain trade data: 05/12/2017 SAGIS producer deliveries data: 06/12/2017 National Crop Estimates Committee s data: 19/12/2017 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