In its final estimates for the 2017 summer crop production season, the Crop Estimates Committee (CEC) lifted maize

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1 29 September 2017 South African Agricultural Commodities Weekly Wrap This was a data-packed week for grain and oilseed markets with releases that include production estimates update, producer deliveries and weekly trade data, amongst others. The most anticipated of the lot was the CEC s second wheat production estimate which showed a 7% upward revision from the previous estimate to 1.7 million tonnes due to an increase in area planted. Overall, the market ended the week on a mixed footing, with wheat showing a notable loss of 4% from last week. The Wandile Sihlobo +27(0) calendar for the week ahead is light with only weekly grain trade and deliveries data due for release. Apart from this, the fruit and vegetable prices were volatile throughout the week with daily stock levels underpinning the market. The SAFEX beef carcass market remained flat throughout the week. Maize market In its final estimates for the 2017 summer crop production season, the Crop Estimates Committee (CEC) lifted maize production by 2% from the previous estimate to million tonnes. White and yellow maize production estimates were revised up by 2% and 1%, respectively, from the previous estimates to 9.89 million and 6.85 million tonnes - reaching a record level of million tonnes. This is well above the annual consumption of 10.5 million tonnes. Also worth noting is that South Africa exported tonnes of maize in the week ending 22 September The leading buyer was Japan with a share of 79%, all yellow maize. In total, South Africa s 2017/18 maize exports currently stand at 1.30 million tonnes, which equates to 59% of the season s export forecast of 2.2 million tonnes. From a pricing perspective - white maize spot price averaged R1 836 per tonne this week, down by 1% from the previous week. Yellow maize spot price averaged R1 954 per tonne, also down by 1% from last week (Chart 1). Meanwhile, the Chicago maize market gained 1% this week, averaging US$157 per tonne (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 Contrary to market expectations of a decline in South Africa s 2017 second wheat production estimate, the CEC boosted its view by 7% from the previous estimate to 1.7 million tonnes. This was generally supported by an increase in area planted. With that said, there are wide disparities across provinces. The Western Cape wheat production estimate was revised down by 5% from the previous estimate to tonnes. Meanwhile, production estimates for the Northern Cape and Free State provinces were revised up by 5% and 76% from the previous estimates to tonnes and tonnes, respectively. The increase in the Free State province s production estimate can be explained by the fact that 47% of the area planted is under irrigation. Therefore, there are expectations of higher yields, as dam levels have improved significantly to over 70% - thanks to good summer rainfall. Worth noting, however, is that a large part of the crop is not in good condition in the Western Cape province and could worsen over the coming weeks as weather forecasts present a possibility of continued dryness. Therefore, the current optimistic picture of 1.7 million tonnes of wheat production, could possibly be revised down in an event that crop conditions continue to deteriorate in the Western Cape province. More emphasis is placed in this particular province because it produces almost half of South Africa s wheat crop. From a trade perspective, South Africa imported tonnes of wheat in the week ending 22 September 2017, all from the US, Romania, Latvia and Australia. This is well above the previous week s volume of tonnes. Overall, South Africa s 2016/17 total wheat imports stand at tonnes, which equates to 91% of the seasonal import forecast. While a net importer of wheat, South Africa continues to export wheat to regional markets. The country s 2016/17 total wheat exports stand at tonnes. In terms of pricing, the domestic wheat market saw substantial losses of 4% this week compared to the previous one, averaging R4 069 per tonne (Chart 3). This was partly on the back of strong commercial selling. Meanwhile, the Chicago wheat price gained 1%, compared to the previous week, averaging US$220 per tonne (Chart 3). These gains were mainly due to unfavourable weather conditions in Australia and an expected decline in US wheat stocks. 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 2

3 Soybean market The CEC left its soybean production estimate unchanged from the previous month, at 1.32 million tonnes. This is 77% higher than the previous season s crop and a record harvest. In terms of pricing, the weekly soybean spot price was down by 0.4% from the previous week, averaging at R4 685 per tonne. Whereas, the Chicago soybean market gained 0.3%, averaging US$381 per tonne (Chart 5). The fact that this season brought the largest crop on record reinforces the view that South Africa could be a net exporter of soybean in the 2017/18 marketing year, with a total export volume estimated at tonnes. However, in the past few months, the market has been fairly quiet with only 99 tonnes of soybeans exported to Mozambique in August This placed South Africa s 2017/18 soybean exports at 411 tonnes. Also worth noting is that South Africa s soybean consumption (crushed oil and cake) reached tonnes in August 2017, down by 5% from the previous month, but still 14% higher than the same period last year. Using an estimate of 2.2 million tonnes of South Africa s soybean crushing capacity, which then translates into tonnes per month, the country utilised 44% of its monthly soybean processing capacity in August This is 3-points lower than the previous month, but 5-points higher than the corresponding period last year. In addition, the ending stocks were estimated at tonnes in August 2017, up by 87% year-on-year. Sunflower seed market The CEC inched up its sunflower seed production estimate by 1% from the previous month to tonnes due to higher yields. Moreover, this is 16% higher than the previous season s harvest. The largest contributing provinces to this output are Free State and North West, with a combined share of 90% of total production. Overall, the sunflower seed market lost ground this week due to strong commercial selling, as well as underlying bearish sentiment on the back of relatively large domestic supplies. The spot price was down by 1% compared to the previous week, averaging R4 739 per tonne (Chart 6). South Africa s sunflower seed consumption (crushed oil and cake) increased by 7% m/m and 28% y/y in August 2017 to tonnes. In addition, South Africa s sunflower seed ending stocks were recorded at tonnes in August 2017, down by 11% m/m, but up by 29% y/y. 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 This was again a quiet week in the SAFEX beef carcass market with prices unchanged from the previous one, averaging R46.00 per kilogramme due to thinly traded volumes. Above all, this implies that the SAFEX beef carcass prices could differ from the physical market prices which continue to show strong activity. The South African cattle industry is normalising after the El Niño induced drought. The most recent data from the Red Meat Levy Admin shows that farmers slaughtered head of cattle in August 2017, up by 12% from the previous month, but still down by 5% from the corresponding period last year. It is unclear whether this will be a temporary blip of full recovery. We will closely monitor the developments over the coming months. Fruit market The South African fruit market ended the week mixed. The prices of bananas and oranges were down by 8% and 13% respectively this week, averaging R5.90 per kilogramme and R3.46 per kilogramme. These losses were mainly on the back of relatively large stocks of tonnes of bananas and tonnes of oranges. Meanwhile, the price of apples increased by 3% from the previous week, averaging R7.56 per kilogramme. This followed a 33% decline in daily stocks to tonnes. 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 Potatoes market The South African potatoes market ended the week in positive territory due to relatively lower stocks of pockets (10kg bags), down by 6% from the corresponding period last week. On Wednesday, the price was up by 16% from the same period last week, closing at R38.42 per 10kg bag (Chart 9). Chart 9: South Africa s average potato prices and stocks Source: Potato SA Weather conditions ahead of the weekend Heading into the weekend, most parts of South Africa should receive rainfall of between 10 and 40 millimetres, with the exception of the Western Cape province which could remain dry and warm (Chart 10). Rainfall will benefit the summer crop producing regions ahead of the planting activity which commences around mid-october. The long-term weather forecast paints a picture of widespread rainfall across the northern parts of the country, which is a welcome development, ahead of the maize planting season (Chart 11). Meanwhile, the winter crop growing regions of the country could remain dry and cool over the observed period not conducive for crops. 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: 03/10/2017 SAGIS producer deliveries data: 04/10/2017 National Crop Estimate Committee s data: 26/10/2017 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