The fundamentals in the South African maize market remain unchanged. The 2018/19 marketing year supplies are

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1 22 June 2018 South African Agricultural Commodities Weekly Wrap The summer crop harvest activity is underway across South Africa, but the progress made thus far varies amongst grains and oilseeds. For example, maize had a late start compared to previous years due to delays in the planting at the start of the season (on the back of unfavourable weather conditions). Meanwhile, sunflower seed harvest activity is in full showing, with soybeans towards completion. The weather will be a key focus within the next couple of weeks as it continues to influence Wandile Sihlobo +27(0) the harvest activity of summer crops and growing conditions of new season winter crops. The forecasts for the next eight days show clear skies across the country, which should bode well for harvest activity, while it s the opposite for winter crops. The week ahead is data-packed, but the most anticipated release is the Crop Estimate Committee s fifth production estimate for 2017/18 summer crops. Maize market The fundamentals in the South African maize market remain unchanged. The 2018/19 marketing year supplies are in good shape, estimated at million tonnes, which is well above the annual domestic needs of million tonnes. The supply figure includes the expected production, as well as opening stock. There is generally some optimism about the 2017/18 maize crop, with some areas that have already harvested reporting yields that vary between average and above average. (The 2017/18 production season corresponds with 2018/19 marketing year) On 27 June 2018, the National Crop Estimates Committee will release its fifth production estimates for 2017/18 maize crop. Reuters analysts survey shows that the Committee could lift its estimate by 0.6 percent from the current estimate of million tonnes to million tonnes. In terms of pricing, white and yellow maize spot prices declined marginally from levels seen last week and averaged R2 046 and R2 144 per tonne, respectively (Chart 1). 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 Western Cape, Free State, Northern Cape and Limpopo are the key winter wheat producing provinces in South Africa, accounting for 95 percent share of the intended area of hectares for the 2018/19 season. The Western Cape province is, however, the main producing province with a share of 64 percent in the overall intended area. The new season planting is complete across the province, but crop conditions reports paint a mixed picture. In Swartland and Overberg regions, the crop is in good condition, thanks to rainfall received in the past couple of weeks. However, the Southern Cape region has not received notable rainfall since the start of the season, hence the recently emerged winter wheat crop is not in good condition. Furthermore, the winter wheat planting activity is still at initial stages in other provinces. The Free State province, which is the second largest wheat producer after the Western Cape, has recently started its planting activity and should gain momentum within the next couple of weeks. The winter wheat crop in the province is produced in both dryland and irrigation areas. The summer rainfall has improved soil moisture levels across the province which bodes well for the new season crop. The irrigation areas could have a good season as dams are almost at full capacity across the province. Overall, the weather will remain central in the discussion of the domestic wheat market for some time as the crop is still in its early stages of development that requires moistures. Unfortunately, the weather charts currently show clear skies over the winter wheat growing areas of the country within the next eight days, which does not bode well with the crop. The rainfall received in the past couple of days was fairly light and have not sufficiently improved subsoil moisture, hence the provinces still need intense and persistent rainfall. In the past couple of weeks, we talked a bit about expectations of higher rainfall over the Western Cape within the next three months, leaning on the South African Weather Service and International Research Institute for Climate and Society s forecast. 1 The view has not changed. There is still some level of optimism regarding the weather in the medium term. Against this backdrop, the SAFEX wheat spot price averaged R3 977 per tonne, up by 2 percent from last week (Chart 3). Chart 3: South Africa and US wheat prices Source: JSE, IGC, and Agbiz Research Chart 4: South Africa s wheat import tariff Source: SAGIS and Agbiz Research 1 South African Weather Service, Seasonal Climate Watch. [Online] Available on: 2

3 Soybean market South Africa s soybean harvest activity is towards completion and this is marked by the declining trend in producer deliveries following weeks of large volumes. In the week of 15 June 2018, about tonnes of soybean was delivered to commercial silos, which is 35 percent lower than the previous week. With that said, the soybean producer deliveries for the first 16 weeks of the 2018/19 marketing year amounted to 1.41 million tonnes, which equates to 99 percent of the expected harvest of 1.43 million tonnes. A few more areas that are at the final stages of harvesting will benefit from expected cool and drier weather conditions within the next two weeks. In the past couple of weeks, we noted a possibility of average and above-average yields in soybean growing areas. This is now evident from the producer deliveries data which are almost on par with the estimated crop of 1.43 million tonnes, as previously mentioned. Next week, the National Crop Estimate Committee will release its fifth production estimate for 2017/18 soybean. We don t foresee any notable changes, if there is any, it will probably be an upward revision. These developments, coupled with lower Chicago soybean prices added a bearish sentiment to the SAFEX soybean market this week. Hence, the SAFEX soybean price declined by 2 percent compared to the previous week, averaging R4 335 per tonne (Chart 5). Sunflower seed market The harvest activity is now in full swing in the sunflower seed growing regions. In the week of 15 June 2018, sunflower seed producer deliveries amounted to tonnes, which is 12 percent higher than the previous week. This placed 2018/19 producer deliveries at tonnes, which equates to 55 percent of the estimated harvest of tonnes. The current momentum in harvest activity is likely to last for some time as weather forecast show a possibility of cool and drier weather conditions within the next two weeks in sunflower seed growing regions. One aspect that most farmers worry about at the moment, especially in the late planted regions, is frost. Given that the crop has already matured, the yield levels are unlikely to be affected, but the quality could deteriorate. The areas that have reported frost so far are limited within North West and Free State provinces, but the extent of it within these provinces is still unclear. In terms of pricing, the SAFEX sunflower seed price averaged R4 617 per tonne this week, down by 0.1 percent the previous week (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 This was again another quiet week in the SAFEX beef carcass market, with the price unchanged from last week, averaging R47.50 per kilogram. This price might not be a true reflection of the physical market which continues to show solid activity. In terms of the meat supply, the South African farmers slaughtered head of cattle in April 2018, down by 6 percent from April The decline in slaughtering is on the back of a cattle herd rebuilding process after a reduction during the drought. However, the trend could soon change as the USDA forecasts a 4 percent annual increase in the number of cattle to be slaughtered in South Africa in 2018 to 3.5 million cattle, due to the anticipated uptick in demand and a general recovery in the industry performance (Chart 7). Chart 7: Monthly cattle slaughtering activity Source: Red Meat Levy Admin, Agbiz Research Potato market The potato market ended the week on a negative footing, with the price down by 2% from the previous week, closing at R29.73 per pocket/10kg bag (Chart 8). These losses were mainly on the back of relatively large stocks of 1.35 million pockets (10kg bag), which in turn, were supported by large deliveries. Chart 8: South Africa s average potato prices and stocks Source: Potato SA 4

5 Weather conditions ahead of the weekend The next eight days could be cool and dry across the country which is conducive for summer crop harvest activity. Meanwhile, the new season winter crop that currently needs moisture could be strained, particularly areas around the Southern Cape in the Western Cape province (Chart 9). The week of 07 July 2018 promises some improvements, with prospects of light showers in areas around Winelands and Overberg regions of the Western Cape province. This, however, will not make a meaningful improvement on soil moisture as it is expected to be light varying between 7 and 16 millimetres (Chart 10). Chart 9: Next 8-days precipitation forecast Source: wxmaps Chart 10: Next 16-days precipitation forecast Source: wxmaps 5

6 Chart 11: Precipitation forecast Source: wxmaps Key data releases in the South African agricultural market SAGIS monthly data: 26/06/2018 SAGIS weekly grain trade data: 26/06/2018 SAGIS producer deliveries data: 27/06/2018 National Crop Estimates Committee s data: 27/06/2018 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