The maize harvest activity is slowly gaining momentum in many areas across the country. The progress made thus

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1 08 June 2018 South African Agricultural Commodities Weekly Wrap The weather is a key focus in the South African grain and oilseed market as it continues to influence the harvest activity of summer crops and growing conditions of new season winter crops. The drier weather experienced in the central and northern parts of the country in the past couple of weeks benefitted summer crop harvest activity, whereas light showers in parts of the Western Cape province improved the new season winter crop conditions. The forecasts for the next eight days paint a mixed Wandile Sihlobo +27(0) picture. Summer crops might experience drier weather conditions which should improve harvest activity. Meanwhile, most winter crop areas of the Western Cape province, which currently need increased moisture, could experience light and scattered showers. Aside from that, this was a quiet week, with most commodities prices in negative territory with the exception of sunflower seed. Maize market The maize harvest activity is slowly gaining momentum in many areas across the country. The progress made thus far is reflected on the volumes of maize delivered to commercial silos. The total maize deliveries for the first 5- weeks of the 2018/2019 marketing year are estimated at tons. About 65% of this was yellow maize, with 35% being white maize. The fact that a large part of maize delivered to commercial silos is yellow maize signals that harvest activity is gaining ground mainly in the early planted areas in the eastern parts of the country. A previously noted, the maize supplies are estimated at 16.4 million tonnes (production and opening stocks), which is well above the local maize demand of 10.7 million tonnes. Hence, South Africa could have over 2.4 million tonnes of maize for the export market. So far, the country has exported tonnes, which equates to 10 percent of the 2018/19 total maize export forecast. In terms of pricing, white and yellow maize spot prices averaged R2 088 and R2 191 per tonne, each down by 2 percent from the previous week (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 rainfall received in the past couple of days led to a slight improvement in soil moisture, which subsequently benefited the newly emerged crop in areas around Swartland, Overberg and Southern Cape. This is also evident in the provincial dam levels which averaged 24 percent in the week of 04 June 2018, up by 5 percentage points from the previous week and 6 percentage points from the corresponding period last year. However, next week s dam levels update might not present a notable uptick as this one due to cool and drier weather conditions in the past few days. Moreover, the outlook for the next eight days shows a possibility of continuous dryness. The rainfall could potentially return in the week of 23 June 2018 in parts of the Western Cape province. Furthermore, there is a possibility of above-normal rainfall in the Western Cape province within the next four month, which is exactly what is needed in order to improve sub-soil moisture. 1 This will support the new season crop over the growing period in the coming months. The Western Cape province is of importance because it accounts for 64 percent of South Africa s intended hectares for winter wheat in the 2018/19 production season. Aside from the production dynamics, the wheat import tariff rate of R per tonne that triggered on 10 April 2018 was finally published in a government gazette on 25 May 2018, making it an official rate (Chart 4). While this is 45 percent higher than the previous rate, the adjustment has brought some certainty in the market. Hence, the import activity has resumed after a quiet period of more than two months when the adjustments were still pending. Last week, South Africa imported tonnes of wheat, which is double the volume imported in the week of 25 May About 31 percent from Russia, 29 percent from Lithuania, 20 percent from Latvia and 20 percent from Argentina. This brought South Africa s 2017/18 wheat imports to 1.3 million tonnes, which equates to 68 percent of the season s import forecast of 1.9 million tonnes. Against this backdrop, the SAFEX wheat spot price averaged R3 819 per tonne, marginally down by 0.21 percent from last week. This was in partly line with the Chicago wheat prices which declined by 2 percent from last week, averaging US$250 per tonne (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 The domestic environment remains favourable for the harvest activity, showing clear skies over most soybean growing areas of the country within the next two weeks. A large part of the crop has already been harvest and yields generally range between average and above-average, which supports the National Crop Estimate Committee s view of a record harvest of 1.4 million tonnes. If we take into account the expected harvest, an opening stock, as well as a relatively small volume of imports, South Africa s 2018/19 marketing year supplies could amount to 1.8 million tonnes, up by 28 percent from the previous year. Against this backdrop, the SAFEX soybean price declined by a percentage point this week compared to the previous one, averaging R4 462 per tonne (Chart 5). Elsewhere, the US soybean crop is currently in good shape in the States that planted early in the season. The areas that have recently planted and some that are yet to plant could benefit from expected rainfall over the Midwest within the next eight days. At the beginning of this week, about 87 percent of the area for soybeans had already been planted, compared to 81 percent on 03 June While the production conditions look favourable, the area plantings for US 2018/19 soybean crop could be slightly lower than the previous season, which then translates into a decline in production. This explains the International Grains Council s view of a 2 percent annual decline in US 2018/19 soybean production to 117 million tonnes Sunflower seed market The next two weeks could present an acceleration in harvest activity as weather conditions are expected to be cool and dry across the country. The late planted-areas that are at tail end stages of maturation could also benefit from drier weather conditions. The yields in areas that have harvested largely vary between average and above-average, which somewhat supports the National Crop Estimates Committee s view of a fairly good yield of 1.32 tonnes per hectare, well above the past five season s average yield of 1.21 tonnes per hectare. If the late-planted areas also present fairly higher yields, then the Committee forecast of tonnes of sunflower seed this season could potentially materialise. In terms of pricing, the SAFEX sunflower seed price averaged R4 611 per tonne this week, up by 0.4 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 The SAFEX beef carcass price was flat from this week, averaging R39.50 per kilogram due to thinly traded volumes. However, 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 the same period last year. 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 positive footing, with the price up by 3% from the previous week, closing at R32.54 per pocket/10kg bag (Chart 8). These gains were mainly on the back of a slight decline in producer deliveries, which then led to relatively lower stocks of 1.26 million pockets (10kg bag). Chart 8: South Africa s average potato prices and stocks Source: Potato SA 4

5 Weather conditions ahead of the weekend The weather charts show clear skies over the most parts of the country within the next eight days. While drier conditions are conducive for summer crop harvest activity, the newly emerged winter crops need moisture as the recent rainfall did not sufficiently improve soil moisture (Chart 9). The weather forecast for the week of 23 June 2018 presents a possibility of widespread rainfall in parts of the Western Cape province which is good for winter crops. Over the same period, the summer crop growing areas could experience warm weather conditions which bode well for the harvest activity (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 weekly grain trade data: 12/06/2018 SAGIS producer deliveries data: 13/06/2018 SAGIS monthly data: 26/06/2018 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