The weather models continue to paint an optimistic picture for the new season. The South African maize belt could

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1 22 September 2017 South African Agricultural Commodities Weekly Wrap The weaker domestic currency, coupled with higher Chicago grains and oilseed prices led to widespread gains in the South African agricultural commodity markets this week. The notable gains were on sunflower seed with the spot price up by 2% compared to the previous week. The maize and soybean spot prices were each up by 1% from the previous week, whilst wheat was up by just 0.41%. The week ahead is data packed, with the National Crop Estimate Committee s production Wandile Sihlobo +27(0) estimates and SAGIS weekly data due for release. Any major changes in these particular data points could lead to notable movements in the grain and oilseed markets. Apart from this, the fruit and vegetable prices were volatile throughout the week with daily stock levels underpinning the market. Maize market The weather models continue to paint an optimistic picture for the new season. The South African maize belt could receive widespread showers in the first week of October This will improve soil moisture ahead of the planting period which is set to commence around mid-october in the eastern parts of the country. Also more encouraging this week was a rebound in South African maize exports after last week s dismal performance. The country exported tonnes. The leading buyer was Kenya with a share of 55%, all white maize. Kenya s maize batch was probably a non-genetically modified. The country still has a restriction on the importation of genetically modified maize. Overall, this placed South Africa s 2017/18 total maize export volume at 1.24 million tonnes, which equates to 56% of the season s export forecast of 2.2 million tonnes. In terms of pricing, white and yellow maize spot prices averaged R1 848 per tonne and R1 963 per tonne this week, respectively, each up by 1% from the previous week (Chart 1). The Chicago maize prices were also up by 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 The weather remains a topical subject in the South African wheat market, but not in good light. The Western Cape province, which is a major wheat producing region in South Africa, remains dry. The recent showers that were received last week were not sufficient to replenish soil moisture and were only concentrated in few areas of the province. These were Overberg and Southern Cape regions, receiving rainfall of between 10 and 20 millimetres. Meanwhile, the Swartland region remained cool and dry, which is not conducive for crop development. With that said, these showers led to a one-point improvement in the Western Cape province s dam levels. In the week ending 11 September 2017, dam levels averaged 35%. However, this is still 27 points lower than the corresponding period last year. Above all, the winter wheat crop is not in good shape and could remain strained for some time as the weather forecasts continue to paint a disappointing picture for the next two weeks. From a trade perspective, South Africa imported tonnes of wheat in the week ending 15 September 2017, all from Romania and Australia. This is 11% higher than the previous week s imports. Overall, South Africa s 2016/17 total wheat imports stand at tonnes, which equates to 84% 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. This marketing season ends next week, 30 September In terms of pricing, the domestic wheat market gained 0.14% this week compared to the previous one, averaging R4 247 per tonne (Chart 3). These gains were partly on the back of higher Chicago wheat prices, weaker domestic currency, as well as a bullish sentiment due to continued dryness in the Western Cape and Free State provinces. At the same time, the Chicago wheat prices were up by 2% this week, compared to the previous one, averaging US$218 per tonne due (Chart 3). The weather is also a primary focus in the global market as northern hemisphere commences with the winter wheat planting process. Key producers such as Russia had already planted 53% of this season s intended hectares on 19 September The country s 2017/18 winter wheat plantings are estimated at 17.5 million hectares, which supports the view of possible large wheat supplies in Russia this season. 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 This was again a quiet week in the South African soybean market with no major news and data releases. The market was largely underpinned by domestic currency movements, which led to a 1% uptick in spot prices to R4 714 per tonne (Chart 5). Apart from the foregoing, South African soybean supplies are in good shape, estimated at 1.39 million tonnes (including opening stocks and commercial deliveries).this is 29% higher than the previous season and implies that the country could be a net exporter of soybeans this season. An update will be released next week. On the global front, the US soybean crop is approaching maturity. At the beginning of last week, 22% of the crop had already started dropping leaves. That said, this is three points behind a 5-year average progress. Overall, the country s 2017/18 soybean production is estimated at million tonnes, up by 3% from the previous season. In the Black Sea region, the soybean harvest process is in full swing. The most recent data from Ukraine s Agricultural Ministry shows the 17% of the country s soybean acreage had already been harvested in the week ending 18 September 2017, with overall tonnes collected. At the same time, Russia had harvested 13% of its soybean acreage with tonnes collected thus far. Sunflower seed market The domestic sunflower seed market had a good run this week with the weaker Rand against the US Dollar and commercial buying being the key drivers of the market. The sunflower seed spot price gained 2% from last week, averaging R4 819 per tonne (Chart 6). Meanwhile, the global market lost 2%, averaging US$394 per tonne due to lower crude oil and vegetable oil prices, as well as harvest pressure (Chart 6). The Black Sea countries have made notable progress regarding the harvest activity. Ukraine had harvested an area of 1.6 million hectares in the week ending 18 September 2017, with overall volume collected at 2.8 million tonnes. The country s 2017/18 sunflower seed production is forecast at 14.0 million tonnes, down by 1% from the previous season. At the same time, Russia had harvested hectares, with 1.5 million tonnes of sunflower seed collected. The process should gain momentum within the next two weeks due to expected dry and cool weather conditions. 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 There was not much happening in the SAFEX beef carcass market this week. The price remained flat, averaging R46.00 per kilogramme due to thinly traded volumes. This implies that the SAFEX beef carcass prices could differ from the physical market due to limited participation (in the stock exchange). Apart from this, the livestock industry is still in its rebuilding process after the El Niño induced drought. The data from the Red Meat Levy Admin shows that South African farmers slaughtered head of cattle in July 2017, down 6% from the previous month (Chart 7). Moreover, this is 13% lower than the corresponding period last year 1. We will monitor the developments closely over the coming months in order to ascertain the impact on prices. Fruit market The South African fruit market ended the week mixed. The prices of bananas and oranges were up by 1% and 7% respectively this week, averaging R5.79 per kilogramme and R3.51 per kilogramme. These gains were on the back of relatively lower stocks of tonnes of bananas and tonnes of oranges. Meanwhile, the price of apples fell by 2% from the previous week, averaging R7.29 per kilogramme. This was due to commercial selling, as well as relatively large stocks of 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 1 The previous month figures were revised up. 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 15% from the corresponding period last week. Yesterday the price was up by 1.4% from the same period last week, closing at R34.47 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, South Africa should remain dry and warm with the exception of the coastal areas and Kwa-Zulu Natal province which could receive light showers (Chart 10). This will not be an issue for summer crop growing areas as it is an off-season period, but winter crops could be strained for some time. 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 that starts around mid-october (Chart 11). The coastal areas of the Western Cape province could also receive light showers, but will, unfortunately, not be sufficient to replenish soil moisture and improve winter crop conditions. 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: 27/09/2017 SAGIS producer deliveries data: 28/09/2017 National Crop Estimate Committee s data: 28/09/2017 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