Between October 2018 and February 2019, which is typically planting to pollination, the weather becomes an important factor in the South African grains and oilseeds market and, to some extent, a major driver of prices. While there are concerns about a possible El Niño later in summer, the season started on sound footing with widespread rainfall in the eastern and central parts of the country. Moreover, farmers have also shown some optimism as the summer grains and oilseed area plantings are set to increase by 5% year-on-year (y/y) to 4,03 million tons in the 2018/2019 production season.
So far, the planting activity has been fairly good in the eastern parts of the country. These good conditions could gain momentum over the coming weeks, not only because the optimal planting window will narrow around mid-month, but also due to a largely favourable weather outlook.
The weather charts this morning (31 October 2018) currently show prospects of between 20 and 90 millimetres of rainfall over the summer crop growing provinces during the next two weeks. Higher rainfall could potentially slow the planting activity in some areas, but potential improvement in soil moisture will have enriching benefits to the crops later in the season. Possible planting delays will not be much of an issue as some areas could still plant outside of the optimal period, although yield levels could be slightly affected.
The impact of the favourable near-term weather prospects on prices has been muted. For example, the yellow maize price is up by over 15% y/y at R2 401 per ton as at 30 October 2018 and the white maize price is up by roughly 21% y/y at R2 411 per ton. This looks as if the market is somewhat pricing in the potential decline in production on the grounds of a possible El Niño.
Be that as it may, other institutions such as the International Grains Council (IGC) are fairly optimistic about South Africa’s 2018/2019 maize production at 12,3 million tons, down 9% y/y (commercial and non-commercial maize) from anticipated lower yields on the back of the forecast El Niño weather phenomenon later in the summer.
With a harvest of 12,3 million tons, South Africa would remain a net exporter of maize until April 2020. As a country, we consume about 10,8 million tons of maize a year and we will probably have about 3,3 million tons of stock when the 2019/2020 marketing year starts in May 2019.
If we add the expected production of 12,3 million tons to the potential 3,3 million tons of stocks, South Africa’s maize supplies will be in good shape over the next two years, all else being equal.
Apart from maize, planting activity is underway in other summer crops such as soya bean and farmers are expected to plant a record level of 851 800 hectares. Similar to other crops, the weather will be a key determinant of the overall production. Worth noting, however, the soya bean pollination stage could fall in with the rainy period (before El Nino), especially the areas that planted early, which increases the chance of higher yields. –Wandile Sihlobo
Wandile Sihlobo, head of economic and agribusiness intelligence at Agbiz, shares highlights in his update on agricultural commodity markets. Click here for the full report on agri markets for the major commodities.