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AGRITrends Oilseeds, Fibre, Grains- South-Africa- December 2019

Maize: Producers in Mpumalanga are progressing well with planting although planting started later than normal. An estimate of 70-80% of maize was planted by end November, only a small fraction of maize was planted 1 or 2 weeks outside the optimal window in Mpumalanga. Maize production under irrigation in Limpopo is already flowering. Producers in the Eastern Free State also experienced a late season. Winds in the eastern Free State is very bad, which depletes soil moisture rapidly. Producers in the North West and central Free State's optimal planting window started on the 15th November. A small percentage of maize and soybean crops were planted, with majority of the producers still busy with soil preparations. Rains remain essential for planting to gain momentum and to complete the planting process in most of the regions.

Wheat: Wheat harvest is 95% complete in the Western Cape and below average yields were generally harvested in the Southern Cape and Swartland area. South Africa is a net importer of wheat. The local prices follow international prices. A reduction in our local crop will not have a significant impact on local wheat prices but will follow what happens in the global wheat market.

Oilseeds: Producers were cautious to plant soybeans in KZN due to the current climatic conditions (cool weather and hail). Mpumalanga producers had planted approximately 40% of their soybean hectares by mid-November. It is expected that the soybean planting intentions in Mpumalanga will be met within the optimal planting window. The eastern Free State soybean producers have planted about 20% of the estimated hectares to date. Rains were received in some parts of the eastern Free State but conditions are still dry.

Fibre: Local cotton prices are stabilized at the moment after going through highs and lows in 2019 amid the trade war worries. Local production is expected to decline to 65,000-75,000 tons in 2022 according to industry. The reduction is mainly because of the prevailing climatic conditions and a seed shortage that occurred during planting period. Prices are expected to decline in the next two months because of the supply pressure from the Northern Hemisphere producers that will be entering the market.

US Kansas yellow corn prices decreased by 0.5% week on week. The market will be supported by snowfall in the US Plains and Midwest which is
expected to slow the late harvest of US corn even further. The improving South American weather is adding downward pressure to prices.

The spot price of white maize increased by 4.3% and the yellow maize spot price increased by 1.8% week on week. Producers in Mpumalanga are progressing well with planting although planting started later than normal. An estimate of 70-80% of maize was planted by end November, only a small fraction of maize was planted 1 or 2 weeks outside the optimal window in Mpumalanga. Maize production under irrigation in Limpopo is already flowering. Producers in the Eastern Free State also experienced a late season. Winds in the eastern Free State is very bad, which depletes soil moisture rapidly. Producers in the North West and central Free State's optimal planting window started on the 15th November. A small percentage of maize and soybean crops were planted, with majority of the producers still busy with soil preparations. Rains remain essential for planting to gain momentum and to complete the planting process in most of the regions.

The favourable weather conditions in major corn producing areas in South America (Brazil and Argentina) may weigh on prices in the next coming weeks. The heavy snowfall in the US could force farmers to leave crop harvesting until early Spring, which could significantly reduce crops, adding a bullish tone to prices. Locally, the occurrence of rain is the main factor to be monitored which will determine how much crops will be planted and which crops are planted. There's improvement in the rainfall prospects in the 1st part of December for most of the summer rainfall area but short term forecasts up until now have been unreliable and uncertain. Longer term rain forecast for the summer rainfall area, Namibia and Botswana indicate higher rainfall prospects towards the second part of summer.

The price of Hard Red Winter wheat increased by 0.6% and the price of Soft Red Winter wheat increased by 4.0% week on week. Current prices for HRW wheat is 7.9% lower compared to prices a year ago. The US wheat prices have been under pressure due to weak export demand. The higher export demand and lower domestic supply for Russia and Ukraine for the 2020 crop provided some support to prices.

Prices in the domestic wheat market traded positvely this week. The wheat spot price increased by 3.5% week on week. Wheat harvest is 95%
complete in the Western Cape and below average yields were generally harvested in the Southern Cape and Swartland area. South Africa is a net importer of wheat. The local prices follow international prices. A reduction in our local crop will not have a significant impact on local wheat prices but will follow what happens in the global wheat market.

The US wheat prices remain capped by abundant global supplies and renewed competition from Russia and the Ukraine. The abundant US wheat supplies, flat domestic use, slow export growth and increased global trade competition, keeps a lid on prices. Locally, wheat prices are expected to recover from November onwards and follow international wheat prices. The grades of the local wheat is good despite the dry conditions (especially in the Western Cape). Because SA is a net importer, the smaller wheat crop will not influence local wheat prices. Instead local producers may get a premium on quality.

The prices of oilseeds in the US traded negatively this week. The price of soybeans in the US gulf decreased by 1.1%, the price of soya oil declined by 1.3% and the price of soya meal decreased by 1.4% week on week. The US soybean market came under pressure due to the weak soy oil futures prices. Favourable weather in South America continues to add pressure to the US soybean prices. According to Reuters, Brazil is estimated to produce a record 122.7 million tons of soybeans in the 2019/20 season which adds a bearish tone to prices. The resurface of more trade tensions also weighed on prices.

Crushing margins remain negative at R529.28/ton. Year on year crushing margins are lower by 239.4%. Crushers remain under pressure. The
soybean spot price decreased by 0.9% and the sunflower seed spot price decreased by 0.9% week on week. Producers were cautious to plant
soybeans in KZN due to the current climatic conditions (cool weather and hail). Mpumalanga producers had planted approximately 40% of their
soybean hectares by mid November. It is expected that the soybean planting intentions in Mpumalanga will be met within the optimal planting window. The eastern Free State soybean producers have planted about 20% of the estimated hectares to date. Rains were received in some parts of the eastern Free State but conditions are still dry.

The resurfacing of trade tensions continues to cap any increases in the US markets. The expected abundant supplies in South America may further add downward pressure on global oilseed prices in the next few weeks. The local oilseed prices are following the international oilseed prices. Prices are expected decline slightly in December and trade sideways from January 2020.

The Australian Wool Exchange (AWEX) Eastern Market Indicator (EMI) lost 25 cents to 1,530 c/kg (clean) from 1,555c/kg (clean) week on week. Sheep numbers are declining across the world. The New Zealand sheep flock is expected to decline by 2,4% this year, with a lower number of breeding ewes available. Demand for wool was declining for the past 12 -18 months due to political issues (Trade War and Brexit) and generally slow global economic growth. The Chinese and the European markets are the largest buyers of wool and the economies in those regions largely influence what happens to wool price trends globally.

Local: The South African Wool market closed 0.1% lower at a value of R169.17/kg (clean) compared to the previous week. The market followed the downward trend in the Australian market this week. Good quality fine and medium length merino wools attracted good competition. There were 12,264 bales on offer and 95.8% was sold.

USA: The Cotton A index increased by 2.3% week on week. Economic growth is a major influencer for cotton demand. The Northern hemisphere will be supplying the market in the next months which could add pressure to the cotton prices, especially if the uptake in China and Europe is lower than previous levels. China's cotton consumption has been lowered for the 2018/19 and 2019/20 forecasts due to slower economic growth in China which is exacerbated by the US/China trade war.

Local: The domestic cotton prices increased by 2.2% this week, prices are 7.7% lower compared to prices a year ago. Local cotton prices have
stabilized at the moment after going through highs and lows in 2019 amid the trade war worries. Local production is expected to decline to 65,000- 75,000 tons in 2022 according to industry. The reduction is mainly because of the prevailing climatic conditions and a seed shortage that occurred during planting period. Prices are expected to decline in the next two months because of the supply pressure from the Northern Hemisphere producers that will be entering the market.

Global: The global number of sheep is declining. The Chinese middle class consumer is the largest influencer of wool demand globally. Demand for wool is the main factor driving price changes in the short and long term. Prices have stabilized after the many months of volatility. However the demand remains lagging which is bearish in the short term. Locally good quality fine and medium merino wools continue to attract competition and buyer interest. Due to shipping backlogs currently experienced and the upcoming Chinese New Year holidays (that falls on 25 January 2020), which may result in deliveries not being able to reach clients by the 20th January. The brokers and buyers have agreed to postpone auctions till next year to ensure product reaches destination on time. The next sale is scheduled for 9 January 2020.


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