Higher income levels will support the value of collateral assets such as land. Although the impact of the drought is severe the impact on producers in general will be less due to increased prices. However, the cash flow of individual producers without a crop will be impacted the most severe. Since production decreased the higher maize price will support the GPV of maize production and gross income of producers that manage to produce a crop although at a lower yield. It is expected that the GPV will recover in 2020 as production will recover at higher price levels. This will support drought affected producers in 2020 to recover financially from the 2018 drought.
Highlights
Grains & Oilseeds
· Preliminary area estimate planted for maize is 1.26 million hectares. This is a decline of 2.15% (49,950 ha) when compared to the previous season. The lower planted maize estimate may even be lower due to challenges such as cold and frost which may affect the development of late planted crops.
· Some rainfall that was seen last weekend caused a decline in white maize prices. For the week ending 18 January 2018, white/yellow maize spread was big. We saw white maize market trading above yellow maize with approximately R400. The spread has since narrowed and changed, yellow maize is trading above white maize.
· Some favourable rainfall is forecasted for the eastern parts and central parts of the country while drier weather conditions are expected for the following week in the North West.
· Stronger local currency limited gains in the local wheat market. The CEC expects the commercial production of wheat to be 1.79 million tons, which is 1.74% less than the previous forecast of 1.83 million tons. The 300 000 ton tariff free importing window may weigh on local prices in the coming month.
· The CEC’s preliminary estimate for sunflower seed area is 44,000 hectares, which is 26.18% (157,500 hectares) lower than the previous season where 601,500 hectares was planted. This is the 3rd smallest area planted in the past 5 years. The CEC estimates 743,600 hectares planted under soybean, which is a 43,600 ha decline (5.54%) compared to the previous season’s 787,200 hectares planted.
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Conce Moraba -Agricultural Economists, Absa group
