Prices in the domestic wheat market traded negatively this week; oilseeds’ crushing margins remain negative; the soya bean spot price decreased and the sunflower seed spot price increased.
Maize market trends
International maize market
US Kansas yellow corn prices decreased by 1% week on week. Improving weather conditions in Brazil and Argentina weighed on the market. US corn prices remain under pressure due to slow exports out of the US. There is still uncertainty about the US-China trade talks and nothing concrete is coming out of the phase 1 trade deal which is hanging over the market. The harvesting of US corn is gaining momentum with drier weather forecasted in the US Midwest for the week.
Local maize market
The spot price of white maize increased by 1.7% and yellow maize spot price increased by 0.8% week on week. South African maize future prices (Dec 2019 and July 2020) traded negatively this week. The CEC released its final production estimate for the summer crops earlier this week. The expected commercial maize crop is set at 11,257,850 tonnes, which is 71,800 tonnrs more than the previous estimate of 11,186,050 tonnes. This estimated maize crop is 10% lower than the 2018 maize crop. The area estimate for the current production season is set at 2,300,500 hectares consisting of 1,298,400 hectares white maize and 1,002,100 hectares yellow maize.
Outlook
Favourable weather conditions in major corn producing areas in South America may weigh on prices in the next coming weeks. The uncertainty of the trade deal adds a bearish tone to prices. Locally, rains remain critical in the eastern, central to western summer crop growing regions. Prices are expected to trade sideways for the next two weeks.
Wheat market trends
International wheat market
The price of Hard Red Winter wheat increased by 0.2% and the price of Soft Red Winter wheat increased by 1.5% week on week. Current prices for HRW wheat is 3.3% lower compared to prices a year ago. Gains in the US wheat prices are being limited by the slow US export progress. The International Grains Council (IGC) is estimating global wheat area for the 2020/21 season at 218 million acres (a 1% expansion year on year).
Local wheat market
Prices in the domestic wheat market traded negatively this week. The wheat spot price decreased marginally by 0.6% week on week. The expected commercial wheat crop is estimated at 1,695,470 tonnes down by 6.1% from the previous forecast of 1,806,170 tons. Wheat production in the Western Cape, which makes up 40% of total South African wheat production, was estimated at 682,500 tonnes in October by the Crop Estimates Committee. The estimated wheat production may not materialize due to the hot and dry conditions experienced in the dryland producing areas of the Western Cape.
The published South African wheat import tariff is still at R1008/ton with the market awaiting the publication of the R776/ton import tariff. Higher international wheat prices could potentially lower the import tariff for the SA wheat producers.
Outlook
Prices in the domestic wheat market traded negatively this week. The wheat spot price decreased marginally by 0.6% week on week. The expected commercial wheat crop is estimated at 1,695,470 tons down by 6.1% from the previous forecast of 1,806,170 tons. Wheat production in the Western Cape, which makes up 40% of total South African wheat production, was estimated at 682,500 tonnes in October by the Crop Estimates Committee. The estimated wheat production may not materialize due to the hot and dry conditions experienced in the dryland producing areas of the Western Cape.
The published South African wheat import tariff is still at R1008/ton with the market awaiting the publication of the R776/ton import tariff. Higher international wheat prices could potentially lower the import tariff for the SA wheat producers.
The price of Hard Red Winter wheat increased by 0.2% and the price of Soft Red Winter wheat increased by 1.5% week on week. Current prices for HRW wheat is 3.3% lower compared to prices a year ago. Gains in the US wheat prices are being limited by the slow US export progress. The International Grains Council (IGC) is estimating global wheat area for the 2020/21 season at 218 million acres (a 1% expansion year on year). 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 are 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.
Outlook
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.
Soya bean market trends
International soya bean market
The prices of oilseeds in the US traded mostly negatively this week. The price of soya beans in the US gulf decreased by 0.6%, the price of soya oil remained unchanged while the price of soya meal decreased by 1.1% week on week. US wheat futures declined due to the focus being on the uncertainty about the US-China trade war overshadowing some of the gains from the stronger than expected US soybean exports and the improving South American weather.
Local soya bean and sunflower seed market
Crushing margins remain negative at R517.01/ton. Year on year crushing margins are lower by 268.4%. Crushers remain under pressure. The soya bean spot price decreased by 0.4% and the sunflower seed spot price increased by 0.7% week on week. The final local production estimate for sunflower seed according to the latest CEC report remains unchanged at 680,940 tons. The area estimate for sunflower seed is 515,250 hectares. The final production estimate for soya bean is 1,170,345 ton. The Eastern Free-State, Limpopo, KZN and Mpumalanga regions received some rainfall the past two weeks. Producers started planting after receiving some rains the past few weeks, follow-up rains will be critical to ensure that expected yields materialise.
Outlook
Chinese consumption of oil meals (soya meal) will continue to decline in the current quarter and a reduction in consumption is also expected for 2019/20 which is curbing world crushing of soya beans. This means US soya bean exports will be kept at lower than expected levels. US stocks will continue to remain high despite the US crop losses. The local oilseed prices are following the international oilseed prices. Prices are expected to increase from November, decline slightly in December and trade sideways from January 2020.
Fibre market trends
Wool market
The Australian Wool Exchange (AWEX) Eastern Market Indicator (EMI) lost 19 cents to 1,555 c/kg (clean) from 1,574 c/kg (clean) week on week. Volatility in the market continues to affect consumer behaviour. Chinese consumers are major influencers of wool consumption globally. China imports 75% of the Australian wool clip, and an estimated 60% of that figure has been remaining in China for domestic consumption. The concern over the US-China trade tariffs, the political and economic roadblock that is Brexit caused a decline in demand for raw wool.
Local: The South African Wool market closed 3% lower at a value of R169.41/kg (clean) compared to the previous week. The market followed the downward trend in the Australian market this week. The stronger Rand coupled with subdued demand from the buyers saw the market experience downward pressure this week.
Cotton market
USA: The Cotton A index decreased by 2% week on week. Economic growth is a major influencer for cotton demand. 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 decreased by 3% this week, prices are 10.8% lower compared to prices a year ago. Local cotton prices are expected to trade sideways for the next three months.
