Market expectations are largely positive because of two factors. First, the area planted for major summer crops such as maize, soybeans and sunflower seeds is up 10% y/y, 4% y/y and 7% y/y, respectively. Second, although summer rains were delayed which subsequently led to a share of plantings occurring outside the optimal window in some regions of the country, weather conditions have improved notably since the beginning of January 2020. And as a result, the crop is in good shape in most regions of the country with anticipation of higher yields.
On the 27th of January 2020, we (Agricultural Business Chamber of South Africa (Agbiz)) tentatively placed our forecast for South Africa’s 2019/20 maize harvest at 12.50 million tonnes. We have now lifted this to 13.72 million tonnes, which is 22% higher than the 2018/19 season’s harvest. This is underpinned by an upward revision of yield estimate to 5.40 tonnes per hectare, from our earlier assumption of 5.00 tonnes per hectare, in an area of 2.54 million hectares.
If such a harvest materialises, South Africa would remain a net exporter of maize in the 2020/21 marketing year which starts in May 2020 (this corresponds with 2019/20 production season). This is at a time where Southern African maize import needs could outpace the previous year, with Zimbabwe in need of maize supplies to an extent that the country lifted a ban on importation of genetically modified maize, which eases access for South African maize exporters.
Other typical maize export markets for South Africa outside the African continent, include Japan, Taiwan, Vietnam and South Korea. While these particular countries have not featured prominently in the 2019/20 marketing year exports, which were largely dominated by African countries, we anticipate that they could return in the 2020/21 marketing year. We think the potential increased supplies could lead to possibly attractive or competitive prices in the coming months, which should be a catalyst for increased exports to countries outside the continent.
Moreover, we estimate that South Africa’s soybeans and sunflower seed 2019/20 season harvest could lift by 26% and 12% from the previous season, to 1.48 million tonnes and 761 070 tonnes, respectively. This too is underpinned by an expansion in area plantings and anticipation of higher yields. Our soybean yield estimate is 1.95 tonnes per hectare, with sunflower seed yield estimate at 1.38 tonnes per hectare. All these are within the historic range of seasons of good rainfall. Unlike maize, however, South Africa could remain a net importer of soybean products, specifically oil cake, and a net importer of sunflower oil, irrespective of the potential improvement in the harvest. This is largely caused by the growing domestic demand for these particular oilseed products.
Overall, an improvement in the summer crop harvest bodes well with South Africa’s food price inflation for the year. As a result of our optimism on 2019/20 summer crop yields, food price inflation could remain benign in 2020, hovering around 4% y/y in our view.
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