As expected, the latest Crop Estimates Committee’s (CEC) production estimate report showed an upward revision to the February estimate for maize to 10.56 million tons. This follows good rains since early January that stimulated farmers to increase the pace of planting.
Although the current estimate is down 16% by 1% year-on-year (y/y)but up 1% on the February estimate, it is better than earlier expectations of a further cut in maize output. The expected carry over stock of 3.2 million tons by the end of the 2018/19 marketing season will bring the total supplies for 2019/20 to 13.76 million tons which will meet the country’s consumption requirements. Thus, we expect limited upside for maize prices in the medium term should the rand/ US dollar exchange rate continue to trade at current levels.
As with maize, the oilseed complex also faces a decrease in output due to the reduced area relative to last year. The sunflower production forecast came in unchanged at 563,590 tons and is still down 35% y/y, which poses upside risk to the price outlook. Soybeans have seen a decrease in both planted area and the production estimate, coming in down 7% and 17% respectively relative to the previous season. The soybean production estimate came in at 1.28 million tons which is still a third record crop, for the crop. The domestic oilseeds situation therefore indicates a tightening supply outlook which will boost prices in the medium term.
In the case of winter crops, the better wheat season particularly in the Western Cape (WC) has ensured a good crop of 1.84 million tons which will help reduce the import demand by almost 36% y/y to just over 1 million tons. Weather will be critical for the WC as we head into the new planting season for winter crops.
For the summer grains, the season is off to a good end with good rains boosting crop prospects. The only concern is the possible crop damage if frost comes in earlier than expected in areas where the maize plantings were very late. The short to medium term weather outlook still calls for rains across the producing areas which bodes well for the developing crops and a good finish to the 2018/19 summer crop season.
On the consumer front, adequate supplies of grain for the year ahead will help limit further food price acceleration in the medium term. This is good for interest rates which are expected to remain flat. The agriculture GDP is expected to still disappoint in the near term but will rebound marginally in the second half of 2019 and thereafter accelerate into 2020.
Comment by Paul Makube, Senior Agricultural Economist at FNB Agri-Business
