Agri Trends 15 May 2015 - Application serverwebapps.daff.gov.za/AmisAdmin/upload/Agri Trends 15 May 2015.pdf · marketresearch has revealed that the UHT milk market in South Africa

Agri Trends 15 May 2015

Absa Bank Limited, Reg No 1986/004794/06, Authorised Financial Services Provider. Registered Credit Provider Reg No NCRCP7 Page 1

Knock-on effects on maize prices! White maize prices are 38% higher than a year ago and yellow maize prices 15% higher while the

expected crop for 2015 is expected to be almost 4.5 million tons less than the 2014 crop. In comparison

corn prices in the USA declined by 25% but the Rand weakened by 14% thereby supporting domestic

prices. Prices in the South African maize market are expected to trade predominantly sideways until the

bulk of the crop is harvested in July. Thereafter, the prices of white maize are expected to increase

moderately by up to 3% between July and March 2016. It should also be noted that the price of white

maize trades continuously at a premium of up to 18% above that of yellow maize. This price premium for

white maize above yellow maize prices extends until March 2016 and it is not expected to decline soon.

Prices are supported by bullish factors such as the need by Zimbabwe to import significant quantities of

maize meal from South Africa and the weak Rand. The domestic supply and demand for white maize

(including South Africa and the SACU member countries) is at break even and we do not have additional

white maize surpluses available for export. Due to the tight stock situation for white maize our prices may

not be impacted in the short term by fundamental factors that determine global corn prices. We should

however take note that the rest of the world is experiencing a deflationary commodity price cycle in the

long term which may impact future prices as soon as South African maize production levels recover and

stock levels increase. Domestic prices for white maize for delivery in July 2016 trade currently at a

discount of 15% compared to prices in July 2015.

Beef Market Trends

International: New Zealand steers

and cows traded lower at NZ$461 and

NZ$316 per head respectively. The high

seasonal supply out of New Zealand has

kept prices low. In the US, beef traded

mostly higher as follows: Top side

traded higher at $298,21/cwt, Rump

traded lower at $459,63/cwt and Strip

loin traded higher at $737,54/cwt, Chuck

traded slightly higher at $273,50/cwt,

Brisket traded higher at $274,59/cwt

which gave us an average carcass price

of $375,03/cwt. The US Department of

Agriculture (USDA) released their

monthly WASDE (World agricultural supply and demand) estimates last week, and showed that the

total red meat and poultry production forecast for 2015 was increased from last month’s estimate as

a result of higher beef, pork, and broiler production. Beef production was increased as a result of

heavier dressed weights, while imports are expected to be higher as a result of strong processing-

grade beef demand and tight supplies of the US processing beef. Memorial Day is on Monday the

25th of May, and since it’s the first holiday of the US summer grilling season, it might bring a spike in

beef demand. This time of year normally brings higher prices because of increased demand from

people hoping to fire up their grills after a long winter.

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Domestic: When compared to last week, prices traded mixed. The prices of the different meat

classes were as follows: Class A prices decreased by 0.07% to 34.00/kg, Class C prices increased

by 0,38% to R26.73/kg and Contract prices increased by 0,17% closing at R34.51kg with the fifth

quarter included. The weaner prices traded slightly higher compared to last week at R19.57/kg. The

average hide price traded slightly higher at R18,42/kg.

Outlook

Internationally, Prices are expected to be supported in the short term by good demand during the US

grilling season, but higher supplies in New Zealand can weigh on prices. Tight supplies and good demand

are expected to continue to support prices in 2015, with lower slaughtering and exports in Australia as

producers rebuild their herds. Locally, prices are expected to trade sideways to downwards in line with

seasonal trends and on the back of good supplies.

Dairy Market Trends

International: International dairy

prices have declined at the morning's

GlobalDairyTrade (GDT) auction on the

6th of May, with the GDT price index

losing 3.5% since the last auction in

mid-April. The uncertainty about New

Zealand’s production during the months

of January and February helped support

prices, but prices have decreased since

then. Prices in Europe have reportedly

being weighed down by higher volume

of milk on offer as production in many

countries nears its seasonal peak. Strong growth in the supply has been reported in Ireland,

Netherlands and France as a result of the removal of the milk quota. Dairyco has also revealed

that data from Australia, New Zealand, the US and the EU, the four world’s main exporting areas,

show that milk production in the first two months of the year remains above the 3 year average.

Domestic: The local milk producer prices have increased marginally during 2015. Import parity

prices are currently trading at levels above the local producer price, which can put some pressure

on prospective importers. The January, February and March 2015 production figures came out

higher than production volumes that were reached the same time a year ago. It also seems that

the market is able to cope with the current production levels. A study by Persistent

marketresearch has revealed that the UHT milk market in South Africa has been growing at a fast

rate, and is expected to continue to improve during 2013-2019. This is as there has been an

increasing acceptability of UHT milk among all economic classes and the ability of companies to

maintain stable retail prices, the report further showed. Persistent market research further

indicated that increasing population and the poor cold-chain infrastructure in developing countries

were factors which were additionally driving the market.

Page 3

Outlook

Internationally, prices are soft on the back of the global oversupply in the market. Future supplies will play

an important role in determining prices in the medium term. Locally, demand for dairy products is

expected to grow, however at a slow pace.

Mutton Market Trends

International: The New Zealand lamb

and mutton traded sideways this week

compared to last week; lamb closed the

week at NZ$73,3/head for 15kg. Ewes

closed sideways at NZ$51.1/head for a

21kg ewe. Import parity prices for lamb

was slightly lower at R48.53/kg and for

mutton was slightly lower at R28.39kg

respectively. The New Zealand’s market

for sheep meat has continued to trend

downward. This is as few sales were

being made, putting pressure on export

prices. Increased production and weaker demand has seen prices for domestically produced

lamb and mutton decline in the UK and China. Australian beef production has been reported to

remain high, posing the question of when supply will start to slow.

Domestic: The mutton prices traded sideways to slightly lower during the past week. Class A

traded slightly lower at R53.89/kg and Class C traded higher at R39.04/kg compared to the

previous week. The price for feeder lambs traded slightly higher at R25.53/kg. The average price

for dorper hides traded slightly lower at R94.00/hide and merino traded slightly higher at

R67.80/hide respectively. The landed imported price of mutton rib from Australia and New Zealand

traded higher at R 27,99/kg compared to the previous week and mutton shoulders however traded

lower at 43,95/kg according to (Association of Meat Importers and Exporters) AMIE.

Outlook

Internationally, in the short term, prices are expected to remain soft due to well supplied market and softer

demand. In the medium to long term, prices are expected to be supported with expected tight supplies

from Australia and New Zealand as nations are rebuilding their herds. Locally, prices are expected to

trade sideways to upwards in line with seasonal trends.

Page 4

Pork Market Trends

International: US pork prices traded

higher over the past week, despite

decreases of 6,47% in loads. Carcass

prices traded 4.90% higher at

US$82.58/cwt, Loin traded slightly higher

at US$97.16/cwt, Rib prices traded

6.33% higher at US$191,08/cwt and ham

traded higher at US$61.57/cwt. The

import parity price increased slightly due

to the higher international prices.

According to the USDA’s latest report,

total US red meat and poultry production

in 2016 is forecast to be above that of 2015. Pork production is expected to increase as pig

production expand, reflecting moderate increases in farrowings during late 2015 and early 2016

and a continued recovery in growth in pigs per litter. The 2015 pork production is also forecast

higher as the pace of slaughter in the second quarter remains heavy and supplies of slaughter

hogs in the second part of the year are expected to remain abundant. Higher production is

expected to weigh on imports.

Domestic: Domestic prices were slightly lower over the past week with Porker prices slightly

lower at R25.35/kg while Baconer prices were slightly lower at R23.52/kg. High maize prices could

influence negatively on the margins for the livestock industry.

Outlook

Internationally, hog prices are expected to follow a downward trend in the short to medium term on the

back of higher supplies. Domestic prices are expected to move sideways with a possible downward

pressure on the back of good production volumes in the market and in line with seasonal trends. In the

medium to long term, prices could improve as demand improves.

Page 5

Poultry Market Trends

International: The poultry prices

in the US traded mostly lower over

the week compared to the past week.

Whole bird prices traded 0.70% lower

and at 109.2USc/lb. Breasts traded

8.72% lower at 157,0USc/lb and leg

Quarters traded 7.89% lower at and

35,0USc/lb respectively. The USDA

has forecast that the total 2016 US

poultry production is expected to be

higher. Broiler and turkey production

are forecast higher as the growth in

production is expected to continue.

Production of broilers for 2015 was also increased from last month as producers continue to

expand egg sets and chicks placed.

Domestic: Poultry prices traded lower during the past week compared to the previous week.

Frozen birds traded 3.38% lower at R21.43/kg compared to the previous week. Whole fresh

medium bird prices traded slightly lower at R22.68/kg while IQF traded slightly lower at R19.69kg.

Short stocks has been reported in the market, especially on the low value products and this

support prospects for increases in prices in the short term.

Outlook

Internationally, prices are expected to continue with the downward trend as broiler production continues

to grow. This is as producers continue to expand egg sets and chicks placed. The lack of export demand

and higher domestic supplies has resulted in more chicken going into freezers, which puts further

downward pressure on prices. Locally, prices are expected to continue being supported by the current

short stocks in the market, which could possibly also encourage imports.

Page 6

Livestock Prices

(R/kg)

15 May 2015

Beef

Mutton

Pork

Poultry

Current

Week

Previous

Week

Current

Week

Previous

Week

Current

Week

Previous

Week

Current

Week

Previous

Week

Class A / Porker

/ Fresh birds 34.00 33.26 53.89 54.33 25.35 25.38 22.68 23.18

Class C/

Baconer /

Frozen birds

26.73 26.63 41.01 39.19 23.52 23.54 21.43 22.18

Contract /

Baconer/ IQF 34.51 34.45 54.21 55.21 24.44 24.46 19.69 20.26

Import parity

price

48.51 49.44 28.39 28.73 24.38 24.31 13.18 14.05

Weaner Calves /

Feeder Lambs/ 19,57 19,32 25,53 24,03 - -

Specific

Imports: Beef

trimmings

80vl/b/Mutton

Shoulders/Loin

b/in /chicken

leg1/4

46,95 49,65 43,95 47,00 37.50 35.50 19.50 20.51

Yellow Maize Trends

International: When compared to

the previous week, the average US

Fob Gulf maize price closed the week

0.33% higher at US$168.10. Early last

week maize plantings in the US are

close to 85, this is well above the last

year’s amount. The International maize

production for 2015/16 is estimated at

989.8 million tons, which is lower than

the 2014/15 record, largely reflecting

the smaller projected U.S. crop

according to the USDA estimates. A

drop in 2015/16 maize production is

also expected for the EU, Brazil,

Ukraine, and Mexico.

Page 7

Domestic: The local maize market for yellow maize traded 2.4% higher at an average of

R2396.40/ton over the past week. The average exchange rate for the week was stronger at

11.96/US$ compared to 12.04US$ the previous week. The all futures prices traded mostly higher

as follows: May-15 contracts increased by R33/t to R2403/t, Jul-15 increased by R20t to R2424/t,

Sep-15 contracts increased by R19/t to R2453/t, Dec-15 also increased by R26/t to R2497/t, Mar-

16 increased by R67/t and traded at R2485/t, May-16 increased by R2/t to R2382/t, while Jul-16

decreased by R71/t to R2230/t. The stronger Rand has further pressured local maize prices.

According to the Standard newspaper local millers and farmers in Zimbabwe are not comfortable

with the ministry’s new issue of permits to allow importers to bring in 200,000 tonnes of maize

meal. The representative milling body is currently following a court process to try to prevent

these imports. Many millers run the risk of going out of business due to the imports being cheaper

than locally produced maize meal.

Outlook

Internationally the substantial increases in the maize production and export estimations from Argentina

and Brazil are expected to weigh on international prices in the approaching week. The high pace of maize

planting in the US is also expected to influence prices. Locally the smaller harvest of maize is expected to

aid prices.

Yellow Maize Futures:

15 May 2015 Jul-15 Sep-15 Dec-15 Mar-16 May-16

CBOT ($/t) 158.61 162.62 166.87 169.71 172.23

SAFEX (R/t) 2424.00 2453.00 2497.00 2485.00 2382.00

Sep-15 Dec-15 Mar-16

Ask Put Call Ask Put Call Ask Put Call

2,500 167 120 2,540 201 158 2,520 230 195

2,460 145 138 2,500 179 176 2,480 208 213

2,420 124 157 2,460 158 195 2,440 187 232

Page 8

White Maize Trends

International: The US white maize

spot market traded 0.60% higher at an

average of US$ 154.60/t over the past

week. Import parity prices traded

slightly lower, compared to the

previous week due to the change in

exchange rate from 12.04/US$ to

11.96/US$. The USDA has estimated

the global 15/16 maize production at

989.8 million tons which higher than

the IGC’s estimate of 951.4 million

tons. US corn production for the 15/16

has been projected at 13,630 million

bushels by the USDA in their May publication.

Domestic: The rand has strengthened slightly against the dollar during the week. The local

average white maize spot price traded 5.99% or R156.20/t higher at R2765.40t compared to the

prior week. The futures prices all traded higher as follows: May-15 contracts increased by R106/t

to R2787/t, Jul-15 increased by R102/t to R2817/t, Sep-15 contracts increased by R92/t to

R2851/t, Dec-15 also increased by R103/t to R2904/t, Mar-16 increased by R93/t and traded at

R2889/t while July-16 traded R30/t higher at R2453/t. The exports of maize into Africa have

increased over the last week ending 8 May as well as the weekly deliveries for yellow and white

maize. The yellow maize exports totalled 3 378 tons and the white maize exports totalled 10 106

tons.

Outlook

Internationally the good planting progress to date in the US as well as the latest USDA’s estimates will

weigh on prices. The local market prices may experience pressure due to the increase in deliveries.

White-Maize

Futures

15 May 2015

Jul-15 Sep-15 Dec-15 Mar-16 Jul-16

SAFEX (R/t) 2817.00 2851.00 2904.00 2889.00 2453.00

Sep-15 Dec-15 Mar-16

Ask Put Call Ask Put Call Ask Put Call

2,900 194 145 2,940 226 190 2,920 262 231

2,860 172 163 2,900 204 208 2,880 240 249

2,820 151 182 2,860 183 227 2,840 219 268

Page 9

Wheat Market Trends

International: The average

weekly wheat spot price traded

3.16% higher compared to the

previous week at US$206.1/t. Soft

red wheat traded 4.43% higher at

US$197.70, while hard red wheat

traded 2.03% higher at US$214.49.

Import parity traded 1.6% higher.

According to the USDA WASDE

estimates the global import demand

for 2015/16 is less with the main

reductions coming from Iran,

Turkey, Morocco, and Syria due

significantly improved crop

prospects. Exports are lower for

Canada, India, EU, Russia, and

Ukraine, but larger for Argentina and Australia. Spring wheat planted in the northern states is

worryingly damp and on the other side the winter wheat crop is struggling from dry conditions in

the Western Great Plains. Despite these concerns there is most likely to be an abundance of

wheat again this year. The announcement of El Niño has put markets on edge for crop setbacks

in certain producing areas. Eastern Australia is normally prone to dry conditions during this

weather phenomenon. The USA hard red winter wheat crop quality is also a concern due to the

rains starting to have a negative impact. There are currently dry conditions in the Canadian

prairies. Russia has removed a duty on wheat exports nearly 1½ months ahead of schedule. This

will allow Russia to export an extra one million tons of wheat by June 30. This will help alleviate a

grain surplus in the domestic market and keep prices higher than the cost of production.

Domestic: The average SAFEX wheat spot price increased from last week’s levels of

R3806.00 and traded at R3827.40/t. The May-15 futures increased by R13/t to R3832, Jul-15

futures traded higher by R6/t to R3846/t, Sep-15 traded R23/t lower at R3845/t while Dec-15

futures traded R43/t lower at R3810/t. The total wheat imports for the week came solely from

Ukraine and were low. For the season to date the collective wheat imports are 1.277 million tons.

Outlook

Internationally the unforeseen increase in US 14/15 wheat ending stock could put pressure on global

prices. Locally wheat prices are under pressure from the stronger Rand but are supported by the possible

adjustment in the South African wheat tariff due before the end of June. Global wheat prices receive

support from funds liquidating oversold positions and the current wet growing conditions in the US.

Page 10

Wheat Futures

15 May 2015 Jul-15 Sep-15 Dec-15 Mar-16 May-16

SAFEX (R/t) 3846.0 3845.0 3810.0 n/a n/a

CME ($/t) 205.11 210.48 215.69 219.15 221.35

Jul-15 Sep-15 Dec-15

Ask Put Call Ask Put Call Ask Put Call

3,880 96 62 3,880 132 97 3,850 171 131

3,840 74 80 3,840 110 115 3,810 149 149

3,800 56 102 3,800 91 136 3,770 130 170

Oilseed Market Trends

International: Soybean prices week

on week traded lower at US$ 350.24/t.

Soya meal traded at US$306,04/t, which

is lower compared to the previous week

while soy oil traded 1.1% higher at

US$33.01/t compared to last week

US$32.64 Import parity decreased by

3.7%. U.S. oilseed production for

2015/16 is estimated at 114.1 million

tons, which is 2.6% less from 2014/15

primarily on lower soybean production.

In Argentina the harvesting is nearing

completion as less than 20% still needs

to be harvested. The Argentinian

soybean crop is anticipated to reach 59.6 tons according to the Rosario Grain Exchange. The

labour strikes at biofuel and crushing facilities are still taking place and have affected 40 plants to

date. Over the last few weeks China, India and Egypt have been displaying growing demand for

soy oil.

Domestic: The average soybean spot prices traded 1.43% lower at R4698.80/t in comparison

to the previous week. The average sunflower spot prices for the week traded 0. 91% higher at

R4857.00/t compared to the previous week.

Outlook

In the interim, both local and international soybean prices are expected to move side-ways due to

increasing global soyoil demand. Indications show that the domestic crush margin increase. The strikes

in Argentina may also provide some price support.

Page 11

Oilseeds Futures

15 May 2015 Jul-15 Sep-15 Dec-15 Mar-16 May-16

CBOT Soybeans (US $/t) 347.74 343.33 347.82 349.43 351.64

CBOT Soy oil (US c/b) 33.12 33.17 33.42 33.66 33.83

CBOT Soy cake meal (US $/t) 301.20 297.10 297.60 299.40 301.00

SAFEX Soybean seed (R/t) 4725.00 4795.00 4,881 n/a n/a

SAFEX Sunflower seed (R/t) 5019 5100 5185 n/a n/a

SAFEX Sorghum (R/t) 2580.00 2587.00 n/a n/a n/a

Sunflower Calculated Option Prices (R/t) Absa Capital Trading Desk: 011 – 895 5524

Jul-15 Sep-15 Dec-15

Ask Put Call Ask Put Call Ask Put Call

5,060 197 156 5,140 292 252 55,220 50,035 0

5,020 175 174 5,100 271 271 55,180 49,995 0

4,980 155 194 5,060 250 290 55,140 49,955 0

Fibres Market Trends

International: The Australian wool

moved 0,48% lower for the week in the

market and closed on Au 1235c/kg. The

decline in prices was following a

number of gains in wool prices in the

market. Cotton has traded 0.62% lower

over the past week and closed at

US63,60c/lb. The USDA has forecast

the 2015/16 world cotton to decline in

stocks, as a result of lower world

production. This follows lower prices in

the market, which discourage cotton-

producing countries. World consumption

is however expected to increase by

3.5% as a result of positive world economic growth and the influence of the decrease in cotton

prices during 2014/15. For 2014/15, the US production was increased slightly on the back of lower

harvested area and higher yields.

Domestic: The last wool auction took place on the 13th May 2015. The local market traded

higher and closed 8.50% higher to close at R132.02/kg (clean). The increases were reportedly

resulting from strong demand this week from the Chinese and Indian buyers which drove the market

higher. SA cotton prices traded lower or a 0.32% decrease to close at R19.29/kg.

Page 12

Outlook

Internationally, prices in Australia are expected to improve due to improved demand and lower supplies.

Cotton’s prices have improved over the last few months. In the long term, prices might be supported by

the expected lower world production and improved consumption following lower prices in the market.

Local wool prices are expected to continue with the upwards trend in the next few weeks due to improved

demand from the Chinese and Indian buyers.

Fibres Market Trends

Week ending 15 May 2015

Wool prices SA prices

(c/kg)

Australian

prices

(SA c/kg)

Australian

Future Jul -

2015 (AU$/kg)

Australian

Future Sep –

2015 (AU$/kg)

Wool market indicator 13202 11857 - -

19μ micron 13826 13201 12.80 12.50

21μ micron 13047 12455 12.50 12.10

Cotton prices

SA derived

Cotton

(R/kg)

New York A-

Index (US$/kg)

New York

future Jul-2015

(US$/kg)

New York

future Oct-2015

(US$/kg)

Cotton Prices 19.30 1.62 1.47 1.47

Vegetables Market Trends

Cabbage: Cabbage prices decreased

this week by 11,7% week on week to

R2950/t. The price decrease was despite a

6,9% decrease in volumes. Prices are

expected to move sideways to lower in the

short term in line with seasonal trends, but

move sideways to upwards in the medium

term.

Carrots: Carrot prices decreased by

19,6% week on week to R3947/t. The price

decrease was despite a decrease of 15,7%

in the volumes of carrots. Prices are expected to move sideways to downwards in line with

seasonal trends.

Onions: Onion prices increased by 1,8% week on week to R3608/t. The price increase was

due to a decrease of 22,1% in volumes compared to the previous week. Prices are expected to

trade sideways to downwards in the short to medium term in line with seasonal trends.

Page 13

Potatoes: Potato prices decreased by 19,0% week on week to R2629/t. The decrease in prices

was despite decreases in volumes of 9,4% compared to the previous week. Prices are expected

to follow a sideways movement in winter, and carry on with that trend until the end of winter.

Good yields have been realised in the Eastern and Western Free State, which may counter the

effects of drought in the Eastern Free State. Prices that were realised during January to April

were higher than those the same time last year.

Tomatoes: Tomato prices decreased by 19.0% week on week to R7044/t. The price decrease

was due to an increases in volumes of 3,7% during the past week. Prices are expected to move

sideways to downwards as a result of higher volumes and in line with seasonal trends.

Vegetable Prices: Fresh Produce Market

(Averages on the Pretoria Bloemfontein Johannesburg Cape Town and Durban markets)

Week ending

15 May 2015

This week’s

Average

Price (R/t)

Previous

week’s

Average

Price (R/t)

This week’s

Total

Volumes (t)

Previous week’s

Total

Volumes (t)

Cabbages 2950 3339 1285 1380

Carrots 3957 4919 1372 1627

Onions 3608 3543 5181 6649

Potatoes 2629 3027 12296 13565

Tomatoes 7044 8696 3543 3417

Enquiries: Karabo Takadi/Julie Hayward Absa Agri-Business E-mail:[email protected]/ [email protected]

Disclaimer: Although everything has been done to ensure the accuracy of the information, Absa Bank takes no responsibility for actions or losses that might occur due to the usage of this information.