Summer grain plantings for the new season were initially very volatile due to a lack of sufficient rainfall in many of the largest summer grain producing regions of the country. In some areas the rain arrived just too late and a large portion of the maize that was planted for the season was after the optimal planting time. However, good rains occurred over large areas of the country's grain areas that are favourable to production conditions, and the crops look considerably better than a few weeks ago in most parts of the country. The one uncertainty which still remains in the local market is the amount of rain that will still fall as the season progresses and the timing of the cold fronts towards the end of the season. With late plantings, early cold may still have a negative impact on yields from the areas where maize was planted late. Other crops, especially sunflowers were also planted late as producers in large production areas waited for enough moisture to plant and finalize maize plantings before moving over to sunflower.
The Crop estimates
The CEC announced its first production forecast for the season’s summer grains which removed some of the uncertainty from the market. According to the first production forecast, total maize production is estimated at 12.2 million tons, of which both white and yellow maize production is at about 50/50 and both are estimated at approximately 6.1 million tons. This year's production, with this estimate, will be the 4th largest maize crop in the past 10 years. The 2017/18 season's record production of 16.82 million tons and exports that did not take place at the desired rate, resulted in local transfer stocks in excess of 4 million tons at the end of the current marketing season (end-April). As a result, South Africa will again compete in the international context in terms of exports in the coming season, which will keep prices closer to export parity for the season. The soybean plantings of 775,300 hectares for the season is a new record, while the expected production of 1.375 million tons will also be a new record for SA. The sunflower plantings, estimated at 584,900 hectares are less than general market expectations. Sunflower seed production is estimated at 731,505 tons for the season.
Graph 1 indicate deep-sea exportable surpluses of maize in the coming season given different yield scenarios. According to the current CEC estimate, the average maize yield is 5.35 ton/ha. Thus, the deep-sea exportable surplus for the 2018/19 season may be approximately 3.7 million ton taking the average local consumption as well as average exports to other African countries into account.
local consumption as well as average exports to other African countries into account.
Graph 1: Deep sea exportable surplus of maize for the 2018/19 season given various yield scenario’s
Source: CEC, SAGIS and Grain SA
Keep the following factors in mind for the coming season
- There will be large carryover stocks at the end of the current marketing season.
- The new season’s production is looking fairly good also reflected in the current crop estimates report.
- There will be large exportable maize surpluses in the 2018/19 season and prices need to trade at export parity in order for exports to take place.
- The exchange rate and international prices will yet again be the biggest factors driving local prices.
- This season will require good discerning marketing decisions – make use of pricing opportunities in the market when such opportunities arise.
- Avoid unnecessary risks and protect cash flow positions at all times.