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.
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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.
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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.
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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.
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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.
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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.