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Agri Trends 08 May 2015
Absa Bank Limited, Reg No 1986/004794/06, Authorised Financial Services Provider. Registered Credit Provider Reg No NCRCP7 Page 1
Wheat import tariff due for an adjustment The current wheat tariff of R461/ton is now due for an adjustment. The tariff became due for an
adjustment after the US Nr2 HRW fob price traded for a number of three weeks for more than $10/ton
lower than the base price of $254/ton. Since the start of April global wheat prices traded sharply lower.
SAGIS indicated in their latest report that the duty on wheat may consequently increase from R461/ton to
R800/ton. In general, ITAC recalculate the new tariff level after a request is received from industry. The
previous adjustments to the tariff took normally between 4 to 6 weeks before implementation. It is
expected that the new tariff will not lead to an increase in flour and bread prices but it will significantly
support the sustainable production and production capacity of wheat in South Africa. The new tariff will
support South Africa’s self-sufficiency in wheat and national food security without an increase in food
prices to the consumer. Producers already indicated that they may increase the planting of wheat which
corresponds closely with the efforts of industry and Government to turn the distressed industry around.
Hopefully, the new tariff will be published before the end of June thereby supporting wheat producers
currently planting wheat and who risk expanding their production of wheat production this season.
Beef Market Trends
International: New Zealand steers
and cows traded sideways at NZ$ 463
and NZ$ 318 per head respectively. In
the US, beef traded mostly higher as
follows: Top side traded higher at
$292,57/cwt, Rump traded lower at
$467,23/cwt and Strip loin traded higher
at $700,80/cwt, Chuck traded slightly
higher at $272,39/cwt, Brisket traded
higher at $271,01/cwt which gave us an
average carcass price of $366,40/cwt.
Good demand for steaks in the US, and
a decline of imports from Australia and
New Zealand are expected to keep beef
prices higher this summer. Both countries were among the top three exporters of beef to the US,
with farmers in these countries having rushed drought stressed cattle and dairy cows to slaughter.
In the New Zealand market, schedules have softened in recent weeks, and are expected to remain
at these reduced levels. Beef plants remain full, processing cows.
Domestic: When compared to last week, prices traded mixed. The prices of the different meat
classes were as follows: Class A prices decreased by 1.13% to 33.20/kg, Class C prices increased
by 1,58% to R27.00/kg and Contract prices increased by 4,34% closing at R35.48kg with the fifth
quarter included. The weaner prices traded slightly lower compared to last week at R19.32/kg. The
average hide price traded slightly higher at R18,25/kg.
Page 2
Outlook
Internationally, tight supplies and good demand are expected to support prices in 2015. This will be
reinforced by the expected lower slaughter rates and reduced exports from Australia, as producers are
rebuilding their herds. Locally, prices are expected to trade sideways to downwards in line with seasonal
trends. It is a norm for Class C price to seasonally improve at this time of the year, on the back of higher
demand. There is a shift in demand towards stewing cuts as we have moved away from the grilling
season.
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 persistentmarketresearch
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.
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.
Page 3
Mutton Market Trends
International: The New Zealand
lamb and mutton traded sideways to
slightly higher this week compared to
last week; lamb closed the week at
NZ$73,3/head for 15kg. Ewes closed
slightly higher at NZ$51.1/head for a
21kg ewe. Import parity prices for
lamb was slightly lower at R49.14/kg
and for mutton was slightly lower at
R28.73kg respectively. Lamb prices
remain under pressure in New
Zealand, with only few sales being
made as demand is quiet. In Australia,
lamb prices however improved in
auctions during the mid-week on the back of lower supplies. An additional tightening in supply of
lambs is expected by analysts, and this is expected to lead to further increases in the market. All
Australian major mutton markets have recorded declining exports in April, following a decline in
slaughter.
Domestic: The mutton prices traded sideways to slightly higher during the past week. Class A
traded slightly lower at R52.61/kg and Class C traded higher at R38.07/kg compared to the
previous week. The price for feeder lambs traded slightly higher at R24.03/kg. The average price
for dorper hides traded slightly lower at R95.00/hide and merino also traded lower at R63.33/hide
respectively. The landed imported price of mutton rib from Australia and New Zealand traded
sideways at R 23,25/kg compared to the previous week and mutton shoulders also traded
sideways at 47,00/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. Rain in these two nations could
limit supplies. 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, due
to decreases of 3,50% in loads.
Carcass prices traded 8.22% higher at
US$78.72/cwt, Loin traded slightly
higher at US$94.70/cwt, Rib prices
traded 6.34% higher at US$179,70/cwt
and ham traded higher at
US$60.83/cwt. The import parity price
increased slightly due to the higher
international prices. Last week was a
good one for hog prices. The
Thursday's negotiated carcass price for
plant-delivered hog averaged
$72.96/cwt, which is $9.96 higher than
a week earlier. The increases in price were driven by a seasonal decline in hog slaughter as well
as a sharp decline in slaughter weights. Meanwhile, FAO has predicted that the global meat
production is expected to increase by 1.3% in 2015, on the back of higher production of pork and
poultry.
Domestic: Domestic prices were slightly higher over the past week with Porker prices slightly
higher at R25.43/kg while Baconer prices were slightly higher at R23.75/kg. Higher maize prices
could influence negatively on the margins for the livestock industry.
Outlook
Internationally, the seasonal decline in hog slaughter could support prices, however, the reported
additional supply of pork in storage and large hog slaughter numbers are factors that could pressure
prices. 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 sideways to slightly
higher over the week compared to the
past week. Whole bird prices traded
0.16% higher and at 108.0USc/lb.
Breasts traded 11.69% higher at
172,0USc/lb and leg Quarters traded
2.7% higher at and 38,0USc/lb
respectively. The bird flu condition in
the US continues to worsen, with
more cases announced daily in Iowa
and Minnesota. The spread of the
virus is expected to be bullish for
turkey and egg prices while bearish for chicken since most of the poultry operations in these
states are turkey and egg producing farms. Chicken producers continue to struggle with a build-
up of leg quarters, the price of which is down about 40% from a year ago. Exports to China and
Russia have been cut off completely while exports to Angola in February were down by more
than 80%.
Domestic: Poultry prices traded higher during the past week compared to the previous week
as there isn’t any build-up of stocks in the market. Frozen birds traded 1.88% higher at R22.18/kg
compared to the previous week. Whole fresh medium bird prices traded slightly higher at
R23.18/kg while IQF traded slightly higher at R20.26kg. Short stocks in the market have been
reported, especially on the low value products, which could continue to give some support to
prices in the short term.
Outlook
Internationally, prices are expected to continue to be soft as broiler production is growing as less-costly
feed produces larger flocks of heavier birds. The lack of export demand and higher domestic supplies has
resulted in more chicken going into freezers, with a 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)
08 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 33.20 33.58 52.61 52.71 25.43 25.41 23.18 22.91
Class C/
Baconer /
Frozen birds
27.00 26.58 38.07 37.17 23.75 23.74 22.18 21.77
Contract /
Baconer/ IQF 35.48 34.00 55.01 53.22 24.59 24.58 20.26 20.07
Import parity
price
49.44 50.08 28.73 28.96 24.31 22.05 14.05 13.63
Weaner Calves /
Feeder Lambs/ 19,32 19,86 24,03 24,00 - -
Specific
Imports: Beef
trimmings
80vl/b/Mutton
Shoulders/Loin
b/in /chicken
leg1/4
49,65 49,65 47,00 47,00 35.50 35.50 20.51 20.51
Yellow Maize Trends
International: When compared to
the previous week, the average US
yellow maize spot price closed the
week 0.53% lower at US$167.55. The
maize price saw a decrease due to
good planting weather still present on
the majority of the maize-belt and the
sharp selloff in the US wheat market
which caused a spillover weakness.
China’s increased imports of maize
could swing global prices that are not
far off a five year low. The US maize
export progress is lying slightly behind
the average seen for this period and
the US maize prices are currently higher than the South American prices.
Page 7
Domestic: The local maize market for yellow maize traded 0.24% higher at an average of
R2340.20/ton over the past week. The average exchange rate for the week was weaker at
12.04/US$ compared to 11,87US$ the previous week. The all futures prices traded lower as
follows: May-15 contracts increased by R48/t to R2370/t, Jul-15 increased by R52t to R2404/t,
Sep-15 contracts increased by R45/t to R2434/t, Dec-15 also increased by R49/t to R2471/t, Mar-
16 increased by R8/t and traded at R2418/t, May-16 decreased by R3/t to R2380/t, while Jul-16
decreased by R49/t to R2301/t. Due to Zimbabwe’s poor maize harvest this season which is 35%
less year on year, South Africa’s exports will be positively affected. Over time South Africa and
Zambia have been major suppliers to Zimbabwe. The 2015 Zimbabwe maize imports totaled 700
000 tons. The weekly South African maize exports for the week concluding 1st of May suggested
that 8 763 tons of maize was exported.
Outlook
Internationally, the western and northern parts of the US Midwest are expected to experience some
rainfall in the coming week which could slow planting; however the maize already planted will benefit.
Locally maize prices will continue to receive support from the smaller maize crop and the weaker Rand.
The USDA report of the first estimates for the 15/16 marketing year to be published on the 12 May will be
carefully watched locally and internationally.
Yellow Maize Futures:
08 May 2015 Jul-15 Sep-15 Dec-15 Mar-16 May-16
CBOT ($/t) 153.09 154.91 157.03 160.89 165.30
SAFEX (R/t) 2404.00 2434.00 2471.00 2418.00 2380.00
Sep-15 Dec-15 Mar-16
Ask Put Call Ask Put Call Ask Put Call
2,480 166 120 2,520 202 153 2,460 228 186
2,440 143 137 2,480 180 171 2,420 206 204
2,400 123 157 2,440 159 190 2,380 185 223
Page 8
White Maize Trends
International: The US white maize
spot market traded 0.60% lower at an
average of US$ 153.68/t over the past
week. Import parity prices traded
slightly higher, compared to the
previous week due to the change in
exchange rate from 11.87/US$ to
12.04/US$. The Southern plains and
maize-belt experienced heavy rains
which added pressure to the market
over the last week. The grains were
assisted by the lower US dollar.
Nearly 55% of the maize crop has
been planted. Brazil is predicting a
large maize crop for the approaching marketing year.
Domestic: The rand has weakened slightly against the dollar during the week. The local
average white maize spot price traded 1.87% or R47.87/t higher at R2609.20t compared to the
prior week. The futures prices all traded higher as follows: May-15 contracts increased by R110/t
to R2681/t, Jul-15 increased by R106/t to R2715/t, Sep-15 contracts increased by R107/t to
R2759/t, Dec-15 also increased by R110/t to R2801/t, Mar-16 increased by R114/t and traded at
R2796/t while July-16 traded R6/t higher at R2423/t. The South African maize prices were able to
gain some ground even with lower US prices. July prices traded higher over the last week. Local
prices were supported by the weaker Rand and the stronger buying interest as indicated in the
last SAGIS report.
Outlook
Internationally the good planting progress to date in the US and the expected substantial increase in
maize production for Brazil and Argentina will weigh on global prices. Locally the maize prices will
continue to be supported.
White-Maize
Futures
08 May 2015
Jul-15 Sep-15 Dec-15 Mar-16 Jul-16
SAFEX (R/t) 2715.00 2759.00 2801.00 2796.00 2423.00
Sep-15 Dec-15 Mar-16
Ask Put Call Ask Put Call Ask Put Call
2,800 184 143 2,840 220 181 2,840 261 217
2,760 162 161 2,800 198 199 2,800 239 235
2,720 142 181 2,760 177 218 2,760 218 254
Page 9
Wheat Market Trends
International: The average weekly
wheat spot price traded 1.72% lower
compared to the previous week at
US$199.8/t. Soft red wheat traded
2.15% lower at US$189.32, while
hard red wheat traded 1.34% lower at
US$210.22. Import parity traded 0.1%
lower. US wheat saw further declines
from the bearish export sales. Some
support was given to the HRW wheat
due to quality concerns where 43% of
the winter wheat headed out and 43%
of the crop rated good to excellent.
There were sufficient widespread
rains in the US winter wheat areas which have improved the crop rating. The US spring wheat
crop gained 20% over the last week which leaves 25% still to be planted. This planting progress
is also ahead of the 5-year average. As from the 15 May Russia are preparing to remove their
export duty on wheat. This duty will however be replaced by a smaller tax which is rumored to be
near one euro/ton.
Domestic: The average SAFEX wheat spot price increased from last week’s levels of
R3763.75 and traded at R3806.00/t. May-15 futures increased by R68/t to R3819, Jul-15 futures
traded higher by R56/t to R3840/t, Sep-15 traded R62/t higher at R3868/t while Dec-15 futures
traded R95/t higher at R3853/t. Despite the lower US wheat prices the South African wheat prices
gained, with a contributing factor being the weaker Rand value. Year on year the human
consumption of wheat is lower this year and is currently sitting at 3.100 million tons.
Outlook
Internationally, Egypt requiring an unstipulated quantity of wheat from the world market will support global
prices. More widespread rain is for most of the main winter wheat producing areas of the US. Locally, the
weaker rand and prospects of a revised import wheat tariff will support prices however the import tariff will
have the greatest impact on the future contact months.
Wheat Futures
08 May 2015 Jul-15 Sep-15 Dec-15 Mar-16 May-16
SAFEX (R/t) 3840.0 3868.0 3853.0 n/a n/a
CME ($/t) 191.88 194.75 201.00 206.88 210.62
Jul-15 Sep-15 Dec-15
Ask Put Call Ask Put Call Ask Put Call
3,880 99 59 3,900 131 99 3,900 177 130
3,840 77 77 3,860 109 117 3,860 155 148
3,800 59 99 3,820 90 138 3,820 135 168
Page 10
Oilseed Market Trends International: Soybean prices week
on week traded higher at US$
361.71/t. Soya meal traded at
US$316,82/t, which is lower compared
to the previous week while soy oil
traded 3.8% higher at US$32.64/t
compared to last week US$31.46
Import parity increased by 0.9%. The
soybean prices were supported by the
Chinese buying of soybeans and the
global import demand increasing
substantially. The soybean crop in the
US is currently 13% complete. The
probability of Argentina’s strikes
continuing in the port of Rosario
helped prices as Argentina is major soybean exporter and a prominent soy oil exporter. The
exports of soybeans form the US is above the 5-year average for this time period.
Domestic: The average soybean spot prices traded 1.23% higher at R4766.80/t compared to
the previous week. The average sunflower spot prices for the week traded 0.30% lower at
R4813.00/t compared to the previous week. The vegetable oil imports decreased close to 30% in
the first quarter of the year due to the increase in local vegetable oil production in soy oil,
sunflower oil and palm oil. The South African oilseed prices concluded varied in the prior week
with soybeans acquiring some support on the back of the higher US soybean prices and the
weaker rand.
Outlook
Internationally in the medium term the Chinese buying activity on the global market of soybeans will have
a significant impact the development of exports and prices. The threat of continued strikes in Argentina
will play a role on the soybean price. The local oilseed price will feel pressure should the rand strengthen
against the dollar this coming week.
Page 11
Oilseeds Futures
08 May 2015 Jul-15 Sep-15 Dec-15 Mar-16 May-16
CBOT Soybeans (US $/t) 358.69 351.64 352.00 353.55 354.58
CBOT Soy oil (US c/b) 32.96 32.99 33.11 33.37 33.66
CBOT Soy cake meal (US $/t) 306.40 307.90 309.60 306.00 305.7
SAFEX Soybean seed (R/t) 4859 4937 5002 n/a n/a
SAFEX Sunflower seed (R/t) 4950 5060 5100 n/a n/a
SAFEX Sorghum (R/t) 2580 2585 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
5,000 199 149 5,100 290 250 5,140 383 343
4,960 178 168 5,060 268 268 5,100 361 361
4,920 157 187 5,020 248 288 5,060 340 380
Fibres Market Trends
International: The Australian wool
moved 5,89% higher for the week in the
market and closed on Au 1241c/kg. The
wool price has sharply increased since
just after Easter, on the back of strong
demand from China, but also with
support from European and Indian
buyers. Analysts have pointed to a
decision by Chinese authorities to free
up credit and the banks' lending
capacity in late April as one of the
significant catalysts for the rise. In the
US, steady US dollar and some increased demand in the week have helped to increase the volume
of wool that is being traded. Cotton has traded 1.20% lower over the past week and closed at
US64,00c/lb. Cotton growers in the Texas High Plains are experiencing the best pre-plant soil
moisture conditions, and facing a difficulty of whether to plant or not. ICE cotton futures fell to their
lowest level in two weeks on Friday, due to the stronger dollar and a reaction to a weekly US export
sales report.
Domestic: The last wool auction took place on the 29th April 2015. The local market traded
higher and closed 5.31% higher to close at R126.68/kg (clean). The increases were reportedly
resulting from strong demand from China as well as the approaching close of the season. SA cotton
prices traded higher or a 0.27% increase to close at R19.36/kg.
Page 12
Outlook
Internationally, prices in Australia are expected to improve due to improved demand from China,
European and the Indian buyers, which is supportive to prices. Supplies are expected to also be tight until
the end of June. For cotton, even though prices are less attractive compared to competing crops, its
position has improved over the last few months. The Cotton Advisory Committee has however reported
that prices are expected to be pressured by the high stocks which are held outside China. In the medium
to long term, prices might be supported by the fact that lower prices may lead alternative crops being
planted. Local wool prices are expected to continue with the upwards trend in the next few weeks due to
improved demand.
Fibres Market Trends
Week ending 08 May 2015
Wool prices SA prices
(c/kg)
Australian
prices
(SA c/kg)
Australian
Future Jul -
2015 (AU$/kg)
Australian
Future Sep –
2015 (AU$/kg)
Wool market indicator 12168 11734 - -
19μ micron 12687 13206 12.70 12.50
21μ micron 12093 12462 12.30 12.10
Cotton prices
SA derived
Cotton
(R/kg)
New York A-
Index (US$/kg)
New York
future Jul-2015
(US$/kg)
New York
future Oct-2015
(US$/kg)
Cotton Prices 19.36 1.61 1.44 1.44
Vegetables Market Trends
Cabbage: Cabbage prices
decreased this week by 2,8% week on
week to R3339/t. The price decrease
was due to a 24,8% increase 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 increased by
6,3% week on week to R4919/t. The
price increase was despite an
increase of 21,7% in the volumes of carrots. Prices are expected to move sideways to
downwards in line with seasonal trends.
Onions: Onion prices increased by 4,5% week on week to R3543/t. The price increase was
despite to an increase of 23,1% 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 increased by 0,5% week on week to R3027/t. The increase in prices
was despite to increases in volumes of 23,7% compared to the previous week. Prices were under
pressure during January until March. Prices increased after March, due to rainfall which was
experienced towards the end of March month which resulted in lower volumes supplied in the
market. Prices can continue to trade higher due to lower volumes, and trade sideways in the
medium term. It is however a norm for prices to decrease after the Easter period.
Tomatoes: Tomato prices increased by 13.2% week on week to R8696/t. The price increase
was due to decreases in volumes of 0,4% during the past week. Prices are expected to move
sideways as a result of lower volumes.
Vegetable Prices: Fresh Produce Market
(Averages on the Pretoria Bloemfontein Johannesburg Cape Town and Durban markets)
Week ending
08 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 3339 3435 1380 1106
Carrots 4919 4626 1627 1337
Onions 3543 3392 6649 5401
Potatoes 3027 3012 13565 10970
Tomatoes 8696 7684 3417 3432
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.