Agri Trends 10 November 2017 Grains, Livestock & Fibre

Improving grazing conditions support herd rebuilding

There is concern that Government may introduce free tertiary education to avoid another “fees must fall” strike by students.  The expansion of the allocation of funds towards free education has traders worried that the already stretched public finances may increase public debt. Governor Kganyago says anchoring inflation expectations around mid-point (4,5%) of the target range of 3% – 6% is one of the most important medium term goals.  Monetary policy takes the weak economic growth into account but policy uncertainty and corruption cannot be fixed by the latter.  Furthermore, the exchange rate remains the biggest single risk to the inflation outlook.  This is amidst weak consumer and business confidence and an expected increase in electricity tariffs.  It is rumoured that Moody’s is visiting South Africa currently.  Given all the uncertainty mentioned it is not expected that the Monetary Policy Committee will increase interest rates when they meet againin two weeks’ time.

Highlights

 Grains

• Lower maize seed sales in some parts of the country, corresponds to the reduced national crop estimate (total 6% less maize 2 470 400 ha vs 2 628 600 ha in 2017). Even though a great number of local producers still indicate that they’ll plant  maize  as their main primary crop  again in the new season.
• With the current large  maize global stocks, US and South American weather outlook it does not seem highly likely that crop prospects could change drastically, thus maize prices will carry on trading sideways for the next couple of months.

Livestock & Fibre

• Exports of beef are impacted as a result of the lack of supplies. Total beef exports have since followed a declining trend from the beginning of 2017, due to lack of domestic supplies. Total volumes exported (fresh or chilled & frozen) for the first three quarters of 2017 is 19% lower compared to the same period a year ago.
• The livestock market may be weighed temporarily by subdued buying activities during mid- month, however, the overall outlook points to strong prices due to improved seasonal demand as the warmer temperatures are supportive to outdoor grilling.
• Underlying support from the beef and sheep meat industry is supporting the poultry and pork market.
• The average weaner calf prices for October 2017 have increased by roughly 68% compared to October 2016, and some report even higher prices.

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