Agri Trends – 23 February 2018 – Grains, Oilseeds, Vegetables

Credit agencies responded positively on the budget speech

Moody’s pending decision on their ratings review is still outstanding but early indications are that they will confirm South Africa’s Baa3 rating but with a Negative Outlook.  In comparison to the Medium Term Budget Policy Statement in 2017, South Africa confirmed the improved fiscal orientation in the 2018 budget.  Credit agencies perceived this as positive but also warned that South Africa must continue on this path.  It is important that South Africa makes a firm turn around and follow through on the change of leadership and great sense of optimism.  In general, economic performance weighs more than political developments in the long run.  The economic indicators reacted positively on the budget speech which indicates a turn-around in business confidence.  As a net exporter the agricultural industry will be challenged to rely less on a weakening exchange rate in the long run but to continue to improve productivity by focusing on research, technology and improved market access.

Highlights

 Grains

• Prices continue to follow international prices, because SA is a net importer of wheat. This week higher international prices on the back of poor weather conditions in the US and EU supported domestic prices. The strong Rand will enable more wheat imports to supplement the local needs after SA’s very poor wheat season. Weather outlook for the next week shows possible rainfall for the Western Cape.
• Favourable weather outlook and the volatility of the Rand will remain particular focus areas, impacting the market. Export activity remains sluggish. With the current strong Rand and lower domestic prices, we anticipate better commercial buying.

Oilseeds

• International weather outlook remains a primary focus. Crop failure in Argentina (the main player in oil meal trade) has resulted in higher oilcake prices. South Africa imports oilcake, higher international prices, negatively affects the market; the stronger Rand at the moment will provide some relief. Domestic soybean prices followed international soybean prices and therefore traded higher week on week

Vegetables

• The drought and heat stress has caused some plant deterioration over the recent months (December &January). Recent favourable weather has allied some stress but quality was compromised. This can be seen with this week’s lower prices for tomatoes, onions, potatoes, peppers and carrots even when lower supplies were recorded.

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