June 2016
Summary Tables
Field crop commodity prices generally traded higher on a monthly basis mainly due to a
weaker exchange rate. This trend is expected to continue in the following weeks.
Potato prices could come under pressure in the following weeks as yields have improved
slightly from levels seen at the beginning of 2016. Potato stocks have also been growing since
April 2016.
In the following weeks, the prices of beef and weaners could remain under pressure due to
lower demand. Lamb and mutton prices will probably move sideways due to a combination of
lower demand in winter, low consumer purchasing power and decreasing slaughter. The price
of pork, being a more affordable red meat, could move upwards due to the lower availability of
red meat on the market.
Milk production should remain low in the following weeks as farmers face a serious cost-price
squeeze.
Commodity price summary table
Commodity
Yellow maize
White maize
Wheat
Soya bean
Sunflower seed
Beef
Lamb
Pork
Dairy
Category
Average Safex spot
prices
Class A2/A3
Weaner calf
Class A2/A3
Average porkers
Average baconers
Class 1
Units
R/ton
R/kg
R/L
May 2015
Average
Price
R 2 385.95
R 2 732.57
R 3 818.67
R 4 667.95
R 4 886.29
R
34.25
R
19.67
R
54.43
R
25.38
R
23.52
R
4.50
Apr 2016
Average
Price
R 3 111.62
R 4 510.14
R 4 575.95
R 6 012.38
R 6 488.33
R
38.73
R
19.94
R
53.34
R
24.78
R
24.04
R
4.45
May 2016
Average
Price
R 3 455.36
R 4 843.14
R 4 966.82
R 6 923.27
R 6 502.45
R
38.47
R
19.67
R
56.72
R
25.16
R
24.19
R
4.50
Change
(m/m)
11.0%
7.4%
8.5%
15.2%
0.2%
-0.7%
-1.4%
6.3%
1.5%
0.6%
1.1%
Change
(y/y)
44.8%
77.2%
30.1%
48.3%
33.1%
12.3%
0.0%
4.2%
-0.9%
2.9%
0.0%
JSE prices for crop commodity futures (per ton)
Commodity
White maize
Yellow maize
Wheat
Sunflower seed
Soya beans
Jun 2016
R 4 954
R 3 825
R 4 816
R 6 759
R 8 010
Jul 2016
R 4 974
R 3 852
R 4 856
R 6 799
R 8 040
JSE futures prices per ton as at 22 June 2016
Aug 2016 Sep 2016 Dec 2016 Mar 2017
R 4 986 R 5 008 R 5 044 R 4 712
R 3 848 R 3 894 R 3 945 R 3 822
R 4 864 R 4 914 R 4 793 R 4 844
R 6 848 R 6 949 R 7 097 R 6 862
R 8 011 R 8 046 R 8 120 R 7 815
1
May 2017 Jul 2017
R 3 478 R 3 370
R 3 225 R 3 266
NA
NA
R 6 470
NA
R 7 200
NA
1
Weather forecast and dam levels
Current conditions
Figure 1: Current rainfall conditions
Source: South African Weather Service, 2016
Figure 1 shows that in March 2015 rainfall was near normal to below normal over the central
and western parts of the country, but above normal in the rest of the country. In April 2016,
rainfall increased to levels above normal in the central parts of the country, while there was a
decrease in the northern and coastal areas to near normal to below normal rainfall. During the
same month, rainfall was near normal to below normal across the rest of the country. From 1
to 10 May 2016, rainfall was above normal over most of the country, while the western coastal
regions and the northern parts of the country received below normal rainfall. From July 2015 to
April 2016, rainfall was generally below normal over most of the country, with patches of above
normal rainfall mainly in the Northern Cape, the Eastern Cape and the Western Cape.
The veld and livestock conditions are improving in some areas; however, in communal areas
the conditions remain poor. Outbreaks of Armyworm were reported in KwaZulu-Natal (KZN),
while cases of New Castle Disease and Non-Pathogenic Avian Influenza were reported in the
Eastern Cape.
Forecast conditions
The rainfall forecast for June to October 2016 (Figure 2) shows chances of above normal
rainfall over the western and north-eastern parts of the country in winter.
Minimum and maximum temperature forecasts show chances of warmer than usual
temperatures over the country, especially over the north-eastern parts during mid-winter
(National Agro-meteorological Committee, 2016).
2
Dam levels
Dam levels (%)
Table 1: Provincial dam levels
In April 2016, dam levels in all
provinces were reportedly lower
than in April 2015, except in the
North West Province (Table 1).
100
90
80
70
60
50
40
30
20
10
0
Province
Apr-2015
Apr-2016
Source: National Agro-meteorological Committee, 2016
3
Figure 2: Rainfall forecast – June to October 2016
Source: National Agro-meteorological Committee, 2016
4
Exchange rates
The average exchange rate for May 2016
was R15.30 to the US dollar. This was
weaker than the April 2016 average by
4.6% and weaker than the May 2015
average by 27.8%.
25
Exchange rate (Rands)
2
20
15
10
5
0
Dollar
Euro
Pound
Figure 3: Rand to US dollar exchange rate
Source: Standard Bank Research, 2016
In May 2016, the rand strengthened briefly against the US dollar when Moody’s rating agency
did not downgrade the country in the first week of the month. However, the rand came under
renewed pressure a few days later from weak employment data. The quarterly unemployment
rate rose to its highest level on record in May 2016, rekindling worries over the government’s
ability to revive the economy.
The rand also came under pressure against the dollar and government bonds weakened
sharply from reports that Finance Minister Pravin Gordhan was facing arrest. The government
nevertheless denied these reports. According to the reports, citing unnamed sources,
Gordhan was facing arrest in a case related to the activities of a spy unit formed when he
headed the South African Revenue Service.
The rand also fell to a two-month low as the US dollar firmed on renewed expectations of an
early Federal Reserve interest rate hike after data suggested the US economy was regaining
momentum. Nevertheless, the Federal Reserve Bank (Fed) kept interest rates unchanged
mainly due to weak US job figures and weak economic growth prospects, which saw the rand
firm slightly. The rand also got support when Standards & Poor’s rating agency did not
downgrade South Africa to junk status.
The rand more recently took a knock when the United Kingdom (UK) voted to leave the EU,
sending global markets into shock. The weakness of the rand is expected to continue in the
following weeks.
5
3
Fertilizer prices
In May 2016, domestic fertilizer prices
traded lower on a monthly basis. Price
changes were due to a combination of
fluctuations in international fertilizer prices,
oil price that affects the natural gas price
and exchange rates.
MAP: R9 455 a ton, down 2% m/m and
0.02% y/y.
Limestone ammonium nitrate (LAN):
R5 364 a ton, down 3% m/m but up
8.5% y/y.
Urea: R5 788 a ton, down 3.4% m/m
and 5.9% y/y.
Potassium chloride: R7 295 a ton, down
1.6% m/m and 1.3% y/y (Figure 4).
R 9 500.00
R 8 500.00
Rand /ton
R 7 500.00
R 6 500.00
R 5 500.00
R 4 500.00
R 3 500.00
Urea (46)
May-16
Jan-16
Mar-16
Nov-15
Jul-15
Sep-15
May-15
Jan-15
Mar-15
Nov-14
Jul-14
Sep-14
May-14
Jan-14
Mar-14
Nov-13
Jul-13
LAN (28)
Sep-13
May-13
Jan-13
MAP
Mar-13
Nov-12
Jul-12
Sep-12
May-12
R 2 500.00
Potassium Chloride (granular)
Figure 4: Domestic prices of fertilizers
Source: Grain SA, 2016b
In May 2016, international fertilizer prices showed a downward trend. The international price
for urea was R3 088 a ton, up 3.7% m/m but down 9% y/y, while MAP was R3 549 a ton, up
2% m/m and 2.2% y/y.
Fuel
140
R15
120
R14
R13
100
R12
Rand per litre
USD per barrel
80
60
40
R10
R9
R8
R7
R6
20
0
May-10
R11
R5
May-11
May-12
May-13
May-14
May-15
Jun-10
Aug-10
Oct-10
Dec-10
Feb-11
Apr-11
Jun-11
Aug-11
Oct-11
Dec-11
Feb-12
Apr-12
Jun-12
Aug-12
Oct-12
Dec-12
Feb-13
Apr-13
Jun-13
Aug-13
Oct-13
Dec-13
Feb-14
Apr-14
Jun-14
Aug-14
Oct-14
Dec-14
Feb-15
Apr-15
Jun-15
Aug-15
Oct-15
Dec-15
Feb-16
Apr-16
Jun-16
4
May-16
Year
Brent crude oil
Reef Unleaded
Figure 5: Monthly Brent crude oil price
Source: The Star Business Report, 2016
Coast Unleaded
Reef Diesel
Coast Diesel
Figure 6: Monthly fuel prices
Source: The Automobile Association of South
Africa, 2016
The international Brent crude oil and fuel prices, the rand to US dollar exchange rate and
transportation costs are the main factors that influence the domestic price of fuel. On the 1st of
June 2016, the price of fuel went up. The price of petrol went up by 52 cents a litre (c/l), while
the price of diesel went up by 76 c/l.
Average monthly Brent crude oil prices are projected to maintain a steady upward trend in the
first seven months of 2016. Increase in oil price and a weaker rand to US dollar exchange rate
are expected to result in increases in petrol and diesel prices of 27 c/l and 61 c/l respectively,
on 6 July 2016.
6
Figures 5 and 6 show the average monthly prices of Brent crude oil and fuel respectively. On 1
June 2016, the price movements of fuel were as follows:
Petrol:
o Reef – unleaded 95 cost R13.26 a litre, up 52 c/l m/m but down 10 c/l y/y.
o Coast – unleaded 95 cost R12.78 a litre, up 52 c/l m/m but down 15 c/l y/y.
Diesel:
o Reef – 0.05% cost R11.29 a litre, up 76 c/l m/m but down 38 c/l y/y.
o Coast – 0.05% cost R10.89 a litre, up 76 c/l m/m but down 45 c/l y/y.
In May 2016, Brent crude oil cost USD47.56 a barrel on average, up USD5.03 m/m but
down USD18.03 y/y a barrel.
The Brent crude oil price continued to gain support on the back of supply disruptions in Nigeria
due to a spate of violence and in Canada due to wildfires. Combined, these factors helped cut
global oil supply by nearly 4 million barrels per day in May 2016. Although these disruptions
are temporary, they have contributed to a drop in the supply glut that has plagued the market
for nearly two years. Industry data also showed a sharp fall in US inventories. Lower
production and nervousness associated the Brexit could see the oil price move sideways in
the following weeks.
5
Electricity
According to Eskom’s Medium-Term System Adequacy Outlook for 2016 to 2021, additional
capacity from Eskom and non-Eskom sources in 2016 and 2017 would ensure enough
electricity supply to meet medium to high demand. The report indicated that Eskom power
stations, power imports and independent power producers (IPPs) contracted to the power
utility provided about 96% of the power in South Africa. In the adequacy report, Eskom
factored the commissioning of several units of Medupi and Kusile power stations, as well as
Ingula. It also included projects under the renewable energy IPP programme and cogeneration projects.
In a more recent development, Eskom reported that it linked the last of the four units at its new
Ingula hydroelectric power plant to the grid on 19 June 2016. The utility looks forward to Ingula
rapidly nearing commercial completion and meeting its 2017 deadline. Unit one of the
Ingula plant, which is in northeast KwaZulu-Natal, added an additional 333 megawatts (MW)
to the grid. Construction of the R25 billion plant began in 2006 and all four units are expected
to be fully operational in 2017, with capacity to produce 1 332 MW.
6
Labour
The agricultural sector is officially in recession and economists expect job losses to follow over
the following quarters especially if the next production season is not favourable. The
agricultural sector posted negative 6.5% growth in the first quarter of 2016 (Q1: 2016), slightly
better than the negative 6.7% recorded in Q4: 2015. However, there are encouraging signs
that the 2016/17 summer might be a good season, which could support agriculture to start
recovering from the end of 2017.
In other developments, the Department of Trade and Industry (DTI) announced that it would
be focusing on the development and revitalisation of agro-processing infrastructure. The DTI
reported that it is in the process of engaging stakeholders around ‘critical enabling’
infrastructure for smallholder farmers, producers and processors for the sector to become
more competitive. This could create some jobs in agriculture in the near future.
7
7
Grains and oil seeds
On 26 May 2016, the Crop Estimates Committee (CEC) released figures of the revised area
planted and fifth production forecast for summer crops for the 2016/17 marketing year (see
Table 2). The latest production estimate is slightly higher than the previous one for all summer
crops. On a yearly basis, production and area planted will only increase in sunflower seed.
Table 2: Fifth summer crop forecast for the 2016/17 marketing year
Commodity
White maize
Yellow maize
Total maize
Soya beans
Sunflower seed
5th forecast
2016
Tons
(a)
3 097 225
4 063 700
7 160 925
728 650
742 750
4th forecast
2016
Tons
(b)
3 067 475
3 986 900
7 054 375
694 550
730 500
Final crop
Area planted Area planted
2015
2016
2015
Tons
Hectares
Hectares
(c)
(d)
(e)
4 735 000
1 014 750
1 448 050
5 220 000
932 000
1 204 800
9 955 000
1 946 750
2 652 850
1 070 000
502 800
687 300
663 000
718 500
576 000
Change
(a ÷ c)
-34.6%
-22.2%
-28.1%
-31.9%
12.0%
Change
(d ÷ e)
-29.9%
-22.6%
-26.6%
-26.8%
24.7%
Source: Crop Estimates Committee, 2016
Table 3 shows the price trends of yellow maize, white maize, wheat, soya beans and
sunflower seed on the Johannesburg Stock Exchange (JSE) Commodity Derivatives Market
(Safex) in May 2016. The prices of these crop commodities traded firmer on a monthly basis
mainly due to a weaker rand to US dollar exchange rate.
Table 3: Monthly price movements in grain and oil seeds
Commodity
Category
Yellow maize
White maize
Average SAFEX
Wheat
spot prices
Soya beans
Sunflower seed
Units
May 2015
Rand/ton
R
R
R
R
R
2 385.95
2 732.57
3 818.67
4 667.95
4 886.29
Apr 2016
R
R
R
R
R
3 111.62
4 510.14
4 575.95
6 012.38
6 488.33
May 2016
R
R
R
R
R
3 455.36
4 843.14
4 966.82
6 923.27
6 502.45
Change
(m/m)
11.0%
7.4%
8.5%
15.2%
0.2%
Change
(y/y)
44.8%
77.2%
30.1%
48.3%
33.1%
Source: Grain SA, 2016
Table 4 shows the price trends of commodity futures as at 22 June 2016.
Table 4: JSE commodity futures prices per ton
Commodity
White maize
Yellow maize
Wheat
Sunflower seed
Soya beans
Jun 2016
R 4 954
R 3 825
R 4 816
R 6 759
R 8 010
Jul 2016
R 4 974
R 3 852
R 4 856
R 6 799
R 8 040
JSE futures prices per ton as at 22 June 2016
Aug 2016 Sep 2016 Dec 2016 Mar 2017
R 4 986 R 5 008 R 5 044 R 4 712
R 3 848 R 3 894 R 3 945 R 3 822
R 4 864 R 4 914 R 4 793 R 4 844
R 6 848 R 6 949 R 7 097 R 6 862
R 8 011 R 8 046 R 8 120 R 7 815
Source: Grain SA, 2016a
8
May 2017 Jul 2017
R 3 478 R 3 370
R 3 225 R 3 266
NA
NA
R 6 470
NA
R 7 200
NA
Maize
R 4 500.00
R 6 000.00
R 4 000.00
R 5 000.00
R 3 000.00
Rand/ton
Rand/ton
R 3 500.00
R 2 500.00
R 2 000.00
R 1 500.00
R 1 000.00
R 4 000.00
R 3 000.00
R 2 000.00
R 1 000.00
R 500.00
R-
May-13
Jul-13
Sep-13
Nov-13
Jan-14
Mar-14
May-14
Jul-14
Sep-14
Nov-14
Jan-15
Mar-15
May-15
Jul-15
Sep-15
Nov-15
Jan-16
Mar-16
May-16
May-13
Jul-13
Sep-13
Nov-13
Jan-14
Mar-14
May-14
Jul-14
Sep-14
Nov-14
Jan-15
Mar-15
May-15
Jul-15
Sep-15
Nov-15
Jan-16
Mar-16
May-16
R-
YM Safex
YM Import parity
YM Export parity
Figure 7: Yellow maize monthly prices
WM Safex
WM Import parity
WM Export parity
Figure 8: White maize monthly prices
Domestic maize prices could move sideways
The average price trends (per ton) of yellow and white maize are shown in Figures 7 and 8
respectively. Following their peak at the beginning of 2016, average domestic maize prices
maintained a bearish trend in the first four months of 2016 as the rand to dollar exchange rate
firmed. In May 2016, maize prices traded firmer m/m and y/y mainly because of a weaker rand
to dollar exchange rate. In the following weeks, the domestic maize price could move
sideways mainly due to a combination of:
slightly firmer rand to US dollar exchange rate; and
higher international maize prices due to unfavourable US weather.
Domestic maize supply
For the week ending 17 June 2016:
The weekly South African maize delivery figures showed that 273 578 tons of maize were
delivered. This included 90 209 tons of white maize and 183 369 tons of yellow maize. This
brings the cumulative maize deliveries for the 2016/17 marketing year to nearly 2.23 million
tons.
Domestic maize imports
For the week ending 17 June 2016:
South Africa did not import any maize. This brings the cumulative maize imports for this
season to 256 267 tons, including 22 260 ton of white maize and 234 007 tons of yellow
maize.
International maize price up
Chicago Board of Trade (CBOT) maize prices have been trading higher over the past weeks
which is a trend expected to continue for the next few weeks mainly because of support from a
combination of:
a weaker US dollar and associated good demand;
spill-over strength from higher US soya bean prices;
concerns about crop losses in South America due to unfavourable weather; and
concerns about dryness in the US Midwest
9
In May 2016, the maize sub-index of the International Grains Council’s ‘Grains and Oilseeds
Index’ increased by 5.5% m/m and 9.4% y/y. Advances were mainly linked to continued
harvest delays in Argentina, as well as a pickup in US export demand due to a weaker dollar.
Wheat
R 6 000.00
Figure 9 shows the average monthly price
trends of wheat (rands per ton).
Rand/ton
R 5 000.00
R 4 000.00
R 3 000.00
R 2 000.00
R 1 000.00
May-13
Jul-13
Sep-13
Nov-13
Jan-14
Mar-14
May-14
Jul-14
Sep-14
Nov-14
Jan-15
Mar-15
May-15
Jul-15
Sep-15
Nov-15
Jan-16
Mar-16
May-16
R-
Wheat Safex
Wheat Import parity
Wheat Export parity
Figure 9: Wheat average monthly prices
Domestic wheat price could trend downwards
In May 2016, wheat prices showed an upward trend as the weaker rand made inbound
shipments more expensive for South Africa, which is a net importer of wheat. The wheat price
is however, expected to come under pressure in the following weeks from a combination of:
a stronger rand which makes imports more affordable; and
lower CBOT prices mainly due to ample availability and good crop conditions.
Domestic wheat imports
In the week ending 17 June 2016:
South Africa imported 14 874 tons of wheat. These imports originated from Lithuania. This
brings the cumulative imports for the current marketing year (October 2015 to September
2016) to 1.483 million tons. South African wheat imports are at a record high for this time of
the year.
International wheat prices lower
High global wheat availability kept the wheat price under pressure in May 2016, a trend
expected to continue in the following weeks. The USDA estimates global wheat ending stocks
for the 2015/16 marketing year at a record 243 million tons, up 12.2% y/y. Furthermore, this
record is projected to be get broken by 2016/17 ending stocks estimated at 257.84 million
tons.
In May 2016, the wheat sub-index of the International Grains Council’s ‘Grains and Oilseeds
Index’ trended lower by 1.7% m/m and 11.6% y/y. Markets in North America were especially
weak, offsetting modest gains in milling wheat prices in the European Union (EU) and the
Black Sea region.
10
Soya beans
Figure 10 shows the average monthly price
trends of soya beans (rands per ton).
R 9 000.00
R 8 000.00
Rand/ton
R 7 000.00
R 6 000.00
R 5 000.00
R 4 000.00
R 3 000.00
R 2 000.00
R 1 000.00
May-13
Jul-13
Sep-13
Nov-13
Jan-14
Mar-14
May-14
Jul-14
Sep-14
Nov-14
Jan-15
Mar-15
May-15
Jul-15
Sep-15
Nov-15
Jan-16
Mar-16
May-16
R-
Soya Safex
Soya Import parity
Soya Export parity
Figure 10: Soya bean average prices
Domestic soya bean price to move downwards
In May 2016, domestic soya bean prices showed an upward trend mainly due to a weaker
rand to US dollar exchange rate that made imported soya bean meal more expensive. In the
following weeks, the domestic soya bean price could move downwards due to a combination
of a stronger rand and a lower international soya bean price.
International soya bean prices could trend lower
In May 2016, international soya bean prices got support from a combination of a lower than
expected USDA estimate for soya bean ending stocks for new (2016/17) crop at 68.21 million
tons, 8.14% lower y/y and uncertainty about the quality and size of the soya bean crop in
Argentina.
However, in the following weeks the international soya bean price is expected to come under
pressure from good harvest progress with higher than expected production in Argentina of 56
million tons (higher by 1.3%) and good planting progress under favourable weather conditions
in the US. Renewed interest in US soya bean exports due to a weaker US dollar could,
however, lend prices some support.
Figure 11 shows the average monthly price
trends of sunflower seed (rands per ton).
R 10 000.00
R 9 000.00
R 8 000.00
R 7 000.00
R 6 000.00
R 5 000.00
R 4 000.00
R 3 000.00
R 2 000.00
R 1 000.00
R-
May-13
Jul-13
Sep-13
Nov-13
Jan-14
Mar-14
May-14
Jul-14
Sep-14
Nov-14
Jan-15
Mar-15
May-15
Jul-15
Sep-15
Nov-15
Jan-16
Mar-16
May-16
Rand/ton
Sunflower seed
Sunflower Safex
Sunflower Import parity
Sunflower Export parity
Figure 11: Sunflower seed monthly prices
Domestic sunflower seed prices to trend lower
Domestic sunflower seed prices showed a slight upward trend in May 2016 mainly due to a
weaker rand. In the following weeks, sunflower seed prices might move downwards due to a
11
combination of a firmer rand and increased domestic and international availability. The CEC
raised its estimate of domestic sunflower seed production to 742 750 tons, up 12% y/y.
International sunflower seed prices could move sideways
The international sunflower seed price is expected to be bearish as global sunflower seed
production is expected to recover in 2016/17. Oilworld forecasts global production at 44.7
million tons, up 7% y/y mainly due to production increases in Russia, Ukraine, Argentina and
the EU.
Livestock products
Lamb and mutton
Figure 12 shows the average monthly price
trends (rands per kg) of lamb and mutton.
R 70.00
R 60.00
R 50.00
Rand/kg
R 40.00
R 30.00
R 20.00
R 10.00
A2/A3
B2/B3
May-16
Jan-16
Mar-16
Nov-15
Jul-15
Sep-15
May-15
Jan-15
Mar-15
Nov-14
Jul-14
AB2/AB3
Sep-14
May-14
Jan-14
Mar-14
Nov-13
Jul-13
Sep-13
R-
May-13
8
C2/C3
Figure 12: Average monthly lamb prices
Source: Red Meat Abattoir Association, 2016
Lamb and mutton prices could trend lower
In May 2016, the price of lamb and mutton classes trended higher m/m and y/y (Table 5). The
number of sheep and lamb slaughtered on a monthly basis showed a significant downward
trend in April 2016 as 332 159 head were slaughtered, down nearly 24% m/m and nearly 28%
y/y. Lower demand in winter, low consumer purchasing power and decreasing slaughter, will
probably see prices move sideways in the following weeks.
Table 5: Monthly price movements in lamb and mutton
Average price
Commodity
Category
Units
May 2015 Apr 2016 May 2016
Class A2/A3
R
54.43 R 53.34 R 56.72
Lamb and Class AB2/AB3
R
45.88 R 46.51 R 47.10
(R/kg)
mutton
Class B2/B3
R
38.72 R 41.75 R 42.71
Class C2/C3
R
38.56 R 37.07 R 39.06
Change
(m/m)
6.3%
1.3%
2.3%
5.4%
Change
(y/y)
4.2%
2.7%
10.3%
1.3%
The import parity price of lamb and mutton from Australia (based on the exchange rate) was
R81.27 a kg, up 14.7% y/y and R45.41 a kg, up 6.5% y/y respectively in May 2016. The rand
could come under pressure against the Australian dollar in the next few weeks due to the
Brexit, so the import parity price of lamb and mutton could increase.
12
Beef
Figure 13 shows the average monthly price
trends of beef and weaners (rands per kg).
R 45.00
R 40.00
R 35.00
Rand/kg
R 30.00
R 25.00
R 20.00
R 15.00
R 10.00
R 5.00
A2/A3
AB2/AB3
B2/B3
C2/C3
May-16
Jan-16
Mar-16
Nov-15
Jul-15
Sep-15
May-15
Jan-15
Mar-15
Nov-14
Jul-14
Sep-14
May-14
Jan-14
Mar-14
Nov-13
Jul-13
Sep-13
May-13
R-
Weaner calf
Figure 13: Average monthly beef prices
Source: RMAA, 2016
Beef and weaner prices could go up
In May 2016, the price of beef decreased m/m, but remained higher y/y. According to the Red
Meat Levy Admin (2016), 218 893 cattle were slaughtered in April 2016, down 11.2% m/m and
nearly 7% y/y. The weaner price also decreased m/m, but was unchanged on a yearly basis
(Table 6) as a higher yellow maize price kept demand for weaners in check. Demand for beef
over the following weeks might remain moderate due to slow growth in consumer spending, a
small drop in food inflation, and drop in demand associated with winter. The prices of beef and
weaners could remain under pressure in the following weeks due to the lower demand.
Table 6: Monthly price movements in beef and weaners
Commodity
Category
Beef
Class A2/A3
Class AB2/AB3
Class B2/B3
Class C2/C3
Weaner calf
Average price
May 2015 Apr 2016 May 2016
R
34.25 R 38.73 R 38.47
R
31.44 R 36.38 R 36.24
R
27.41 R 32.71 R 31.94
R
26.93 R 28.37 R 28.15
R
19.67 R 19.94 R 19.67
Units
(R/kg)
Change
(m/m)
-0.7%
-0.4%
-2.4%
-0.8%
-1.4%
Change
(y/y)
12.3%
15.3%
16.5%
4.5%
0.0%
In May 2016, the derived import parity price of cow meat from Australia was R68.92 a kg
compared to the domestic price of C2/C3 beef of R28.15 a kg. The rand could come under
pressure against the Australian dollar in the following weeks due to the Brexit, so the import
parity price of cow meat could increase.
25
Beef-to-maize price ratio
In May 2016, the beef-to-maize price ratio
was 11.13:1, weaker by 10.6% m/m due to
a higher feed price, and 22.3% weaker than
the long-term average of 14.3:1 (Figure 14).
Beef-to-maize price ratio
20
14.33
15
10
5
May-16
Feb-16
Aug-15
Nov-15
May-15
Feb-15
Nov-14
Aug-14
Feb-14
May-14
Aug-13
Nov-13
Feb-13
A2/A3 beef-to-maize ratio
May-13
Aug-12
Nov-12
May-12
Feb-12
Aug-11
Nov-11
May-11
0
Long-term average A2/A3 beef-to-maize ratio
Figure 14: Beef-to-maize price ratio
13
Pork
Figure 15 shows the average monthly
porker and baconer price trends (rands per
kg).
R 30.00
R 25.00
Rand/kg
R 20.00
R 15.00
R 10.00
R 5.00
Porker
May-16
Jan-16
Mar-16
Nov-15
Jul-15
Sep-15
May-15
Jan-15
Mar-15
Nov-14
Jul-14
Sep-14
May-14
Jan-14
Mar-14
Nov-13
Jul-13
Sep-13
May-13
R-
Baconer
Figure 15: Average pork prices
Source: RMAA, 2016
Pork prices to move sideways
In May 2016, the monthly prices of porkers and baconers showed an upward trend m/m (Table
7). According to the Red Meat Levy Admin (2016), 213 545 pigs were slaughtered in April
2016, down 8.5% m/m and 5.6% y/y. The price of pork, being a more affordable red meat,
could move upwards in the following weeks due to the lower availability of red meat on the
market.
Table 7: Monthly price movements in pork products
Average price
Commodity
Category
Units
May 2015 Apr 2016 May 2016
Porker
R
25.38 R 24.78 R 25.16
Pork
(R/kg)
Baconer
R
23.52 R 24.04 R 24.19
Change
(m/m)
1.5%
0.6%
Change
(y/y)
-0.9%
2.9%
In May 2016, the derived import parity price of US barrow and gilt carcasses was R34.12 a kg,
in comparison with domestic baconer and porker prices. If the rand trends weaker, import
parity prices could trend higher in the following weeks.
Dairy
Figure 16 shows the average monthly milk
producer price trends (rands per litre).
R 5.00
R 4.50
R 4.00
Rand/litre
R 3.50
R 3.00
R 2.50
R 2.00
R 1.50
R 1.00
R 0.50
R-
Dairy
Figure 16: Average monthly milk prices
Source: Milk Producers Organisation, 2016
14
Lower milk production persist
Milk production in April 2016 is estimated at 223 million litres, 5.3% lower y/y. Total year-todate production is approximately 941 million litres, 5% lower y/y. Milk producers continue to
face a serious cost-price squeeze as a result of a sharp increase in input prices along with a
slight increase in producer prices. Scarcity of quality roughage due to drought is also
contributing to lower production. This trend should continue unless producer prices increase
substantially. In April 2016, the milk producer price was around R4.50 a litre, slightly up m/m
by 1% m/m (Table 8).
Table 8: Monthly price movements in dairy
Commodity
Category
Units
Dairy
Class 1
(R/L)
Average price
May 2015 Apr 2016 May 2016
R
4.50 R
4.45 R
4.50
3.00
Milk-to-maize price ratio
Change
(y/y)
0.0%
Milk-to-maize price ratio
In May 2016, the milk-to-maize price ratio
was 1.3:1, weaker by nearly 9% m/m due
to a higher feed price, and 26.6% weaker
than the long-term average of 1.77:1
(Figure 17).
2.50
2.00
Change
(m/m)
1.1%
1.77
1.50
1.00
0.50
Milk-to-Maize Price Ratio
Feb-16
May-16
Aug-15
Nov-15
Feb-15
May-15
Aug-14
Nov-14
Feb-14
May-14
Aug-13
Nov-13
Feb- 13
May-13
Aug- 12
Nov- 12
Feb-12
May- 12
Aug-11
Nov-11
Feb-11
May-11
Nov-10
Feb-10
Aug-10
May-10
Aug-09
Nov-09
May-09
0.00
Long-term Avg Ratio
Figure 17: Milk-to-maize price ratio
International dairy prices at the Global Dairy Trade (GDT) Event 166 on June 15
Skimmed milk powder (SMP): prices declined 1% for the July contract, but increased 1.5% for
all contracts in Oceania. International factors, particularly intervention in the EU, continue to
overshadow SMP markets in Oceania. Additionally, with the arrival of the new milk producing
season and anticipation of increasing milk volumes, markets are expecting increasing volumes
of SMP to become available. SMP prices in the EU were unchanged.
Butter: prices increased 7.8% for the July contract and 5.3% for all contracts in Oceania.
Increasing domestic demand in Australia, coupled with recent export interest in both Australia
and New Zealand, are helping strengthen prices. Butter price strength in the EU as well as US
also supported prices. Price strength is expected to continue in coming weeks. Butter prices in
the EU have been trending upward due to increasing demand.
Cheddar: prices decreased 0.2% for the July contract, but prices increased 6.9% for all
contracts in Oceania. The cheddar cheese price strengthened at the lower end of the price
range. Profitability for cheddar has been good and exports stronger. Many export customers
are loyal to their sources of cheddar.
15
Vegetables
Table 9 shows the price trends (rands per ton) and Table 11 total volumes traded (tons) in
onions, potatoes and tomatoes. The vegetable prices represent the national average for all
markets and all classes.
Table 9: Average monthly price movements in vegetables
Average price
Commodity
Units
May 2015
Apr 2016
May 2016
Onions
R
3 378 R
5 755 R
5 293
Potatoes
Rand/Ton
R
2 652 R
4 939 R
4 375
Tomatoes
R
6 080 R
8 109 R
6 120
Change
(m/m)
-8.0%
-11.4%
-24.5%
Change
(y/y)
57%
65%
1%
Table 10: Monthly volume movements in vegetables
Commodity
Onions
Potatoes
Tomatoes
May 2015
31 835
96 256
19 749
Tons
Apr 2016
31 860
84 661
19 573
May 2016
32 661
85 169
20 462
Change
(m/m)
Change
(y/y)
2.5%
2.6%
0.6%
-11.5%
4.5%
3.6%
Onions
R 7 000
40 000
R 6 000
35 000
The average monthly price of onions
could maintain a downward trend in the
following weeks due to steady supply.
Figure 18 depicts the current price trend.
30 000
R 5 000
25 000
R 4 000
20 000
R 3 000
Ton
Rand/ton
9
15 000
R 2 000
10 000
R 1 000
5 000
R-
0
Tons (RHS)
Price (LHS)
Figure 18: Onion prices and volumes
Source: Department of Agriculture, Forestry and Fisheries (DAFF), 2016
16
Potatoes
R 7 000
120 000
R 6 000
100 000
80 000
R 4 000
60 000
R 3 000
Ton
Rand/ton
R 5 000
40 000
R 2 000
Potato prices could come under pressure
in the following weeks as yields have
improved slightly from levels seen at the
beginning of 2016. Potato stocks have
also been growing since April 2016.
Figure 19 depicts the current price trend.
20 000
R 1 000
R-
0
Tons (RHS)
Price (LHS)
Figure 19: Potato prices and volumes
Source: DAFF, 2016
Tomatoes
R 10 000
30 000
R 9 000
25 000
R 8 000
20 000
R 6 000
R 5 000
15 000
Ton
Rand/ton
R 7 000
The average price of tomatoes is expected
to show a downward trend in the following
weeks as availability improves in winter.
Figure 20 depicts the current price trend.
R 4 000
10 000
R 3 000
R 2 000
5 000
R 1 000
R-
0
Tons (RHS)
Price (LHS)
Figure 20: Tomato prices and volumes
Source: DAFF, 2016
10 Other news and developments
Economy
Inflation slows down slightly
Inflation, as measured by the consumer price index, slowed down to 6.1% in May 2016 from
6.2% in April 2016, surprising economists who had expected it to rise to about 6.3% y/y. This
slight drop in inflation will probably give the monetary policy committee of the South African
Reserve Bank (SARB) some confidence to hold the repo rate at 7% on 21 July 2016. The
SARB was widely expected to raise the repo rate from 7% to 7.25%.
GDP shrinks 1.2%
South Africa’s economic growth in the first quarter of 2016 was worse than expected.
Statistics SA data showed an unexpected contraction in consumer spending and a sharp
decline in investment, with mining and transport being the biggest drag on growth. GDP
contracted at an annualised 1.2% in Q1: 2016, down from a positive 0.4% in Q4: 2015.
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International trade and marketing
Britain exits the EU
The road ahead for South Africa’s trade agreements with the United Kingdom (UK) and the
EU became unclear on 24 June 2016 after the UK voted to leave the EU, and sending global
markets into shock. The Brexit result is widely expected to create uncertainty around the
future of South Africa’s trade agreements with the UK and EU and likely put South Africa’s
path to economic recovery at risk.
Poultry producers look beyond South Asia for growth
The South African Poultry Association (SAPA), which has taken steps to interdict the
Department of Agriculture, Forestry and Fisheries from implementing new brining regulations,
is also looking for the department’s help to gain a foothold in export markets. The association
has complained about the effect that chicken imports will have on the local industry. SAPA are
now looking beyond South Africa’s shores to offset the effect of imports and wants the
government’s help to achieve this objective.
The Western Cape plans to increase wine exports
The Western Cape has set its sights on increasing wine exports to all strategic markets
following a recent trade pact between South Africa and the EU. According to Western Cape
provincial government authorities, the goal is to more than double wine exports to major
destinations by 2025. The Economic Partnership Agreement with the EU will allow South
Africa to export 110 million litres of wine to the EU, up from the current annual duty-free quota
of 48 million litres.
China begins selling off cotton stocks
China is selling off its cotton reserves, a move that may positively influence global prices
according to Koot Louw, Cotton SA’s secretary. According to Louw, China imported large
volumes of cotton and kept the market alive in the recent past. China began selling cotton
from its national reserve last in May 2016. To date, approximately 450 000 tons have been
sold, reducing reserves to 10.6 million tons, according to Cotton SA’s 5th crop estimate report
for the 2015/16 season.
Agribusiness
Drought eats into Tongaat Hulett profits
Consumers will continue to pay more for sugar as the effects of a severe drought feed through
the production chain and the government increases protection for domestic cane growers. In a
year that saw the maize crop estimated at almost half the level of 2014’s record harvest, sugar
production at one of South Africa’s largest producers of the sugar, Tongaat Hulett, is
estimated to drop to below one million tons in 2016/17. This is more than 30% lower than the
2014 record production. The company’s sugar operations in South Africa were down to an
operating loss of R5 million for the 12 months ending 31 March 2016 after generating a profit
R261 million a year earlier.
Tractor sales increase
In May 2016, tractor sales increased by 5% y/y to 422 units according to the South African
Agricultural Machinery Association (SAAMA). Sales are down 8.2% y/y in the first five months
of 2016 and industry experts forecast a 15% to 20% drop in tractor sales in 2016 on a yearly
basis.
18
Policy issues
Hunting industry defends itself
Hunters who travel to Africa to shoot big game have been keeping a low profile in the
aftermath of global outrage provoked by the killing of Cecil the Lion in Zimbabwe in 2015.
However, they have recently begun to defend their industry. The conservation arm of Safari
Club International (SCI), which suspended the membership of US dentist Walter Palmer for
shooting Cecil, has published research that reports that trophy hunting contributes USD426
million to eight sub-Saharan countries and employs 53 000 people. United Airlines and Delta
Airlines banned transporting animal trophies and tighter hunting rules were introduced after
the shooting of Cecil. According to SCI, such restrictions threaten a vital source of income for
one of the world’s poorest regions.
11 Conclusion
The rainfall forecast for June to October 2016 shows chances of above normal rainfall over the
western and north-eastern parts of the country in winter. Minimum and maximum temperature
forecasts show chances of warmer than usual temperatures over the country, especially over
the north-eastern parts during mid-winter.
The veld and livestock conditions are improving in some areas; however, in communal areas
the conditions remain poor. Outbreaks of Armyworm were reported in KwaZulu-Natal (KZN),
while cases of New Castle Disease and Non-Pathogenic Avian Influenza were reported in the
Eastern Cape.
Field crop commodity prices generally traded higher on a monthly basis mainly due to a
weaker exchange rate. This trend could to continue in the following weeks.
The prices of beef and weaners could remain under pressure in the following weeks due to the
lower demand. Lamb and mutton prices will probably move sideways in the following weeks
due to a combination of lower demand in winter, low consumer purchasing power and
decreasing slaughter. The price of pork, being a more affordable red meat, could move
upwards in the following weeks due to the lower availability of red meat on the market.
Milk production should remain low in the following weeks as farmers continue to face a serious
cost-price squeeze.
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12 References
Crop Estimates Committee. (2016). Area planted and crop production figures. Crop Estimates
Committee.
DAFF. (2016). Summary report for certain products for all markets. Department of Agriculture
Forestry and Fisheries.
Grain SA. (2016). Price information (Domestic and International). Grain SA.
Grain SA. (2016a). Safex feeds. Grain SA.
Grain SA. (2016b). Domestic and international fertilizer prices. Grain SA.
Milk Producers Organisation. (2016). Milk producer prices. Milk Producers Organisation
(MPO).
National Agro-meteorological Committee. (2016). Advisory on the seasons. Department of
Agriculture Forestry and Fisheries,.
Red Meat Abattoir Association. (2016). National South African price information. Red Meat
Abattoir Association.
Red Meat Levy Admin. (2016). Red meat actual slaughter statistics. Red Meat Levy Admin.
South African Weather Service. (2016). Current rainfall conditions. South African Weather
Service.
Standard Bank Research. (2016). Exchange rates. Standard bank.
The Automobile Association of South Africa. (2016). Fuel Pricing. Retrieved from The
Automobile Association of South Africa: http://www.aa.co.za/on-the-road/calculatortools/fuel-pricing.html
The Star Business Report. (2016). International oil prices. The Star.
Unigrain. (2016). Weekly maize reports. Unigrain.
Compiled by:
Brian Mahumani
Analyst, Agricultural Economic Insights
Tel: +27 11 721 7903
Email: [email protected]
Standard Bank South Africa accepts no responsibility for any application, use or interpretation
of the information contained in this report and disclaims all liability for direct, indirect or
consequential damages resulting from the use of this report.
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