Over the past few months, South Africa’s Crop Estimates Committee (CEC) has consistently slashed down its estimate of 2019/20 winter wheat harvest from the view painted at the start of the season. The current estimate is now at 1.7 million tonnes (from 1.9 million tonnes at the start of the season), and likely to be revised down further when the CEC releases this month’s update tomorrow (November 26).
The downward revision could stem from the Western Cape, who’s harvest is nearly completed and the yields disappointed in various regions of the province. This is because of drier weather conditions between the end of August to September and later rainfall over the past couple of weeks when the crop had already matured. The late rains have not only caused damage in some areas but have also negatively affected grading levels of the crop.
These developments, however, have not been clearly reflected in South African wheat prices and are unlikely to in the foreseeable future. South Africa is a net importer of wheat and therefore its price levels are influenced by international wheat market conditions.
Currently, there are large wheat supplies in the global market. In its November 2019 update, the United States Department of Agriculture estimated 2019/20 global wheat production at 766 million tonnes, which is 5% higher than the previous season. As a consequence of this, the stocks could increase by 4% y/y to 288 million tonnes.
This will essentially keep global wheat prices at relatively lower levels, which is beneficial for consumers in importing countries such as South Africa. Unfortunately, the same cannot be said for farmers. (We currently forecast South Africa’s 2019/20 wheat imports at 1.6 million tonnes, up 14% y/y).
Written for Agbiz.
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