There are a number of institutions that produce global agricultural supply and demand estimates, with the notable ones being the United States Department of Agriculture (USDA) and the International Grains Council (IGC). The former has recently released its monthly update comprising of various commodities. For the purpose of this post, however, I am only going to focus on wheat, maize and soybeans. These are also commodities that matter a lot for South Africa as the country is a net importer of wheat and soybean products.
In its January 2020 update of the World Agricultural Supply and Demand Estimates report, the USDA placed 2019/20 global wheat production estimate at 764 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.
In the case of maize, however, the USDA forecasts 2019/20 global maize production at 1.1 billion tonnes. This is 2% less than the previous season because of a poor harvest in parts of the US and Argentina, amongst other countries. These are still comfortable levels in covering the world’s maize needs. The reduction in production, while consumption is relatively strong, means that the stocks could fall by 7% y/y in 2019/20 season to 297 million tonnes. This has led to a general uptick in maize prices. Fortunately for South Africa, the spillover will be minimal in the near-term as the country is a net exporter of maize.
The 2019/20 global soybean production is set to decline by 6% y/y to 338 million tonnes, mainly on the back of anticipated poor yields in the US and Argentina. However, the stocks will not be affected notably because of somewhat lower demand, specifically in Asia following the African swine fever which negatively affected the pig industry. This means that soybean prices might not increase notably in the near term, which would be beneficial for importing countries. South Africa is one such country; a net importer of soybeans and a notable importer of soybean oilcake.
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