We start the week with the United States (US) dominating the agriculture news, specifically the worries about the size of the damage the windstorms caused in Iowa maize and soybean fields earlier this month. The initial assessment from some local analysts suggests that crop yields will likely be lower than historical averages as a result of the damage caused. This means the season has shifted in a space of days from being one of the best in many years to a disaster for the farmers.
But should South African farmers and grain users care about this incident? I think they should, in as far as it influences the global supplies and prices. Iowa is the US leading maize producer and a major soybean and pig producer. This means crop damage in this State, depending on its scale, could shift the national harvest and prices. With that said, the price data hasn’t been alarming at all. At the end of last week (August 20, 2020), US maize price traded around US$167 per tonne, up by 1% y/y and slightly lower than levels seen in the previous few days. This price level supports the views of various grain analysts such as StoneX — who is on the ground — that estimates the damage in Iowa crop to be lower than many currently fear, and further state that at a national level, the damage will most likely be a blip.
We will receive more insights into the US crop conditions in the evening when the Department of Agriculture (USDA) releases its weekly crop progress report. This particular report will also provide further evidence of the scale of the damage in Iowa crop fields.
The impact of this at a global level, something that South Africa and other African countries should be watching, will be clear on Thursday when the International Grains Council (IGC) releases its monthly global grains supply and demand estimates. The IGC data will provide insight into whether the supply concerns that drove a recent price rally are set to continue, and also whether the aforementioned crop damage in Iowa is something we should worry about at a national (US) and global level.
My sense, in evaluating all the views of analysts on the ground, is that the damage will probably be deemed minimal at a bigger scheme of things. Therefore, the IGC data will reinforce the view that the world will still have surplus grains and oilseeds in the 2020/21 season. The price jumps will continue to occur from time-to-time, as China continues to make big purchases of agriculture products.
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