As much as I like boasting about South Africa’s agricultural production and exports, there are particular commodities I pay close attention to which we import in large volume. One such commodity is wheat.
In one of my previous posts, I stated that South Africa imports roughly half of its annual wheat consumption; thus, it is always essential to pay close attention to global wheat production dynamics.
It is comforting that the International Grains Council maintained the 2024-25 global wheat production forecast at 796 million tonnes, slightly up from the previous year.
Australia, Canada, Kazakhstan, the US, China, and India are the key countries that boosted the harvest this year, while other large producers in the EU and Black Sea expect a slight decline in production.
With global wheat consumption set to remain moderate, we can expect the global wheat stocks also to be stable in 2024-25. This means the prices may move sideways to moderate in the near to medium term.
This promising global wheat production outlook is in an environment where South Africa’s wheat production has not been ideal. Farmers have just completed the 2024-25 harvest, and most provinces had poor yields.
South Africa’s 2024-25 wheat production is forecast at 1,92 million tonnes, down by 6% from the 2023-24 production season.
The farmers have delivered much of the crop to the commercial silos. For example, the wheat producer deliveries for the first 19 weeks of the 2024-25 marketing year stand at 1,76 million tonnes as of February 7. This is closer to the expected overall harvest of 1,92 million tonnes.
Wheat production has declined across the other provinces except for the Northern Cape, North West, and Gauteng.
For example, the Western Cape, a major wheat producer, saw a 1% drop in its wheat harvest to 1.07 million tonnes. This is mainly due to poor yields in regions that suffered from excessive rains, not the decline in area plantings.
The area planted was reduced in other major producing provinces, such as the Free State and Limpopo. The relatively lower wheat prices at the start of the season may have been one factor in the decision to slash plantings.
However, the Free State and Limpopo face challenges beyond the prices. In 2024, these provinces experienced a severe mid-summer drought, which led to significant summer grain losses. When the winter wheat season started in May, farmers were downbeat and worried about soil moisture.
Others may have wanted to conserve soil moisture for the new summer crop season. Thus, we saw lower plantings and relatively lower expected yields in some areas. These challenges have contributed to the 6% expected national decline in the 2024-25 South African winter wheat harvest.
In a season like this, with a reasonably expected lower harvest, one would assume that imports would increase, especially as South Africa’s consumption of wheat and wheat products remains strong.
However, the latest South African Grain and Oilseeds Supply and Demand Estimates Committee estimates suggest that 2024-25 wheat imports may fall 6% to 1,82 million tonnes. This is closely aligned with the five-year average of wheat imports to South Africa.
The major reason for an expected decline in imports is that we have ample supplies, thanks to the higher opening stocks, supplemented by the ample imports in the past season.
One could argue that South African importers took advantage of the relatively better prices of global wheat imports in the past few months to build supplies for this new season.
Overall, the 2024-25 season imports will likely account for 47% of South Africa’s annual wheat consumption. Sourcing imports should not be a challenge, as there are sizeable global wheat supplies.
In such an environment, the major risk is the domestic currency. If it remains strong and stable, as it has in recent times, then the wheat price path ahead remains positive for consumers.
If you enjoyed this post, please consider subscribing to my newsletter here for free. You can also Follow me on X (@WandileSihlobo).
