Market overview
Markets
Januarie 2014
40
Market overview of grain
and oilseeds
FUNZANI SUNDANI AND WANDILE SIHLOBO,
ECONOMISTS, INDUSTRY SERVICES, GRAIN SA
Throughout November 2013, there have been
significant movements on the international
and domestic maize, soybean and wheat
markets; as well as notable volatility on the
exchange rate.
International markets
Maize markets
On the maize markets, prices have been moving
sideways, mostly pressured by large expected
global supplies coupled by a slower import
demand from China. On the side, an increasing
demand from the world market provided some
support for maize prices; with South Korea, the
EU and Japan among the top importers.
Natural disasters have also negatively affected
maize production, with most highlights on the
recent typhoon in Philippines that damaged
about 153 495 hectares of their arable land, of
which 20 951 is for maize.
In the Southern African region, Zambia is still
experiencing dry conditions and soil moisture
is not sufficient for 2013/2014 maize plantings.
Drought conditions in South America have
negatively affected maize production, the
Argentinian maize area forecast has recently
been decreased by 0,2 million hectares to
3,3 million hectares.
On the other hand, the US has been experien-
cing favourable weather conditions, thus
positive harvest progress. However, the US
market has recently faced some disappointing
news from the Chinese market; China rejected
US maize exports due to unapproved GMO
variety.
Soybean market
Soybean markets have also experienced
some sideways price movements with a lot
of pressure on soybean prices coming from
South America.
Dry conditions in Argentina have resulted in a
decrease in the area planted with maize, which
was substituted by soybean production. The
US has had favourable weather conditions
which gave support to the harvest progress.
Furthermore, increasing demand from the
world market also added some support for
soybean prices, with South Korea among the
top importing countries.
Oilworld
recently reported that world
exports of soybean are seen rising sharply by
4,5 million tons, which is an almost 20% rise
from the previous year. The driving force for
these exports is to be seen in the growing
requirements of the global crushing industry
and the rising demand for soy oil and soy
meal. Furthermore, the 2013/2014 soybean
world exports are expected to increase by
11 million tons to 108,6 million tons. Brazil
is again expected to be the world’s largest
exporter of soybeans at around 45 million tons
in September and August 2013/2014, followed
by the USA at an estimated 40 million tons;
Argentina is expected to be at 9,3 million tons;
Paraguay at 5,1 million tons; and Uruguay is
expected to be at 3,2 million tons.
Wheat markets
On the wheat markets, wheat prices have
largely been supported by an increasing
demand from Egypt, Japan, Lebanon,
Bangladesh, Chinese Taipei and South Korea.
On the other hand, wheat prices have been
pressured by an expected increase in wheat
production from South America; with
Argentinian 2013/2014 wheat production
expected to be at 8,5 million tons, which is
slightly up from last year’s production of
8,2 million tons.
Brazil’s Agriculture Ministry announced that
the government is planning to offer subsidised
loans to producers in order to expand wheat
acreage across the country. Brazil hopes to cut
reliance on foreign wheat, particularly US and
Argentinian wheat imports.
Furthermore, India continues to add pressure
on wheat prices, the country’s winter wheat
plantings for the 2014 harvest are estimated
to be complete at 17,9 million hectares,
compared to 15,8 million hectares at the same
time last year.
Exchange rate
The rand continues to trade at low levels
(
Graph 1
), currently trading around R10,30 to
the dollar. The recent pressure on the rand
value came after South Africa’s third quarter
GDP growth eased to 0,7%, from an upwardly
revised 3,2% in the second quarter.
The main reason for lower growth in the
third quarter was a 6,6% contraction in the
manufacturing sector, which was caused by
widespread strikes in the motor industry.
Furthermore, a strong US Purchasing Managers
Index (57,3) raised concerns about tapering
of stimulus measures. Concerns about the
local current account deficit also added some
pressure on the rand value.
– 30 November 2013
Graph 1: Exchange rate.
Source: Grain SA (2013)
