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Bearish for too long: A brief review
of domestic and global wheat market
fundamentals
s
outh African wheat producers are approaching the plant-
ing season, with the Nation l Crop Estimate C mmit-
tee expected to release the planting intentions data on
26 April 2016. In the previous season, South African wheat
producers planted 482 150 hectares of land, which was a
positive increase of 1% from the area planted in 2014.
Nonetheless, production turned out lower than expected as a result
of an ongoing drought in some areas of the Western Cape Prov-
ince such as the Swartland, led to lower yields. At the moment the
weather conditions still indicate a dry outlook but indications from
a number of weather forecasters are that South Africa might get
some rainfall this season, as the El Niño event transits into La Niña.
The market conditions are also slightly
favourable with the wheat import tariff
having increased to an all-time high of
R1 224,31/ton. In this article, we will briefly
explore the current domestic and global
wheat market conditions.
Domestic market
conditions
The 2015/2016 South African wheat pro-
duction was 1,46 million tons, which is 17%
lower than the previous season’s crop and
the lowest since the 2010/2011 season. Us-
ing this production figure, Grain SA esti-
mates that South Africa’s 2015/2016 wheat
imports could reach 2 million tons.
According to Grain SA’s database, which
dates as far back as the 1990/1991 season,
this would be the highest import volume on
record and resonates with the increase in
South Africa’s wheat consumption, which is
now roughly above 3million tons (
Table 1
). At
the same time, South Africa continues
to export wheat to regional markets. The
2015/2016 wheat exports are forecasted at
287 000 tons, which is 5 000 tons lower than
the 2014/2015 exports.
To some extent these aforementioned fac-
tors have been supportive of domestic
wheat prices. Moreover the existing wheat
import tariff and the weaker rand against
the US dollar have added support to do-
mestic wheat prices. At the time of writing,
the wheat nearest contract month price and
December 16 contract month price were up
by 22% and 18% respectively compared
WANDILE SIHLOBO,
economist: Grain SA and
TINASHE KAPUYA,
head: Trade and Investment, Agbiz
GRAIN MARKET
-overview
– 15 April 2016
Mei 2016
40
ON FARM LEVEL
Graph 1: South Africa’s wheat imports and share of annual consumption.
Source: Grain SA
Graph 2: Global wheat supply and demand estimates.
Source: International Grain Council and Grain SA
Data as at April 2016