19 February 2018
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Report No. 2 2018

A weak La Niña weather phenomenon, which is associated with above average rainfall, is forecast for the Southern Africa region over the period February to April 2018. The next two weeks could bring rainfall of between 25 millimetres to 90 millimetres across the maize belt of South Africa. This will improve soil moisture levels, and greatly benefit summer crops. Summer crop commodity prices are expected to remain stable to bearish from combinations of improving growing conditions, a recovering rand and strong buying interest. A firming rand could see the petrol price drop by 75 cents and diesel by 45 cents on 7 March.

The rand came under pressure against the USD last week from uncertainty around the transition of political power in South Africa. However, this week it rebounded by 1.4% week-on-week (w/w) as the president of South Africa resigned and from USD weakness. On a yearly basis, the rand has firmed by 9.4% to average R11.89/USD. Higher than expected inflation in the US is expected to depreciate the USD, which will further support the rand.

This week, the oil price averaged USD63.21 a barrel, down by USD4.53 w/w and by USD7.52 year-on-year (y/y). Bearish factors: reports of
rising US oil inventories. Bullish factors to watch: a weaker USD (which stokes demand) and comments from Saudi Arabia over a deal to withhold production. A firming rand could see the petrol price drop by 75 cents and diesel by 45 cents on 7 March.

This week’s yellow maize price: R1 892 a ton, down by 0.5% w/w and by 32% y/y. Bearish factors for maize prices: a stronger rand; lower Chicago maize prices; and improving weather conditions. Week 6 total maize exports: 29 392 tons, 76% was yellow maize. Cumulative 2017/18 total maize exports: 1.9 million tons. This is 86.4% of the seasons export forecast of 2.2 million tons.

This week’s white maize price: R1 801 a ton, down by 20 cents w/w and by 37% y/y.

This week’s wheat price: R3 616 a ton, very slightly up by 0.1% w/w but down by 9.2% y/y. Bullish factor: tapering wheat deliveries to silos. Bearish factors to watch: a recovering rand and lower Chicago prices. Domestic wheat imports remain high. Week 6 wheat imports: 65 268 tons from Latvia (79%), Germany (20%) and Argentina (1%). Cumulative 2017/18 wheat imports: 826 184 tons, which is 43.5% of the forecast seasonal imports of 1.9 million tons.

Source: Standard Bank

Disclaimer: Standard Bank South Africa accepts no responsibility for any application, use or interpretation of the information contained in this report and disclaims all liability for direct, indirect or consequential damages resulting from the use of this report

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