31 july 2020 weekly food-for-thought - randagri...2020/07/31 · wandihle sihlobo, chief economist...
TRANSCRIPT
31 July 2020
WEEKLY
FOOD-FOR-THOUGHT
FOOD-FOR -THOUGHT
CONTENTS
International agriculture
- Africa Focus: Kenya
Local agriculture- Maize imports and exports- Producer deliveries- Sixth production forecast
NewsInternational and national news
Exchange rateOverview of ZAR and US dollar movements
Price risk managementMinimum/maximum option strategy
Weather- Local weather forecast- Weather forecast for the USA
ParitiesImport and export parities for yellow maize
LOCAL
WEATHER
Fourteen-day forecast:
South Africa can expect continued dry conditions over the next two weeks. Minimal rainfall is however expected for the southern parts of the country where winter grain plantings need follow-up rain.
WEATHER
North America:
INTERNATIONAL
According to the latest weather forecast for the next 8 to 14 days, the USA can still expect above average rain over the corn belt.
The rain will be welcomed, especially around the corn belt where drought conditions are already likely to cause lower production.
IMPORT AND EXPORT
PARITIES
AUG ’20 SEP ’20 DEC ’20 MAR '21
PMB import parity R3 293 R3 402 R3 497 R3 616
Cape import parity R3 127 R3 176 R3 284 R3 426
SAFEX yellow maize R2 740 R2 827 R2 814 R2 689
Export parity R2 544 R2 536 R2 591 R2 514
AGRICULTURE
Maize:
• The eastern parts of the country around Mombasa are predominantly relying on shiploads of maize imported from Mexico, which arrived over the past 2 to 3 weeks.
• Two more ships from Mexico and South Africa will deliver additional maize to Kenya.
• These imports will be sufficient to meet demand in the country until the first maize productions can be delivered in September.
• Conditions for maize crops in Kenya look promising. The biggest concern is the grasshopper infestation in the north of the country.
INTERNATIONAL
FOCUS: Kenya
AGRICULTURE
Maize: Excellent
= 17%
Good
= 55%
Fair
= 21%
Poor
= 5%
Very poor
= 2%
USA: crop conditions as at 26 July 2020
Soybean: Excellent
= 15%
Good
= 57%
Fair
= 22%
Poor
= 5%
Very poor
= 1%
INTERNATIONAL
PLAASLIKE
LANDBOU
• Uitvoer = 271 441 t• Vorige week = 10 724 t• Invoer = 0 t
Witmielies
• Uitvoer = 719 814 t• Vorige week = 111 410 t
• Invoer = 0 t• Vorige week = 0 t
Geelmielies
2020/21 seisoen
WM uitvoere:
Zimbabwe = 50%
GM uitvoere:
Taiwan = 39%
Bestemming vir meeste uitvoere:
• Export = 271 441 t• Previous week = 10 724 t• Import = 0 t
White maize
• Export = 719 814 t• Previous week= 111 410 t
• Import = 0 t• Previous week = 0 t
Yellow maize
2020/21 season
WM export:
Zimbabwe = 50%
YM export
Taiwan = 39%
Destination for majority of exports:
AGRICULTURELOCAL
LOCAL
AGRICULTURE
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Soybean Delivery
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Sunflower Delivery
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Cumulative oilseed producer deliveries as at 24 July
Cumulative maize producer deliveries as at 24 July
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White maize deliveries
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Yellow maize deliveries
% gelewer 2020 2019 5jaar gem
LOCAL
AGRICULTURE
The rand traded weaker yesterday against the US dollar on the back on sky-rocketing Covid-19 infections worldwide.
The technical analysis indicates that the South African currency is likely to tend to weaken further over the short term
EXCHANGE RATE
R/$
NATIONAL AND INTERNATIONAL
NEWS
Read more at: http://www.soybeansandcorn.com/news/Jul29_20-2020-US-Corn-Estimates-Moving-Higher
Opinion:Increased production in the USA will increase the deliveries and will therefore place CBOT-prices as well as local SAFEX-prices under pressure.
Opinion:
The good performance of the agricultural sector will support economic growth in South Africa and will support the exchange rate.
USA production forecast increased
The rand weakens further due
to increase in Covid-19 cases
Agricultural sector performs well in
the midst of Covid-19 storm
In the latest USDA production forecast, the expected maize production was increased by 5 bushels to 178,5 bushels per acre, which is equivalent to 12 ton per hectare.
Favourable weather conditions – lower temperatures and widespread rain over the corn belt – last week contributed to higher yields.
In the state of Iowa, the drought still has an enormous impact, with 10 % of the area suffering severe droughts and 40 – 50 % experiencing abnormally dry conditions
On Thursday 30 July, the South African currency again traded weaker against the US dollar. This is mainly due to the fact that Covid-19 infections worldwide have drastically increased. Investors therefore withdrew funds from emerging markets to invest in more stabile markets.
Read more at: https://www.moneyweb.co.za/news-fast-news/rand-falls-focus-on-virus-impact/
Opinion:
The weaker rand will support local grain prices, but will simultaneously negatively affect production costs.
Wandihle Sihlobo, chief economist at Agbiz Chamber of Commerce, said during a virtual conference on 30 July that the agricultural sector was one of a few to perform well during the Covid-19 pandemic. According to the latest harvest forecast, South Africa can expect a total maize production of 15,5 ton. Estimates indicate that the industry will achieve a 10 % recovery in the agricultural GDP for the 2020 season.
The most significant problems currently experienced are the large worldwide demand for maize, particularly in Africa, and traffic pile-ups at borders and harbours of products intended for export.
Read more at:
https://ewn.co.za/2020/07/29/agriculture-sector-has-weathered-covid-19-storm-says-chief-economist
SUMMARY
• The condition of winter grain in South Africa iscurrently good, but follow-up rain will provideeven further support.
• In the USA there are large areas where droughtshave started taking a toll, but the welcome rainsforecast for this week will support grainconditions.
• South African yellow maize prices tend to trade atCape import parity. The weaker exchange rateand the worldwide demand for grain currentlysupport prices.
PRICE
RISK MANAGEMENT
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0
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2200 2300 2400 2500 2600 2700 2800 2900 3000 3100 3200 3300 3400 3500 3600
Min/Max price Minimum/Maximum price
A put option is bought for the client to establish a minimum level. To keep costs low, a call option is simultaneously sold, which establishes the maximum price.
Should the market in future reach the maximum level (call option) the client will receive a short futures position which will force the client to deliver at the maximum price level.
If the market price trades at the minimum level (long put option), the client can be sure that they will be able to deliver at the minimum level no matter how far the price falls below this level.
Example:
The client buys a put option @ R2 560 (minimum level) at a cost of R120/t. At the same time, the client also sells a call option @ R 3000 (maximum level) at a premium of R25/t. The client can now receive a minimum price of R2 560/t and a maximum price of R3 000/t for his grain.
The cost of the strategy will be R120 (put) – R25 (call) = R95/t.
Tel: +27 (0) 13 243 1166E-mail: [email protected] Web: www.randagri.co.za Address: 24 Samora Machel Street
Middelburg, Mpumalanga
CONTACT US
“Life is not a matter of holding good cards,
but rather playing a poor hand well.”- Robert Louis Stevenson