weekly market analysis 04 november 2011 - server...

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AGRI TRENDS

W Weekly Market Analysis 04 November 2011

What is COP 17?

COP 17, a conference held in South Africa. It is a medium where people put the emphasis on the effect of climate change and what causes it and how can we prevent it. Everybody is speaking about emissions. When you buy a new car you have to pay emissions tax, our electricity is generated by coal mines with lots of emissions e.a. Human activities have had a number of effects on the climate system. Global GHG emissions due to human activities have grown every year. The more sophisticated humans get the higher the emissions. Warming of the climate system has been observed, as indicated by increases in average air and ocean tempratures (La Ninas and El Nino’s for us in the Agri sector), widespread melting of snow and ice cover, and rising global average sea level. Every Government ‘s have the responsibility to protect what we have for the future and therefore it is their responsibly to put measures in place to prevent unnecessary production of emissions.

Beef Market Trends

• International: The US market prices traded mixed during the week compared to the previous week. Market activity in the US market was good, with demand and supply almst at equlibrium. In the US, beef traded as follows: Top inside traded 2,9% lower at 208,76 $/cwt, Rump traded 1,2% lower at 261,29 $/cwt and Strip loin traded 1,7% higher at 477,32 $/cwt. Chuck traded 0,8% higher at 230,08 $/cwt and Brisket traded 0,6% higher at 192,23 $/cwt. Rain has dominated the weather patterns across much of the state over the past couple of weeks. Heavy rain was recorded across a wide area and this has hampered harvesting activity of both grain and hay. Much of the hay has reportedly been that badly damaged that it is not worth baling. Sprouting in grain has also been reported and with further rain forecast over the next week it would seem that this situation will only worsen which will change good grain into feed grain. Areas in South Western regions where pastures are still green will benefit from the moist, but generally the late rain has brought only negative effects. Conditions in the Northern Pastoral regions remain solid with good early rain having been recorded in the Kimberly region.The supplies of cattle at physical markets remained moderate for this time of year. The Muchea auction continued to be the largest of the weekly sales, followed by the Great Southern auction.Pastoral cattle supplies continued to dominate Muchea’s sale, even though the numbers of these have begun to decline. The supplies of heavy weight steers, bullocks and grown heifers all remain tight, while there were slightly improved numbers of locally bred yearlings. Yearling store supplies have improved, but vealer supplies continued to be moderate. The strong market conditions in recent times for cows continued to encourage solid numbers to be forwarded to auctions. The moderate supplies of vealers continued to be predominately light and medium with limited heavy weights available. With the strong pasture supplies available many producers are keen to grow their vealers out this year. Demand from restockers and feeders for vealers remained very strong

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Beef Price Trends (c/kg)

Class A Class C Contract Weaner Import parity

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*Last 3 points 3 months forecast

Absa Weekly Market Analysis

throughout the classes, despite many feeders still haven’t signed forward contracts yet. Trade weight yearling demand eased with less competition recorded between the trade, feeders and restockers. Processor demand for heavy weight steers, bullocks and grown heavy weight heifers increased with all grades enjoying higher prices throughout the week.There was continued quality and weight recorded during the auctions. Processor demand remains high and the market realised a slight increases in overall prices throughout the classes of locally bred cattle. Heavy weight bull demand started the week at dearer levels but declined as the week progressed with the average remaining similar.

US beef and pork exports each will top $5 billion in value this year and are poised to grow again in 2012. This year, USMEF expects beef exports to account for 14% of total US production, an increase of 12% last year. On average for 2011, exports have added about $200 per head to the value of finished steers and heifers. Canadian fed exports to the US for the week increased by 18% to just over 10,000 head. YTD volumes are 37% lower than last year. Slight pressure was noted in some auction markets towards the end of last week. Auction volumes totaled over 87,000 head, up 30% compared to the previous week. The bullish market factors that can influence the Canadian market are: Tight fed supplies which could shorten up packer inventories. Beef should be able to take advantage of strong pork export demand. Local futures basis should start to narrow. Bearish market factors are: Dismal packer margins are not indicative of current fed prices. The Loonie is once again finding support at Greenback parity. Chicken margins at retail are very good compared to Beef and pork. Russia has decided to resume purchases of Paraguayan beef and derivates following the foot and mouth disease (FMD) outbreak recently. Russia which is one of Paraguay's main beef clients only banned livestock from the San Pedro province where the outbreak was reported. Russia had banned all Paraguayan beef imports once the FMD outbreak was reported in the Santa Helena farm. The country's authorities proceeded to terminate 820 cattle and imposed several quarantine rings. No further outbreaks have been reported since.

• Domestic: Beef prices traded higher during the past week compared to the previous week. The prices of the different meat classes were as follows: Class A prices increased by 0,54% to R31,50/kg, Class C prices increased by 0,71% to R28,25/kg and contract prices also increased by 0,54% closing at R31,65/kg. The availability of weaners in the market continued to be in short supply. Hide prices traded the at R9,34/kg for the week. The landed imported price of beef trimmings from Namibia and Botswana traded higher at R41,20/kg week-on-week.

Outlook

Internationally, beef prices are expected to remain high with an upward trend in the short to medium with restockers looking to improve their herds. Lower supplies during the festive period are possible. In the local market, prices of beef will remain strong and move sideways in the short to medium term due to shortages and higher demand during the approaching festive period.


Mutton Market Trends

• International: New Zealand and Australian prices were sllightly lower compared to the previous week. Local import parity for lamb and mutton traded lower due to a stronger rand compared to the previous week. Montana State University has received almost $743,000 to research the use of sheep in organic farming and to incorporate those findings into their MSU courses and share the discoveries with Montana producers and growers. This a three-year grant. The grants totaling $19 million were given through two programs- the Organic Agriculture Research and Extension Initiative and the Organic Transitions Program. Organic farmers can't use chemicals to control weeds, so they often rely on tilling the soil. But, too much tilling and plowing can cause soil to wash away or blow away. The worst scenarios occurred during the 1930s when dust storms carried tons of topsoil for hundreds of miles. US meat companies are turning to new technoloy by using video surveillance cameras in an effort to reduce E. coli and other contamination inside processing plants. The new technique allows remote auditors to watch whether plant workers follow safety protocols aimed at reducing the spread of deadly bacteria. The world's largest beef processor, saw a 60% drop in the level of E. coli found by company inspectors after it installed monitoring cameras. These cameras can also be used to see if employees are doing their work but most important are that they doing it correctly. The Brazilian meat processor started with a pilot program after it recalled 380,000 pounds of meat that sickened 23 people in nine states in 2009.

• Domestic: The mutton and lamb prices traded mixed during the week compared to the previous week. The Class A2 prices closed the week at R48,56/kg which is 0,35% lower than the previous week. Class C2 prices closed at R40,09/kg or 0,28% higher, while contract prices closed at R48,65/kg or 0,27% lower. The average price for a dorper skin traded lower than the previous week at R 48,63 per skin or 4,4% lower and a merino skin traded 2,1% higher at R74,25 per skin compared to the previous week. The landed imported price of mutton rib from Australia and New Zealand traded the same compared to the previous week at R26,05/kg and mutton shoulder also traded at R44,90/kg the same as last week according to AMIE.

Outlook

Internationally, prices will continue to move sideways with a possible increase in the short term due to higher demand towards month end and the festive period when customers normally spend more. Locally, the prices of mutton will increase the short to medium term towards the December with a sideways maybe little downward movement in January.

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Mutton Price Trends (c/kg)

Lamb Class A Class C NZ Lamb Import NZ Mutton Import

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Pork Market Trends

• International: US pork prices traded lower during the week-on-week. Carcass prices traded 2,07% lower at US$ 95,45/cwt, Loin traded 2,85% lower at US$ 102,40/cwt, Rib traded 0,44% lower at US$ 143,74/cwt, while Ham traded 3,48% lower at US$ 84,35/cwt. Import parity for ham traded 2,29% lower due to a lower prices despite of a weaker exchange rate compared to the previous week. Fresh bone-in loins traded steady to weaker with Boston butts also lower. Skinned hams traded lower with lean trimmings steady. Trading was moderate with light to moderate demand and moderate to heavy offerings.

• Domestic: The pork prices traded higher during the past week, not following the downward trend of the international pork market. The price of Porkers traded the 3,13% higher at R19,11/kg, while the price of Baconers increased by 1,46% to R18,11/kg and the price of Contract meat increased by 2,31% to R18,61/kg compared to the previous week. This increase in prices was due to higher demand and still shortages in supplies. The imported landed price of loin from Canada and the US traded the same at R28,95/kg week-on-week according to AMIE.

Outlook

Internationally, prices are expected to trade upwards due to stronger demand and the high prices of substitute meat products. Locally, the prices are expected to increase in the short to medium term due to the high mutton and lamb prices and supply shortages in these substitude products. Poultry Market Trends

• International: The poultry prices in the US were mixed during the past week compared to the previous week. Whole bird prices traded the lower compared to last week at 74,00c/lbs a 0,74%. Breasts traded higher by 1,33% and closed at 114,0c/lbs, while leg quarters traded lower by 1,0% and closed at 49,5c/lbs compared to last week. Import parity was 0,24% lower due to a weaker Rand:US dollar exchange rate. Whole broiler prices were steady to barley to lower. Offerings were light to moderate to support current trade needs. Retail and food service demand was light to moderate with best sales into retail channels. Floor stocks were moderate to heavy. The market activity was slow to mostly moderate. In the parts structure, movement improved slightly and was noted as moderate overall. Prices were trading steady to firm for wings, steady to weak for dark meat, and steady for breast items. Supplies of wings were in good supply and moving well. Dark meat items were moderate to heavy and

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Pork Price Trends (c/kg)

Porker Baconer Import Parity Export Parity

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Poultry Price Trends (c/kg)

Whole Frozen Whole Fresh IQF Import Parity

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breast items were moderate. Market activity was low to moderate. In production wereas, live supplies were moderate; weights were mixed but noted as desirable.

Brasil Foods SA, the world’s largest poultry exporter, posted better-than-expected third quarter profit on higher domestic sales and increased prices. Net income rose to 365 million reais ($213 million) compared to last year. Net sales climbed 10% to 6,29 billion reais, while exports rose 6% to 2,47 billion reais. The company’s margin on earnings before interest, tax, depreciation and amortization increased to 11,5%, from 10,8%. Global food production has its limits therefore European poultry processors, grouped together into AVEC and representing 95% of EU poultry industries, which understand these limits and which part they play in this respect. A sustainable EU market in a global world was therefore the theme of this years conference. AVEC is actively participating in EU programs for reducing gas emissions and managing waste water. At the same time, they underline that poultry has the lowest carbon footprint and land use, compared to other animal species. The EU is also taking the lead in terms of animal welfare and producing healthy and wholesome food and to further reducing Salmonella and campylobacter are therefore key objectives. The Sharjah Municipality in India has intensified its inspection campaign in the fruit, vegetables and meat markets and food outlets to ensure the safety of food in view of the Eid Al Adha celebrations. The inspection targets the outlets selling fruits, vegetables and meat which are consumed more during Eid. Inspectors will be working day and night to ensure that all foods available in the market are fit for human consumption. Inspection has been intensified round the clock in ports and airports to ensure that imported birds and livestock are not carrying diseases that could be transmitted from animals to people. The inspectors also are instructed to conduct surprise visits to restaurants, cafeterias and other food outlets to ensure they are abiding by the health and hygiene regulations.

An investigation done by Botswana has revealed that there are no set standards for the brining of chickens leaving the poultry industry. Brining is the process by which a solution of sodium chloride, phosphates, proteins, anti-oxidants and other preservatives is mixed with water and injected into pieces of meat to secure their moisture and flavor and to preserve them. It is an internationally acceptable practice and is widely used in the US, Australia and neighboring South Africa. However, to avoid abuse, brining is a process that is carefully legislated. Botswana has no legal instrument or standards by which local producers adhere, leaving the process open to abuse. It has been revealed that broiler processors have been left to treat their produce whichever way they want. Without regulation, producers have cheated the consumer a number of times where the price of a chicken braai pack in Botswana costs twice the amount it does in South Africa, where laws regulating brining are being implemented. South Africa's Quantitative Ingredient Declaration states that chicken products should contain 92% chicken and 8% water. For the US, it is 88% chicken and 12% brine, and the information must be specified on the label.

• Domestic: Poultry prices closed mixed again this week compared to the previous week. Frozen birds traded at R 16,25/kg or 0,43% lower compared to the previous week. Whole fresh medium bird prices traded a massive 3,93% higher at R 21,67/kg and IQF traded at R 15,32/kg or 3,51% higher compared to the previous week. The landed price of Brazilian imported chicken leg quarters traded higher at R 15,85/kg and grillers traded higher at R 18,95/kg week-on-week according to AMIE. Congratulations to Rainbow Chicken, South Africa’s largest producer of fresh and frozen chicken products who captured the International Poultry Council’s Branded Marketing Award for 2011 for its inventive campaign aimed at increasing consumer awareness of its flagship brand of chicken and Rainbow value-added chicken products. Rainbow won the award for its inventive “Jiva Nathi” or funky chicken dance campaign, a multi-faceted advertising and promotional effort that focused on quality and incorporated a variety of media, including television, radio, print and billboards.

Outlook

Internationally, the prices will move higher in the short to medium term as the market activity increases because of higher red meat prices and towards December. Locally, the market is expected to trade higher in the short to medium term due to sky high red meat prices which is pushing up the white meat prices.


Livestock Prices (R/kg) 04 November 2011

Beef

Mutton

Pork

Poultry

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Previous Week

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Previous Week

Class A / Porker / Fresh birds

31,50 31,33 48,56 48,73 19,11 18,53 21,72 20,85

Class C/ Baconer / Frozen birds

28,25 28,05 40,09 39,98 18,11 17,85 16,25 16,32

Contract / Baconer/ IQF

31,65 31,48 48,65 48,78 18,61 18,19 14,94 14,80

Import parity price

31,94 32,82 30,66 30,94 20,61 20,91 11,78 11,81

Weaner Calves / Feeder Lambs/ 21,81 22,00 28,50 28,00 - - - -

Specific Imports: Beef trimmings 80vl/b/Mutton Shoulders/Loin b/in /chicken leg1/4

41,20 41,00 44,90 44,80 28,95 28,95 15,85 15,65

Yellow Maize Trends

• International: The average yellow maize prices increased slightly week-on-week. The average US yellow maize spot price closed the week 0,4% or US$ 1,04/t higher compared the previous week. Declines in the outside markets helped force grains lower as the stock market suffered sharp losses and crude oil in negative territory triggered the weakness earlier in the week, along with sharp gains in the US dollar. However, outside markets recovered late in the week bringing grains back into positive territory. Maize saw impressive gains over concerns of lower yields and tight stocks which spilled over to other grains. Maize found some support from talk of lower yields awaiting the release of the latest USDA report. Weekly export sales for maize were neutral coming in at 622,600 tons. Genetically modified seed and a green light from soybean plantings, have put Brazilian maize farmers on course to break their harvest record by an even bigger margin than had been thought, with exports to approach an all-time high. The USDA’s Brasilian office increased its forecast to 64m tons for the Brazilian maize crop, putting it well ahead of the current record of 58,6m tons, set in 2007. The upgraded figure was also well ahead of the USDA's official estimate, of 61,0m tons. This will keep Brazil ahead of the European Union in the production league. The EU lifted its estimate for its own harvest by 2,9m tons to 63,7m tons, following reports of better-than-expected yields in the west, notably in France and Italy.

• Domestic: The local maize market followed the international market and traded on average 1,95 or R 43,20/t higher during the past week. The Rand: US dollar exchange rate was on average weaker during the past week, compared to the previous week. The average exchange

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Yellow Maize Prices (R/t)

Import Parity Export Parity SAFEX spot

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rate for the week was R7,95/US$ compared to R7,90/US$ the previous week. Safex futures traded higher in the week: Dec-11 traded 1,76% (R40/t) higher, Mar-12 traded 1,34% (R30/t) higher, May-12 traded 4,87% (R95/ton) higher and Jul-12 traded 4,81% (R88/ton) higher compared to the previous week.

Outlook Internationally, markets will move sideways with a possible upward trend in the short to medium term due to the possible yield forecast. Locally, the market prices are expected to increase due to the uncertainty round the number of hactares that will be planted and an uncertainty about current maize stocks with a possible deficit forecast for the 2011/12 marketing season.

Yellow Maize Futures 04 November 2011

Dec-11 Mar-12 May-12 Jul-12 Sept-12

CBOT ($/t) 258,10 262,27 265,03 266,99 249,44

SAFEX (R/t) 2,449 2,417 2,220 1,931 -

Mar-12 May-12 Jul-12

Ask Put Call Ask Put Call Ask Put Call

2,300 193 162 2,080 207 172 1,960 225 183

2,260 171 180 2,040 185 190 1,920 202 200

2,220 151 200 2,000 164 209 1,880 181 219

White Maize Trends

• International: The US white maize spot market traded lower by 1,0% or US$ 2,95/t in the past week compared to the previous week. The local import parity of white maize traded 0,2% lower compared to the previous week. This decrease in import parity was due to the fact that the average rand: dollar exchange rate traded weaker in the past week compared to the previous week. The rand strenghtened from R7,90/US$ last week to R7,95/US$ this week.

• Domestic: The local average white maize spot price traded 0,4% (R8,80/ton) higher compared to the previous week, with white maize trading 77,6% higher than the same time a year ago. The white maize futures contracts traded higher this week: Dec-11, traded 1,3,38% (R80/t) higher, Mar-12 traded 3,73% (R87/t) higher, May-12 traded 6,22% (R130/ton) higher, Jul-12 traded 5,29% (R97/t) higher and Sept-12 traded 4,38% (R82/t) higher compared to last week.

Outlook Internationally, the white maize price trend will follow the yellow maize prices with sideways movement in the weeks to come. In the local market, prices for the new season can increase in the short to medium term due lower numbers of hectares that could be planted because of a lack of moisture and possible lower stock levels.

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08/07/11 05/08/11 02/09/11 30/09/11 28/10/11 12-11

White Maize Prices (R/t)


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White Maize Futures 04 November 2011


SAFEX (R/t) 2,307 2,269 2,045 1,918 -



2,460 203 160 2,260 226 186 1,980 243 194

2,420 181 178 2,220 204 204 1,940 220 211

2,380 160 197 2,180 183 223 1,900 198 229 Wheat Market Trends

• International: The average weekly wheat spot price traded 0,1% higher compared to the previous week. Soft red wheat traded 1,1% ($2,83/t) higher, while hard red wheat traded 0,8% ($2,28/t) lower. Import parity traded 0,7% higher due to a weaker rand :US$ exchange rate. Snow fell in Western Kansas and a storm system is moving through the state bringing much needed moisture to the freshly planted crops. The last 30 days has brought significant rainfall to parts of Oklahoma. Much of the Central and South Central parts of the state have received very timely rains with respect to wheat production. Winter wheat planting is on track compared to this time last year. Some wheat was planted earlier in dry conditions and some is just being planted. However, wheat emergence is below normal and last week, 42% of the Oklahoma wheat crop was rated as fair with 32% good and 4% excellent. This confirms that the wheat crop is late and will result in little grazing potential for the remainder of 2011. Wheat export sales were bearish coming in at 320,100 tons. The grain markets were pressured by outside markets and the higher dollar. Rain is forecast for the hard red winter wheat region. Producers this week increased a campaign to persuade the Ukraine president to sign off a law passed by parliament two weeks ago to reinstate a 20% refund to grain traders from 2012. Agrotrade, the farm operator which also have a 3% share of Ukraine's grain export trade, warned about low prices that farmers would be forced to accept to ensure the country's supplies undercut those from rival Russia. However, Ukraine's parliament gave up hopes of signing off on the measures, which would have represented a second stimulus to merchants within a month after the removal of the controversial grain export levies. The Ukraine finance minister had estimated that the refunds would cost about 5bn hryvnia ($625m) in 2012. It looked unlikely after an increase in grain exports since the lifting of the tariffs which were blamed for decreased exports compared to 2009 levels. Exports are better since Egypt is buying Ukrainian grain again. Egypt, the world's biggest wheat exporter, last weekend bought 180,000 tons of Ukrainian wheat, the first in three years. The USDA said that if Ukraine continues to participate in Egyptian tenders, this may create an opportunity for the US to regain a stronger position in the North African market. Ukraine is under pressure from the IMF to improve its finances, to win resumption of lending under a $15bn programme halted earlier this year. Ukraine has harvested a bumper crop this year, with the country's farm ministry a week ago upgrading its estimate by 1m tons to 54m tons, and pegging exports at 27m tons. Some traders have questioned whether Ukraine will be able to achieve this figure after its slow start to 2011/12, with their port capacity limited to about 2,5m-2,7m tons a month. However, the winter planted crop has made a poor start, due to the drought which prompting

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Wheat Prices (R/t)


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expectations that about 20% may need to be reseeded next spring. This could be supportive for sunflowers and maize in acreage terms. Both crops are spring plantings. Australia looked set for more of the rains which will for a second season, causing notable wheat quality downgrades, and will boost the current supplies of feed grains. Forecasts are that the grain belt in Western Australia, the country's biggest cereals producing state, was set to receive up to 25mm of rain with more rain on the way. The rains threaten further interruptions to an early Western Australia harvest which is already showing signs of quality damage, from rains up to four times the normal in some areas. While pre-harvest rains can be welcome and supporting yields, rainfall on mature grain can lower wheat gluten levels and encourage sprouting, leaving grain planted for milling fit only for animal feed. A much-wetter-than-normal few weeks in the Geraldton zone has already caused harvest delays, and reports of grain quality downgrades have already started to filter through. Persistent rains, lasting into the main harvesting period, would threaten Australia for a second successive season with extensive quality downgrades of a crop which is normally overwhelmingly of milling grade. In 2010 it was eastern areas which suffered the quality damage.

• Domestic: The average SAFEX wheat spot price traded 0,1% or R3/t higher this week compared to the previous week, and therefore not following the international market. The local market didn’t find support from weaker US prices, but rather from a slightly weaker rand against the US dollar. Safex future prices traded mixed during the past week compared to last week: Dec-11 traded 1,90% (R52/t) higher, Mar-12 traded 1,32% (R37/t) lower, May-12, traded 1,3% (R37/t) lower, and Jul-12 traded 1,65% (R48/ton) lower than the previous week.

Outlook Internationally, prices are expected to trade sideways in the short term with a possible increase in prices in the medium term due to pressure from outside markets and drought but the moisture that is present can support more plantings. Locally, the market will continue to follow the international market, but the weaker rand can suppport an upward trend.

Wheat Futures 04 November 2011


KCBT ($/t) 264,55 269,85 273,37 276,46 282,19

SAFEX (R/t) 2,763 2,814 2,859 2,907 -



2,860 153 107 2,900 199 158 2,940 226 193

2,820 131 125 2,860 177 176 2,900 204 211

2,780 110 144 2,820 156 195 2,860 184 231

Oilseed Market Trends

• International: US soybean prices traded week-on-week on average again higher by 4,1% or $18,32/ton compared to the previous week. The current price is also 1,8% lower compared to the same time a year ago. Soybeans had bearish weekly

export sales of 209,700 tons. Brazil ‘s

prospects for raising plantings of the grain had been improved by the rapid start to the soybean planting season, signalling an early harvest of the oilseed and a timely seeding of follow-on winter, or safrinha, maize. The completion of maize plantings early in

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Oilseed Prices (R/t)

Derived Soya Derived Sunflower Soya Spot Sunflower Spot

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the calendar year is important for ensuring maize is well developed ahead of potential winter frost, as damaged crops in June this year. In Parana, a major safrinha maize state, soybean plantings have finished in some areas, according to regional officials, meaning farmers should start harvesting in January. Farmers are in general very pleased with the early completion of soybean planting because this is the main area in Parana where the safrinha maize will be planted after the soybeans are harvested. On-time maize planting is essential for good safrinha maize yields. Safrinha maize is planted directly after soybeans in the same season – basically will there be two summer crops harvested in one season. Ukraine's strong revival in grain sales since the ditching of export levies may have come at a price in removing pressure for a $625m industry VAT refund scheme, which politicians abandoned on Friday. Soybean merchants in the US were offered hope of a revival in foreign business even as data showed dismal US exports of the oilseed, which fell to their lowest of the marketing year. US soybean shipments in the week to last Thursday came in at 209,701 tons, well below market expectations of 450,000-750,000 tons, this was against a background of speculation of purchases of US soybeans by China. There remains talk that China has been actively a buyer of soybeans this past week but that was not evident in sales reports. There was a slowdown in exports which has left weekly

US export sales running so far in 2011/12 at less than half the pace of last year. There is hope

of a recovery in US shipments, thanks to decrease in the competitive advantage of South American soybeans, which are seen as taking American market share in export markets following bumper 2011 harvests in Argentina and Brazil. While Brazilian soybeans had been unusually price competitive in September and August, when the country's exportable supplies are typically starting to run low, that advantage had diminished over the last two weeks. Looking ahead, expectations about exports of Argentinean’s crop that is due for harvest early next year are tempered because of the official forecasts that were too high. The crop was pegged at 51m tons, which was 2m tons lower than the USDA official estimate, attributing their more conservative figure to a switch by farmers to maize, following best agronomic practice by rotating crops. Maize has taken most of the productive soybean area while overall soybean plantings had increased, the rise was mostly seen in marginal areas. A Rapid depletion of South American soybean stocks is indicated by the latest information on the volume of shipments, estimating that soybean shipments from Argentina, Brazil and Paraguay had jumped by 3,2m tons, or 64%, in the last two months, compared to last year. World demand for US soybeans will recover in November, December and January, when most of the South American soybean stocks will have been disposed of and South American exports are seasonally small.

• Domestic: The average soybean spot prices traded 0,2% or R7,40/t higher compared to the previous week. This increase was mainly driven by the higher international markets. The current price is still 1,4% higher compare to the corresponding time a year ago. The soybean futures prices all traded higher as well during the past week: Dec-11 traded 2,78% (R93/t) higher, Mar-12 traded 1,38% (R47/t) higher, May-12 traded 1,02% (R35/t) higher and Jul-12 traded 1,50% (R52/t) higher compared to the previous week. The average sunflower spot price for the week traded higher and closed 0,6% (R25,40/t) higher than the previous week. This is still 18,6% lower than the same time a year ago. The sunflower futures prices closed mixed compared to the previous week: Dec-11 traded 2,53% (R107/t) higher, Mar-12 traded 2,31% (R100/ton) higher, May-12 traded 3,07% (R130/t) higher and Jul-12 traded 1,89% (R82/t) higher compared to the previous week.

Outlook Internationally, markets will trade sideways to slightly higher in the weeks to come due to more favourable outside markets but feed wheat can influence the prices negatively. Locally, the soybean prices will follow international prices in a sideways movement. Locally a decrease in plantings projected for the new season will have a positive effect on oilseeds in the new season.


Oilseeds Futures 04 November 2011


CBOT Soybeans (US $/t) 448,64 451,95 455,33 458,34 454,15

CBOT Soy oil (US c/b) 51,87 52,46 52,81 53,08 53,25

CBOT Soy cake meal (US $/t) 315,40 320,20 322,40 325,40 325,50

SAFEX Soybean seed (R/t) 3,435 3,465 3,450 3,522 -

SAFEX Sunflower seed (R/t) 4,347 4,430 4,360 4,410 -

Safex Sorghum (R/t) 2,600 2,100 - - -

Sunflower Calculated Option Prices (R/t) Absa Capital Trading Desk: 011 – 895 5524



4,460 280 250 4,400 393 353 4,450 457 417

4,420 259 269 4,360 371 371 4,410 435 435

4,380 238 288 4,320 349 389 4,370 413 453 Fibres Market Trends

• International: The Australian market closed higher (0,74%) than the previous sale at AU 1,224c/kg. The last sale closed higher, with the next sale on the 9

th Nov 2011. Retail sales of

clothing in China’s domestic market continues to grow, but at a much slower pace than 2010. For the nine months to September this year, the volume of retail sales of clothing at the top 100 large-scale department stores has increased by 5.4%. The slower growth is probably due to the 19,2% increase in clothing prices this year. This slowdown will decrease China’s raw and semi-processed wool imports by between 2% and 3% in 2011 compared to 2010. This reflects an easing in demand for wool products being experienced by the Chinese wool textile industry. The averaged cotton price was increased to 98,16c/lbs for the week which was up from 97,37 c/lbs, the average price from the previous week but down from 129,54 c/lbs reported the for corresponding period a year ago. The spot transactions reported for the week totaled 2,539 bales. This compare to 38,472 bales last week and 23,145 bales reported a year ago. Total spot transactions for the season were 150,159 bales, compared to 92,666 bales the corresponding week a year ago. Cotton futures posted a third week successive fall after experts warned of a serious decline in cotton prices this season, restrained by supplies which looked set to recover even further than was expected. The drop pursued an upgrade of the world supplies by 400,000 tons to 2,3m tons forecast for the world cotton surplus in 2011-12, reflecting better hopes for production as well as a lower estimate for demand. The fibre's stocks-to-use ratio, an important indicator of the readiness of supplies and thereby of price potential, is expected to rise from 46% to 55% with out China. This increase could turn into a significant decline in the season-average Cotlook A Index. The demand downgrade by 100,000 tons to 24,7m tons, reflected fears for the world economy, which would lower to 1% consumption growth in China, India and Pakistan, which account together for two-thirds of use.

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8,300 8,450 8,600 8,750 8,900 9,050 9,200 9,350 9,500 9,650 9,800 9,950

10,100 10,250 10,400 10,550 10,700

08/07/11 12/08/11 16/09/11 21/10/11 12-11

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Wool & Cotton Price Trends

Australia Wool SA Wool SA Cotton


Weeks Months


• Domestic: The last wool auction was held on the 2nd

Novemer 2011. The next auction will be on 9

th November 2011 with approximately 9,000 bales of wool on auction.The wool

market continued to increase with the indicator gaining 3,9% on last week to close at R104,03/kg (clean) or an increase of 13% on the opening sale. A possible supply shoertage appeared to be the major driving force with supplies in the main consuming countries currently at low levels. The Australian market also saw increases in prices. The rand traded at R7,95 against the US dollar and was 0,8% weaker compared to last week’s average rate. It was 0,4% weaker against the euro tradind at R10,95. The competition was good from various sectors of the trade with 96% of the 10 369 bales offered sold. The prices of all long wool categories increased by 3% to 5%.

Outlook International wool prices will increase in the short term with a possible upwards movement in the medium term due to possible supply shortages. Cotton prices will move sideways with a possible downward trend in the short term due to a larger US harvest. Locally, the wool prices will follow the international prices with an upward trend due to shortages and cotton prices will follow the US cotton prices in a downward trend, with a weaker rand that can support these prices.

Fibres Market Trends Week ending 04 November 2011

Wool prices SA prices (R/kg)

Australian prices (R/kg)

Australian Future Nov - 2011 (AU$/kg)

Australian Future Jan - 2012 (AU$/kg)

Wool market indicator 104,03 100,12 - -

19µ micron 123,96 121,72 14,25 14,13

21µ micron 110,60 109,75 12,70 12,70

23µ micron - 91,25 10,55 10,55

Cotton prices

SA derived Cotton (R/kg)

New York A-Index (US$/kg)

New York future Dec-2011 (US$/kg)

New York future Mar-2012 (US$/kg)

Cotton Prices 18,91 2,38 2,16 2,15

Vegetables Market Trends

• Cabbages: Cabbage prices decreased with 4,6% w/w, but traded 23,9% higher y/y for the week under review and 42,2% higher than two years ago. Volumes increased a massive 17,3% on a w/w basis. Prices decreased due to a increase in volumes. Prices are expected to move downwards in the short to medium term due to higher volumes in the summer months.

• Carrots: Carrot prices decreased by 0,7% w/w but traded 6,8% higher y/y and was 31,3% higher than two years ago. The price decrease was due to a huge 24,6% increase in supplies. Prices are expected to move downwards in the short to medium term due to higher volumes.

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Selected Fresh Produce Markets -Average Vegetable Prices (R/t)

Cabbages Carrots Onions Potatoes Tomatoes


Weeks Months


• Onions: Onion prices increased by 5,9% w/w, but traded 10,7% lower y/y and 28,3% lower than two years ago compared to the same week. The prices increased despite of a 13,8% increase in volumes. Prices are expected to move sideways in the short term with a downward trend towards the January 2012 due to lower demand after Christmas.

• Potatoes: Potato prices decreased by 0,7% w/w but traded 48,3% higher y/y, and 6,7% higher than the same week two years ago. Prices decreased due to a 14,3% increase in volumes compared to the previous week. Prices are expected to decrease in the short to medium term due to higher supplies during the summer months but higher demand can play a role to increase price in December.

• Tomatoes: Tomato prices increased by a good 14,3% w/w and 20,0% higher y/y and also 0,9%

higher than two years ago. Prices increased due to a slight 0,6% decrease in volumes. Prices are expected to move sideways with a downward trend in the short to medium term due to higher supplies but higher demand can influence the price during the Christmas period.

Vegetable Prices: Fresh Produce Market (Averages on the Pretoria, Bloemfontein, Johannesburg, Cape Town and Durban markets) Week ending 04 November 2011

This week’s Average Price (R/t)

Previous week’s Average Price (R/t)

This week’s Total Volumes (t)

Previous week’s Total Volumes (t)

Cabbages 1,596 1,596 1,299 1,107 Carrots 2,782 2,782 1,654 1,328 Onions 1,774 1,774 5,307 4,664 Potatoes 3,352 3,352 13,930 12,183 Tomatoes 3,986 3,448 4,695 4,724

Enquiries: Dawid Snyman Sector Intelligence Specialist Absa AgriBusiness E-mail: [email protected]

Disclaimer: Although everything has been done to ensure the accuracy of the information, Absa Bank takes no responsibility for actions or losses that might occur due to the usage of this information.

weekly market analysis 04 november 2011 - server...

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