Our focus currently is on developments on the weather front as grain and oilseed farmers look forward to a promising season following the disastrous 2023/24 crop season which saw the total harvest falling by 23.5% y/y.
Monitoring the 2023/24 summer harvest forecasts has been interesting following an El Nino-induced mid-summer drought that decimated crops earlier in the year. After an initial optimism of a 17.41 million tons in the first estimate despite the drought conditions, the National Crop Estimates Committee (CEC) downgraded their forecasts in the subsequent updates.
This saw South Africa’s commercial maize harvest dropping below the 13-million-ton level for the first time in over five years from 14.36 million tons to 12.72 million tons, down 22.6% y/y and 5% below the 10-year average of 13.47 million tons, according to the CEC’s 8th estimate. Other crops also saw declines with soybeans down by 34% y/y at 1.83 million tons.
We expected this scenario to materialise given the lower producer deliveries of 10.31 million tons by the end of October 2024, which was 81% of the expected crop and 26% below the 3-year average of 13.88 million tons.
Nonetheless, the weather outlook remains optimistic with recent predictions indicating a development of a weak La Niña pattern in the early part of the summer season, according to the South African Weather Service (SAWS). This still indicates normal rainfall conditions which should allay fears given the recent hot conditions.
Further, the near-term weather outlook indicates a potential for 35mm to 60mm of rain for the summer crop areas of the FS, MP, GP, the NW, MP, and MP provinces over the next two weeks.
Consequently, farmers were encouraged to increase their 2024/25 summer crop plantings by 0.8% y/y to 4.47 million ha. Maize is 2.64m ha with a potential harvest of just over 14 million tons using a 10-year average of 5.33 tons/ha.
On the supply side, we had a good carryover stock of maize which provided a slight buffer to ensure that we meet our export commitments estimated at 1.85 million tons for the 2024/25 marketing year, according to the South African Grains and Oilseed Supply and Demand Estimates Committee.
On other crops, strong prices of R10,550/t encouraged farmer to raise planting area by 2.1% y/y to 540 thousand ha. Soybeans planted area is expected to increase marginally by 0.2% y/y to 1.15m ha. Sorghum sees a massive rebound of 28.3% y/y to 54 thousand ha, while dry beans increases sharply by 14% y/y to 45,105 ha. Groundnuts were the only exception with a decrease of 2.9% y/y to 40 thousand ha. See figures 3a to 3c.
Prices responded strongly to the harvest contraction with average white maize prices so far for October 2024 up by 37.8% (+R1,542/t) y/y at R5,607/ ton, while its yellow counterpart was 14% above last year at R4,44/ ton.
Average prices for the first two weeks of November 2024 rose sharply by 49.6% (+R1,940/t) at R5,855/t and 28.3% (+R1,048/t) y/y at R4,752/t respectively for white and yellow maize.
Spot prices recently increased sharply to new record highs of R5,929/t and R4,793/t for white and yellow maize respectively. However, new season contracts for July 2025 delivery are way below these levels at R3,808/t and R3,699/t for white and yellow maize respectively. Consequently, gross margins are not that fantastic.
Short term rainfall outlook has improved.
Delays at the onset of the rainfall season raised concern of a possibility of another bad year despite forecast of La Nina.
However, the situation has since improved and the next two weeks should see some showers in the summer crop areas.
Further, La Nina remains in the forecast but might manifest as a weaker pattern. This indicates normal rainfall conditions which is still positive for the season ahead.
Global situation: Tight 2024/25 maize production and stocks, but price growth is still lethargic.
Overall long-term production outlook still shows an uptrend maize, soybeans, and sunflower (fig 6a to 6c). However, near term maize production and stocks indicate a contraction of 2% and 0.7% y/y respectively for 2024/25 season at 1.22 billion tons and 306.5 million tons.
The continued trade disruptions in the Middle East and Ukraine have provided upside support, but price growth remains lethargic. Although ticking up slightly in recent weeks, average US maize prices for the two weeks of November 2024 were still 8.4% below the same period in 2023 at US$200.35/t.
The soybean production and stocks outlook however is strong into 2025. The USDA production estimates showed an increase of 19.8% y/y at 428.92m tons with ending stock of 134.65m tons which is 8.7% higher y/y (fig 6b). Consequently, the benchmark international soybean prices are down by 22.6% y/y at an average of US$397.86/t during the first two weeks of November 2024.
Conflict in the Black Sea region has constrained sunflower production and trade. The estimated global sunflower production is now down sharply by 26.4% y/y at 50.69m tons with available stocks falling by 9.6% y/y at 2.34m tons for 2024/25 season (fig6c). The benchmark contract for difference for sunflower oil reached US$1,326/t recently, which is 66% higher relative to levels at the beginning of 2024.
Summary and outlook
The 2024/25 production conditions are set to favourable for summer crop production. Implications for prices is that they are likely to trend closer to export parity by July as the better harvest weighs on pricing.
Although input cost growth is benign, the new season contracts are still relatively on the low side, thus margins are unlikely to be fantastic.
