Food for Thought

May 10, 2019

Ten day weather forecast: North America

Most grain producing areas in the USA can expect good rainfall over the next ten days.

Ten day weather forecast: South America

The northern areas in Brazil, as well the far south can expect good rainfall. Dry weather predicted for most parts of Argentina with minimum rainfall in the east.

Note: CPT = Cape | PMB = Pietermaritzburg

July 2019 September 2019 December 2019 March 2020
PMB Import Parity R 2 856 R 2 808 R 3 016 R 3 140
CPT Import Parity R 2 532 R 2 808 R 2 753 R 2 865
SAFEX Yellow Maize R 2 511 R 2 570 R 2 638 R 2 671
Export Parity R 2 089 R 2 127 R 2 224 R 2 366

  • CBOT prices in the USA currently trade at a six year low. The graph illustrates the factors that triggered the massive decline in prices as well as the weight of each factor.
  • The low price of soybeans can mainly be attributed to the trade war between the USA and China which started May 2018.

Corn Week Ending
5 May ’18 29 Apr ’19 5 May ’19 2014-2018 (Average)
Colarado 15% 8% 21% 28%
Illinois 68% 9% 10% 66%
Indiana 37% 2% 3% 35%
Iowa 37% 21% 36% 51%
Kansas 44% 31% 41% 51%
Kentucky 34% 28% 42% 46%
Michigan 12% 2% 3% 16%
Minnesota 8% 2% 6% 42%
Missouri 74% 45% 49% 74%
Nebraska 38% 16% 35% 47%
North Carolina 78% 53% 73% 81%
North
Dakota
6% 1% 3% 23%
Ohio 20% 2% 2% 27%
Pennsylvania 8% 5% 17% 19%
South Dakota 37% 2% 3% 29%
Tennessee 5% 0% 0% 70%
Texas 79% 41% 70% 73%
Wisconsin 13% 4% 7% 24%
18 States 36% 15% 23% 46%
Soybeans Week Ending
5 May ’18 28 Apr ’19 5 May ’19 2014-2018 (Average)
Arkansas 38% 10% 10% 37%
Illinois 26% 3% 3% 16%
Indiana 20% 0% 0% 12%
Iowa 11% 3% 3% 11%
Kansas 7% 2% 2% 6%
Kentucky 5% 4% 4% 6%
Louisiana 61% 24% 24% 58%
Michigan 5% 2% 2% 6%
Minnesota 1% 0% 0% 15%
Mississippi 50% 20% 20% 54%
Missouri 17% 2% 2% 11%
Nebraska 15% 3% 3% 13%
North Carolina 12% 5% 5% 7%
North Dakota 1% 0% 0% 7%
Ohio 7% 1% 1% 9%
South Dakota 1% 0% 0% 5%
Tennessee 6% 3% 3% 9%
Wisconsin 4% 0% 0% 6%
18 States 14% 3% 3% 14%

The Rand is currently trading above the 200 and 100
moving averages. It appreciated against the US
Dollar after President Trump announced higher
tariffs on Chinese imports. Another contributing
factor to the stronger Rand is the successful South
African national election on Wednesday, the 8th of
May, which was completed without incident. At the
time of writing this report, the Rand was trading at
R14.36 to the US Dollar.

European Union grain import increases by 40%

The European Commission’s new shortterm outlook indicates that maize imports increased by 38.6% (from 14.5 million to 20.1 million tons in the 2017/18 season). This equates to a 50% increase against the five-year average. Most grain imports will originate in the Ukraine.

Read More

President Trump threatens trade war peace

The President of the United States of America, Donald Trump, announced that should China not reach an agreement with the USA in the short-term, higher tariffs will be put into place on Chinese goods. The announcement sparked tension between the two leading economies, and prices on the stock market depreciated drastically.

Read more

El-Nino still a possibility

Sea surface temperatures remain at weak El Nino levels. Although it is too early to be certain about the status of surface temperatures in the El Nino areas over the next few months, there are some indications of a further weakening of El Nino conditions. The main cause of this is the cooling of sub surface water temperatures in the El Nino areas. More concrete information will only come to light in around July.

Read more

  • SAFEX yellow maize prices are trading very close to CPT import parity. Upcoming future contracts will already trade below these levels. Pressure on the local market will increase, as the harvesting season is set to kick-off.
  • USA crop planting progress is far behind the average, due to wet conditions in key production areas. It is too soon to tell whether this will have an impact on the market. USA producers demonstrated five years ago, in similar conditions, that they are able to plant large amounts of hectares in a short period of time.
  • Soybean producer deliveries increased in pace over the past week – a clear indication that the harvesting season is in full swing. Soybean prices are under pressure as a result of this.
  • The stronger Rand added extra pressure to the parity prices and, is one of the causes of the losses on SAFEX over the past two days.

Producer sells 100t soybeans to Rand Agri at R4 728 (SAFEX)

  • R3 309.60/t (70%) paid out to producer.
  • R1 418.40/t (30%) withheld by Rand Agri.
  • March 2020 soybeans trade at R5 147/ton SAFEX.
  • Rand Agribuys a position on behalf off the producer in March 2020.
  • Should the March 2020 price move to R5 300 until February 2020, the producer will make a R153/tprofit (R5 300–R5 147).
  • The R1 418.40/t + R153/t = R1 571.40/t is paid out to the producer.

Benefits:

  • Stay in the market for longer –up to 20 February 2020.
  • Get your price any day, and receive your money within a week.
  • Earn interest on the capital of the 70%.
  • No storage costs.
  • Measurable instruments on March’s price.

Disadvantage:

  • If the market moves below R5 147 and decreases by R1418.40 to R3 728.60/t, the producer needs to close his position or maintain his position, paying in for market shortfalls every day.