Contrary to expectations, the South African Crop Estimates Committee (CEC) lowered its estimate of the country’s wheat planted area by 6.1% from the April update at 532 300 hectares.
Senior agricultural economist at FNB Commercial Paul Makube said this was largely due to the massive decline of 17% and 26% year on year (y/y) in planted area in the Northern Cape and the Free State, respectively.
“However, production conditions have been relatively favourable and using an average yield of 3.8t/ha the harvest might come in at 2.02 million tons which is 4% lower y/y,” Makube said.
South Africa remained a net importer of wheat and the situation on world markets was that of a tightening supply outlook with both the USDA and the International Grains Council (IGC) projecting global production declines of 0.4% and 2.4% y/y, respectively, for the 2023/24 season at 796.67 million tons and 784 million tons. Global stocks were even tighter, down by 1.5% and 7% y/y, respectively, for the USDA and IGC at 266.53 million tons and 263 million tons, he said.
The bank’s business unit said the non-renewal of the Black Sea Grain Deal brokered by the UN and Turkey to facilitate the movement of grain from Ukraine complicated the supply outlook as availability became constrained.
“The implications are for elevated global wheat prices, and which consequently lift domestic prices given that South Africa is a net importer. Average international wheat futures for Sep-23 delivery have already increased by 12.7% to US$337.45/ton. Domestically, wheat for Sep-23 delivery rose by 9% to R6,780/ton. Obviously good news for producers, but inflationary for wheat by-products,” Makube said.
Agricultural Business Chamber (Agbiz) chief economist Wandile Sihlobo said while wheat plantings were down by 6% y/y, estimated at 532 300 hectares with the notable decline in the Northern Cape, Free State and Limpopo, the Western Cape was marginally up from the previous season.
“In our view, such an area planted, combined with favourable weather conditions as we have observed, would result in a decent harvest of 2.0 million tons (down 4% y/y). We assumed an average yield of 3.8 tons per hectare, which is a possibility if the weather conditions remain favourable throughout the season. With a wheat harvest of this size, South Africa will likely need to import about 1.5 million tons of wheat to meet domestic consumption in the 2023/24 season,” Sihlobo said.
Sihlobo said overall the winter crop was in good condition, and they would keep a close eye on weather conditions in the coming weeks and months.
“Another important date is August 29, when the Crop Estimates Committee will release the first production forecast. Regarding the summer crop, the focus will soon shift to the new season that starts in October. The current season is towards completion as few areas are still busy with the harvest, and yields are solid.”
With regards to the sixth summer crop production estimates for the 2022/23 season out, Agbiz said one could take these data with confidence that there would likely be no further significant adjustments and the upcoming four updates will likely reinforce their optimistic view, as farmers were completing the harvest activity, and yields remained high.
On Wednesday afternoon, the South African Crop Estimates Committee maintained the 2022/23 maize crop estimate at 16.4 million tons, unchanged from last month.
This crop was 6% more than the 2021/22 season and the second-largest harvest on record. The expected ample harvest was primarily on the back of large yields, as the area planted is slightly down from the 2021/22 season. A crop of 16.4 million tons implied South Africa would have sufficient supplies to meet domestic maize needs of roughly 11.4 million tons and have over 3.0 million tons for export markets in the 2023/24 marketing year.
Moreover, the soybeans harvest was unchanged from June’s record estimate of 2.8 million tons (up 24% y/y). The annual crop improvement was due to an expansion in the area planted and higher yields. The ample soybeans harvest means South Africa can meet its domestic demand and remain with more than 300 000 tons of soybeans for export markets. After a few downward revisions, the sunflower seed production estimate remained unchanged at 758 610 tons (down 10% y/y). The annual decline in the sunflower seed production forecast mirrored the reduced planted area and yields in some areas.