Last week, the South African Crop Estimates Committee (CEC) mildly lifted its forecast for 2020/21 summer grain and oilseeds production from the previous month by 1% to 18,7 million tonnes (this compared with 17,6 million tonnes in 2019/20 production season). The upward adjustments were on maize, soybeans and sorghum, whereas sunflower seed, dry bean and groundnut production estimates were revised. If we zoom into significant crops, the 2020/21 maize, soybean and sunflower seed harvests are forecast at 15,9 million tonnes (up 4% y/y, and second-largest harvest on record), 1,9 million tonnes (up 39% y/y, a record harvest), and 712 940 tonnes (down 12% y/y), as illustrated in Exhibit 1.
maize production data essentially mean that South Africa would remain a net
exporter in the 2021/22 marketing year, starting in May 2021 (corresponds with
the 2020/21 production season). South Africa's annual maize consumption is
roughly 11,4 million tonnes, which means there will likely be over 2,0 million
tonnes of maize available for export markets, all else being equal.
expected large harvest could also add downward pressure on maize prices,
although marginal as the global maize market remains supportive of prices. This
is particularly the case as we forecast an excellent crop in South Africa and
across the Southern and East Africa regions, a major importer in the previous
year. For example, estimates from the United States Department of Agriculture
show that Zambia's maize production could reach 3,4 million tonnes (up 69% y/y).
In comparison, Malawi's maize harvest is estimated at 3,8 million tonnes (up
25% y/y), Mozambique's maize crop is estimated at 2,1 million tonnes (up 8%
y/y), Kenya's maize is forecast at 4,0 million tonnes (up 5% y/y). There is
optimism about the crop in other countries, including Zimbabwe.
past few months, the weaker domestic currency, growing demand for South
Africa's maize in the Southern Africa region and the Far East, coupled with
generally higher global grain prices, provided support to the domestic maize
prices. But we believe that the domestic crop conditions will matter more for
price movements in the future than has been the case over the past few months.
On 25 March 2021, South Africa's yellow and white maize spot prices were down
18% y/y and 3% y/y, trading at R3 220 per tonnes and R3 123 per tonne,
soybean case, the price drivers are somewhat similar to maize. Nevertheless, an
increase in the soybean harvest will still not change much because South Africa
imports around half a million tonnes of soybean meal (although this volume will
fall notably this year on the back of the large domestic harvest). The country
will most likely continue being dependent on imports, even at these harvest
levels, to meet the growing demand for soybean meal by the poultry sector.
Hence, global soybean market dynamics will continue to influence local prices.
On 25 March 2021, the domestic soybean spot price was up 17% y/y, trading
around R7 670 per tonne.
In sum, the
broadly large summer grain and oilseeds production estimate this season is on
the back of increased area plantings for summer crops and favourable rainfall
since the start of the season. We expect the maize production estimate to be
adjusted somewhat in the coming month as farmers on the ground continue to
express optimism about yield prospects. This will likely add downward pressure
on maize prices, which bodes well for South Africa's consumer food price
inflation for 2021.