27.08.2019

SA could see biggest wheat harvest in a decade

Preliminary data from South Africa’s Crop Estimates Committee (CEC) suggest that the country could harvest 1.92 million tonnes of wheat in the 2019/20 production season. If this materialises, it would be the biggest harvest in a decade. The catalyst for the optimistic outlook is both the increase in area planted and also prospects for good weather conditions, which in turn would potentially boost the yields. - Wandile Sihlobo, Agbiz chief economist

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Preliminary data from South Africa’s Crop Estimates Committee (CEC) suggest that the country could harvest 1.92 million tonnes of wheat in the 2019/20 production season. If this materialises, it would be the biggest harvest in a decade. The catalyst for the optimistic outlook is both the increase in area planted and also prospects for good weather conditions, which in turn would potentially boost the yields.

The CEC forecasts South Africa’s wheat plantings at 537 000 hectares, up by 7% from the 2018/19 production season. The gains are mainly in the Western Cape, a province that accounts for 61% the country’s wheat plantings. The Eastern Cape, KwaZulu-Natal, Mpumalanga and Gauteng, which are not major wheat producers, also saw an uptick in plantings, which ultimately boosted the headline plantings number for this season.

The rainfall that was experienced over the past few weeks in parts of the Western Cape, and also healthier dam levels in the province where production is under irrigation have also raised optimism for potentially good yields this season. At the moment the winter wheat crops are in good condition in most parts of South Africa but there is a need for follow-up rainfall before crop conditions deteriorate, specifically in the Western Cape. On this end, the South African Weather Service had positive news to report on 30 July 2019. The agency sees a possibility of above-normal rainfall conditions between August and October 2019 over the Western Cape. Appreciating that the 1.92 million tonnes is still a first estimate and a lot could change over the coming months, the expected rainfall will be a key deciding factor of the direction South Africa’s wheat harvest takes.

But if we assume that the expected harvest materialises, South Africa’s wheat imports for 2019/20 could fall to levels around 1.3 million tonnes from 1.4 million tonnes estimate in the current marketing year. This will balance the shortfall shown in Figure 1. From a pricing perspective, we think today’s data will have minimal impact as South Africa remains a net importer of wheat. And thus, the domestic wheat prices are likely to trade sideways at levels around R4 500 per tonne as we’ve seen over the past few months. Essentially, the global wheat market developments still matter a lot for price direction of the domestic market.

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