He also provides more information about the latest developments in the agricultural sector. Here is Sihlobo...

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He says the sentiment about the 2020/21 global grains and oilseeds production prospects is changing from a once optimistic outlook to a potential downward revision of the harvest. Sihlobo further explains that because of dryness experienced in South America and the Black Sea region, doubts exist regarding the potential size of the harvest. According to him, Brazil and Argentina, which collectively account for 14% and 50% of global maize and soybeans production respectively, have also, according to reports, been experiencing persistent dryness which has caused delays in plantings. Other countries who have also been reporting potential damages to their crops as a result of dryness, are Russia in the Black Sea region and the United States - who collectively accounts for 17% of global wheat production.

The scale of the impact that the dryness may have on the 2020/21 global maize, soybeans and wheat harvest is unclear thus far. In light of this, Sihlobo says a downward revision could exist from the optimistic estimates that both the International Grains Council (IGC) and the United States Department of Agriculture (USDA) reported last month and earlier this month.

He explains that under such a scenario, grains and oilseeds prices, which have already lifted somewhat following the reports of unfavourable weather conditions, could remain at fairly higher levels.

Sihlobo adds that US maize, wheat (Hard Red Winter Wheat) and soybean prices were up on 22 October 2020, by 31% year-on-year, 32% year-on-year, and 24% year-on-year, respectively, trading at US$228 per tonne, US283 per tonne, and US$466 per tonne. Meanwhile, the weather effects are not the only driver of prices. “The growing demand from China which is rebuilding its pig herd, as well as Egypt for wheat and the likes of Taiwan, amongst other countries, have also boosted commodities prices. The challenge currently is that the reprieve on price increases might not materialise in the near term if there is a sizable downward revision in the 2020/21 global grains and oilseeds production forecast,” says Sihlobo.

He further indicates that the USDA estimated 2020/21 global wheat production at 773 million tonnes, which is up by 1% from the previous season at the beginning of this month. He says Russia, Australia, Kazakhstan and India were amongst the countries expected to provide a boost to the harvest. Sihlobo says the reports of persistent dryness in Russia and the US present a risk of a potential downward revision of this estimate. 

Furthermore, he says it will be two weeks until the USDA releases its update of the monthly World Agricultural Supply and Demand Estimates report, which will provide more insights on the potential size of the harvest on 10 November 2020. Sihlobo says this will be an important date for wheat-importing countries like South Africa who will be affected by price implications production estimates will present. This, as South Africa imports about 50% of its annual wheat consumption of 3.2 million tonnes.

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