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

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In this week’s insert, Sihlobo talks about what the views currently are on the global grains and oilseed production season.

“The 2021/22 grains and oilseed crop in the Northern Hemisphere has matured, and various regions expect a relatively good harvest. The attention will soon be shifting to the Southern Hemisphere and the essential region here is South America, a major producer of various grains and oilseeds. The concern of various analysts is how the forecast La Niña will impact the planting activity, and thereafter crops in this region, and the impact of all this in the global 2021/22 production forecasts.

“We think the major forecasters, such as the International Grains Council (IGC) and the United States Department of Agriculture (USDA), have not fully accounted for a potential decline in crop output in this particular region.

“A case in point is the recent USDA's update of the World Agricultural Supply and Demand Estimates report, which painted a picture of generally large supplies of maize, wheat, rice and soybeans in the 2021/22 production season,” says Sihlobo.

He adds that in the case of maize, the 2021/22 global harvest estimate was lifted marginally from September to 1,198 billion tonnes, which is up by 7% from the 2020/21 production season.

“The 2021/22 global maize stocks were also lifted from the previous month to 301 million tonnes, which is up 4% y/y. Notably, while this 2021/22 global maize production forecasts look promising, the outcome of the global supplies will depend on the final size of the South American crop. Hence, we continue to see upside risks due to an expected La Niña, which could cause dryness in this region.

“Similarly to maize, the 2021/22 global rice production estimate was lifted by 1% from September to 510 million tonnes. This is up by 1% from the 2020/21 production season because of expanding area plantings in Asia and the expected improvement in yields.

“The global rice stocks also lifted marginally from September 2021 to 183 million tonnes. Still, this is 1% lower than the 2020/21 global rice stock levels. Therefore, we expect the global rice prices to increase marginally or move sideways in the coming months.

“This will follow nearly six months of decline in global rice prices. This also means that rice-importing countries such as South Africa can expect prices at relatively higher levels in the coming months.

“Still, prices are unlikely in the near term to be at higher levels as experienced at the start of the year where Thailand and Vietnam rice prices (5% broken) were over $US500 per tonne in February and March. Both these prices are currently at levels below US$450 per ton,” he adds.

He further explains that the 2021/22 global soybeans production estimate was lifted marginally from September to 385 million tonnes.

“This is 5% higher than the previous 2020/21 production season, primarily supported by an expected large harvest in the US, Brazil, Argentina, India, Paraguay, Russia, Ukraine, and Uruguay.

“Again, the 2021/22 production season in South America only started this month, October, so the optimistic harvest estimate is still tentative in the face of the aforementioned La Niña risk on the horizon.

“Still, unlike other grains that are characterised by tight stocks, the 2021/22 global soybeans stocks are at fairly comfortable levels at 105 million tonnes, up by 5% from the previous season. This is a result of both an improvement in production and also an expected softening in global consumption, especially in China.

“Negatively, the USDA lowered its 2021/22 global wheat harvest estimate by 1% from September 2021 to 776 million tonnes. With that said, this is still 1% higher than the previous month. The stocks followed a similar path and were lowered from September by 2% to 277 million tonnes.

“This is now 3% lower than the 2020/21 production season. These lower stocks will most likely add upward pressure on prices, and thus increasing costs for wheat importing countries such as South Africa.

“South Africa's wheat import estimate for the 2021/22 marketing year is 1,53 million tonnes, slightly above the previous season's imports,” says Sihlobo.

He reiterates by concluding that the major global crop forecasters have maintained a reasonably optimistic view about the 2021/22 production season.

“Still, this could change depending on the severity of the La Niña impact in South America. We are particularly concerned as this could be a second consecutive year of dryness in this region and its contribution to global maize and soybean production.

“Critical from now on will be consistent monitoring of the weather conditions at least through to February 2022, when crops in the Southern Hemisphere region generally matures.”

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