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CO L U M N
GRAIN MARKET PROSPECTS
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on American yields and this is also
making the market nervous, as in
the case of South Africa.
LOCALLY
Exchange rate movement
The rand/dollar exchange rate
strengthened somewhat since January 2016 (Graph 4). However,
the exchange rate remains volatile.
After the results of the British
referendum the rand weakened, as
did the currencies of many other
developing markets. The rand/
dollar had a huge influence on the
price formation of crops on Safex
and it is said that the exchange rate
movement is absolutely unpredictable. This makes decision-making
very difficult.
White and yellow maize
As we know the South African
maize crop is very small and significant tonnages of white and yellow
maize will have to be imported.
The frost came late this year and
green grass could still be seen in
some maize fields by the end of
June. The late frost resulted in the
further development of maize, particularly in the western areas of the
summer planting area. A higher
maize crop estimate by the NCEC
will not be surprising.
White and yellow maize prices
form an import derived price level
at present and the fluctuating
rand/dollar exchange rate and the
American corn price play an important role in the price formation
process (Graph 5).
Graph 6 reflects the historic
and future price movements of
the calculated import parity and
export parity, as well as the Safex
price movement of white maize.
At this stage white maize is trading
at slightly above the calculated import parity. The market is already
discounting a large white maize
42 AUG/SEP 2016
Graph 6. Derived import and export parities for white maize (USA corn) Safex
Randfontein based.
crop and the Safex price of new
season maize is significantly lower
than the current season white
maize. This trend will probably
continue until new fundamental
news regarding the new season
crop becomes known.
Oil seed complex
Sunflower and soybeans
Sunflower and soybeans have
to be imported this marketing
year. The prices of the two commodities form at a level of the
import derived price of the two
commodities. The price levels of
the said commodities are therefore
fairly high at this stage. The prices
of oil cake meal and oil available
abroad are used for the calculations. The prices of the new season
sunflower and soybeans are not
dramatically lower as in the case of
maize. Exchange rate movements
and the international price of the
commodities have a huge effect on
the price formation process and
should therefore be monitored.
SUMMARY AND CONCLUSION
All the most important South Af-
• SENWES Scenario
rican grain and oilseed prices form
on an import derived basis due
to the fact that South Africa, as a
result of the drought experienced
over the past season, will have to
import some of the commodities.
The situation will probably continue until there is more certainty
regarding planting progress and
prospects in respect of climate for
the new season. This situation can
continue until February 2017 in
respect of certain crops. We know
that South Africa's situation can
change from an import situation
to an export situation. This can
have a material effect on the commodity price levels. In the case of
white maize the calculated import
parity of white maize was in the
region of approximately R4 687
per ton at the time of the writing
of this report and the calculated
export parity was R2 242 per ton.
The difference is therefore R2 445
per ton, which is the potential
price movement in one marketing
year.
Speak to your Senwes Grainlink
grain procurer and draw up a marketing plan in good time.