Senwes Scenario June / July 2016 | Page 39

CO L UMN Energy prices The international maize and soya bean prices are further supported by the higher crude oil prices. Ethanol production in America accounts for approximately 44% of the local consumption of maize, which means that the international crude oil price plays a huge role in the price formation process. The crude oil price has declined by almost 63% since mid-January 2016. A number of ethanol plants are starting to make money again, which is increasing the demand for maize, which in turn supports the price of this commodity. International grain and oil seed situation Graph 3 reflects the price movements of yellow maize on the CBOT. It is evident that the maize prices are relatively low and that producers making use of production credit are not making a lot of money at a price below $4/bu. The large carry-over stock levels in the USA and the world are the main reasons for the low international maize price. Graph 4. Exhange rate movements. ••• Current climate in the USA Brazil is experiencing a drought over parts of its maize producing areas and it will be difficult for Brazil to meet all its export obligations. This means that Brazil will have to import maize. The predicted La Nina-episode is expected for the coming season, which could result in a drought situation in the southern states. Americans are busy planting and progress was estimated at 45% during the past week, compared to the 5-year average of 38%. Planting progress in respect of soya beans is also higher than the 5-year average. The reason for the high plant- ing progress percentages is the fact that most of the fields have dried sufficiently and excessively wet conditions do not exist. The map below indicates the current climate in the USA. Certain areas are drying to a larger extent, particularly in the southern states. Damage due to excessively wet conditions in Argentine is another price supporting factor. The La Nina-episode predicted for the coming season normally results in a drought over the southern states, which supports the American corn price to some extent. LOCALLY Exchange rate movements The rand has strengthened since January 2016, although fluctuations are still at the order of the day. This results in lower priced imported maize, soya beans and sunflower which, in turn, puts pressure on our Safex prices. The rand may decline again over the short term, which will support prices. (Graph 4. > CONTINUED ON PAGE 38 SENWES Scenario • JUN/JUL 2016 37