Agri Trends 21 July 2017 Grains & Livestock

The Reserve Bank has cut rates by 25 basis points

The welcome move by the Reserve Bank that cut rates by 25 basis points was met by a weakening of the Rand. However the Rand strengthened again supported by a weak US$. As a result the Rand remained relatively strong despite the rate cut. Imports of crude oil, farming requisites, oilcake and wheat in Rand value should therefore not be affected negatively by the cut in interest rates. The lower interest rates will lead to an increase in the money supply and growth in demand, which will support economic growth as consumer and business confidence starts to pick up. Having said this, the threat of a credit downgrade rendering us to total sub-investment grade is still possible. An increase in policy certainty and an uptick in economic growth are needed for the remainder of 2017 and for the medium term to 2019.  It remains a possibility that we hope for.

Highlights

Livestock & Fibre

• With the poultry industry faced with bird flu outbreaks, production costs may increase due to the added biosecurity measures and production losses. As a result, poultry producers may demand higher prices. This may in turn result in a shift towards pork products as alternative to poultry, thereby boosting demand for pork and supporting prices. Pork prices may also gain underlying support from the higher lamb, mutton and beef prices.
• While the final sale of the season saw the Merino indicator softening, prices for most of the season were significantly higher than in 2015/16 and the forecast is for the market to continue to increase over the long term.

Grains, Oilseeds & Vegetables

• Most of the wheat farmers received sufficient rains for wheat; the only going-concern area was Swellendam due to very late plantings (received very late rain). Dam levels still remain an on-going concern; especially for the irrigation farmers who will need more water from October onwards.
• Soybean deliveries have been coming in with large totals , SAGIS figures shows March2017 till May 2017 totaled 1,205,727 tons compared to the previous seasons Mar2016/Feb2017 total deliveries of 713,660 tons.

For a detailed update please download attachment