FOOD-FOR-THOUGHT WEEKLY - 17 July 2020 - Rand Agri
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17 July 2020
WEEKLY
FOOD-FOR-THOUGHT
Weather
- Local weather forecast
- Weather forecast for the USA
Parities
Import and export parities for yellow maize
International agriculture
FOOD-FOR -THOUGHT - Africa Focus: Zimbabwe
CONTENTS Local agriculture
- Maize imports and exports
- Producer deliveries
News
International and national news
Exchange rate
Overview of ZAR and US dollar movements
Price risk management
Minimum/maximum option strategy
Fourteen-day forecast:
LOCAL
WEATHER According to the South African Weather Bureau, no rain is
currently expected anywhere in the country. Cold weather
accompanied by rain is however forecast for the southern
parts of South Africa from around 23 July.
INTERNATIONAL WEATHER North America: Some rain is forecast for the eastern parts of the US corn belt which are currently experiencing fairly dry conditions. Good rains will be needed soon.
IMPORT AND EXPORT
PARITIES
AUG ’20 SEP ’20 DEC ’20 MAR '21
PMB import parity R3 265 R3 175 R3 318 R3 461
Cape import parity R3 104 R3 007 R3 090 R3 246
SAFEX yellow maize R2 653 R2 653 R2 722 R2 737
Export parity R2 396 R2 390 R2 454 R2 478
INTERNATIONAL
AGRICULTURE
FOCUS: Zimbabwe
Maize:
• Local maize production is the main source of Zimbabwe’s
current supply of maize.
• Annual consumption stands at 1.4 - 1.6 million tons which
causes a shortage of stock with a local harvest of only 700 000
tons.
• Imports have been halted for the moment since local supplies
meet the mmediate consumption needs.
• Imports are expected to commence again at the end of August
until the second quarter of 2021 since the maize supply will not
be sufficient in the longer term.
INTERNATIONAL
AGRICULTURE
USA: crop conditions as at 13 July 2020
Maize: Excellent Soybean: Excellent
= 17% = 14%
Good Good
= 52% = 54%
Fair Fair
= 23% = 25%
Poor Poor
= 6% = 5%
Very poor Very poor
= 2% = 2%
LOCAL
AGRICULTURE
2020/21 season
• Export = 244 737 t
White maize • Previous week = 16 669 t Destination for majority of exports:
• Import = 0 t
WM export: YM export
Zimbabwe = 50% Taiwan = 39%
• Export = 499 146 t
• Previous week= 83 902 t
Yellow maize • Import = 0 t
• Previous week = 0 t
LOCAL
AGRICULTURE
Cumulative oilseed producer deliveries as at 10 July
Soybean deliveries Sunflower deliveries
1 400 000 100% 800 000 100%
90% 90%
700 000
1 200 000
80% 80%
600 000
1 000 000 70% 70%
500 000
DELIVERIES IN TON
DELIVERIES IN TON
60% 60%
800 000
50% 400 000 50%
600 000
40% 40%
300 000
30% 30%
400 000
200 000
20% 20%
200 000
100 000
10% 10%
0 0% - 0%
1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 51 53 1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 51
DELIVERY WEEK DELIVERIES
% delivered 2020 2019 % delivered 2020 2019
LOCAL
AGRICULTURE
Cumulative maize producer deliveries as at 10 July
White maize deliveries Yellow maize deliveries
7 000 000 100% 6 000 000 100%
90% 90%
6 000 000
5 000 000
80% 80%
5 000 000 70% 70%
4 000 000
DELIVERIES IN TON
60% 60%
DELIVERIES IN TON
4 000 000
50% 3 000 000 50%
3 000 000
40% 40%
2 000 000
30% 30%
2 000 000
20% 20%
1 000 000
1 000 000
10% 10%
- 0% - 0%
1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 51 1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 51
DELIVERY WEEK DELIVERY WEEK
% delivered 2020 2019 5-year avg % delivered 2020 2019 5-year avgEXCHANGE RATE
R/$
The South African currency trades weaker against the US
dollar after investors started withdrawing funds from
emerging markets in favour of the safety of more stable
markets.
The technical analysis indicates that the exchange rate
can still strengthen over the short term.NATIONAL AND INTERNATIONAL
NEWS
Another fuel price increase Weak Chinese consumption Winter rainfall region can
on the cards data puts pressure on SA rand expect rains into August
Despite the improved performance of the rand over The South African rand performed much better over the Warmer temperatures are expected over the interior of South
the last few weeks, motorists can still expect an past week and yesterday reached a one-month high. Its Africa from Friday morning onwards, after a very strong cold
increase in fuel prices at the beginning of August. good rally was however cut short with the release of front brought good rains over parts of the Western and Eastern
The increase is due to higher oil prices. If all very poor consumption figures from China on Thursday Cape during the past week. Over the longer term, it is expected
economic factors remain constant, the petrol price is morning, dashing hopes that the Chinese economy that further frontal systems can develop during the first part of
likely to increase by R0,34 per litre, while diesel will would recover quickly after the Covid-19 pandemic. The August, which could lead to good rains for the winter rainfall
cost R0,68 more per litre. disappointing data resulted in investors seeking safety in region.
more stabile markets.
This follows the hefty price increase of R1,72 and
Mr. Johan van den Berg, agricultural meteorologist, warns
R1,73 for petrol and diesel respectively in July.
that a frontal system is approaching and will cause another
spell of cold weather over the country by 23 July.
Read more at: Read more at: Read more at:
https://businesstech.co.za/news/energy/416387/her e- https://www.moneyweb.co.za/news-fast-news/rand- https://www.netwerk24.com/landbou/Nuus/reen-tot-in-
is-the-expected-petrol-price-for-august-3/ slips-as-weak-china-data-overshadows-vaccine-hope/ augustus-oor-winterreenstreek-verwag-20200714
Opinion: Opinion: Opinion:
A further fuel price increase will place consumers A weaker rand will support grain prices but will Good rains in the winter grain producing regions will
under more pressure and will decrease the profits of simultaneously increase production costs. support crops and ensure better yields.
grain producers who are currently harvesting.• Dry weather can be expected across the entire
country this week. Another cold front accompanied
by rain, is however forecast to arrive by 23 July.
• South African maize is trading further from export
SUMMARY parity. This means that local prices are becoming
higher than international prices.
• A weaker rand supports local grain prices but puts
the South African economy under pressure.PRICE
RISK MANAGEMENT
Min/Max price Minimum/Maximum price
300
A put option is bought for the client to establish a minimum level. To keep costs low,
a call option is simultaneously sold, which establishes the maximum price.
200
Should the market in future reach the maximum level (call option) the client will
receive a short futures position which will force the client to deliver at the maximum
price level.
100
If the market price trades at the minimum level (long put option), the client can be
sure that they will be able to deliver at the minimum level no matter how far the
0 price falls below this level.
2200 2300 2400 2500 2600 2700 2800 2900 3000 3100 3200 3300 3400 3500 3600
Example:
-100
The client buys a put option @ R2 560 (minimum level) at a cost of R120/t. At the
same time, the client also sells a call option @ R 3000 (maximum level) at a premium
-200 of R25/t. The client can now receive a minimum price of R2 560/t and a maximum
price of R3 000/t for his grain.
The cost of the strategy will be R120 (put) – R25 (call) = R95/t.
-300
-400CONTACT US
Tel: +27 (0) 13 243 1166
E-mail: info@randagri.co.za
Web: www.randagri.co.za
Address: 24 Samora Machel Street
Middelburg, MpumalangaYou can also read
