FOOD-FOR-THOUGHT WEEKLY - 21 August 2020 - Rand Agri
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21 August 2020
WEEKLY
FOOD-FOR-THOUGHT
Weather
- Local weather forecast
- Weather forecast for the USA and South America
Parities
Import and export parities for yellow maize
International agriculture
FOOD-FOR -THOUGHT - Africa Focus: Zambia
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
LOCAL Fourteen-day forecast:
WEATHER Dry weather is expected over South Africa in the next
two weeks.
Follow-up rains for winter grains are still critically
important.
North America:
Good rain is forecast for the state of Iowa where
the most severe drought conditions still persist.
Only minimal rain is expected over the rest of the
corn belt.
INTERNATIONAL
WEATHER
South America:
According to the latest 10-day forecast, the southern
parts of Brazil can again look forward to good rains.
This will support the soil moisture levels for early
plantings in September.
IMPORT AND EXPORT
PARITIES
AUG ’20 SEP ’20 DEC ’20 MAR '21
PMB import parity R3 486 R3 658 R3 579 R3 796
Cape import parity R3 291 R3 403 R3 305 R3 507
SAFEX yellow maize R2 949 R3 030 R3 017 R2 825
Export parity R2 772 R2 749 R2 757 R2 721
INTERNATIONAL
AGRICULTURE
AFRICA FOCUS: ZAMBIA
Maize:
• Prices are still supported despite good production.
• Schools are still closed and producers are holding back their
deliveries as they do not need capital to pay school funds.
• The government has released its first crop forecasts and total
production is estimated at 3,38 million ton.
• Total annual consumption is estimated to be about 2 million ton.
• Thanks to excellent crops, a significant surplus will be available
for export programs.
Source:
Commodity Insight Africa –
Jacques Pienaar
INTERNATIONAL
AGRICULTURE
USA: crop conditions as at 16 August 2020
Maize: Excellent Soybean: Excellent
= 17% = 16%
Good Good
= 52% = 56%
Fair Fair
= 21% = 21%
Poor Poor
= 7% = 5%
Very poor Very poor
= 3% = 2%
LOCAL
AGRICULTURE
2020/21 season
• Export = 299 362 t
White maize • Previous week = 8 600 t Destination for majority of exports:
• Import = 0 t
WM export: YM export
Zimbabwe = 50% Taiwan = 39%
• Export = 846 137 t
• Previous week= 6 341t
Yellow maize • Import = 0 t
• Previous week = 0 t
LOCAL
AGRICULTURE
Cumulative oilseed production deliveries as at 14 August
Soybean deliveries Sunflower deliveries
1 400 000 100% 900 000 100%
90% 800 000 90%
1 200 000
80% 80%
700 000
1 000 000 70% 70%
600 000
DELIVERIES IN TON
DELIVERIES IN TON
60% 60%
800 000
500 000
50% 50%
400 000
600 000
40% 40%
300 000
400 000 30% 30%
200 000
20% 20%
200 000
10% 100 000 10%
0 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 DELIVERY WEEK
%%gelewer
delivered 2020 2019 %%gelewer
delivered 2020 2019
LOCAL
AGRICULTURE
Cumulative maize production deliveries as at 14 August
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
DELIVERIES IN TON
60% 60%
4 000 000
50% 3 000 000 50%
3 000 000
40% 40%
2 000 000
2 000 000 30% 30%
20% 20%
1 000 000 1 000 000
10% 10%
0 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 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
% %gelewer
delivered 2020 2019 5jaar gem
5-year avg 5-year avg %%gelewer
delivered 2020 2019 5jaar gemEXCHANGE RATE
R/$
The South African currency traded weaker against
the US dollar today as a result of the
strengthening of the dollar.
The technical analysis indicates that the rand
might strengthen somewhat over the medium
term.NATIONAL AND INTERNATIONAL
NEWS
South African rand dips as Fuel price drop on the cards
China food security at risk
dollar lifts for September
On Thursday 20 August, the South African rand The latest report released by the AA indicates an expected
Forecasts indicate that the world’s most populated fuel price drop in September. This will bring some relief to
traded weaker against the American currency. This
country may suffer food shortages of fuel consumers. The price of petrol is likely to decrease
is due to the strengthening of the US dollar on the
approximately 130 million ton by 2025. by 9 cents per litre, while diesel is expected to be 7 cents
back of positive data released by the Federal
Reserve. per litre cheaper.
China is expecting a maize shortage of about 16,68
million ton by October 2021. The shortage led to an The lower petrol prices are due to a more stable
The fact that load shedding was implemented in
increase in maize prices, which is forcing consumers rand/dollar exchange rate and lower international oil
South Africa for the third consecutive day, places
to switch to alternative commodities such as prices.
further pressure on the local economy where the
wheat. This is in turn is creating increases in wheat
Covid-19 pandemic is already taking its toll.
prices in the country. Read more
Read more: https://kormorant.co.za/2020/08/18/fuel-price-drop-on-
Read more: the-cards-for-september/:
https://af.reuters.com/article/southAfricaNew
https://www.scmp.com/economy/china-
s/idAFL8N2FM193
economy/article/3097781/china-food-security-
country-faces-grain-supply-gap-130 Opinion:
Opinion:
A weaker South African currency will support local grain Cheaper fuel will lower the production costs of agricultural
Opinion: producers and will support new season plantings.
Food shortages in China will necessitate imports. prices.
This will force the prices of net exporters such as
South Africa upward, since foreign demand for
the product will increase.• Dry conditions are expected in South Africa during
the next two weeks. Winter grains however need
follow-up rains to ensure good yields.
• South African yellow maize trades closer to Cape
import parity, which means that local grains are
becoming more expensive.
SUMMARY • Grade issues have been observed in the market,
especially in the Northwest Province and western
Free State, most likely in the late plantings.
• The South African currency trades weaker against
the US dollar, supporting local grain prices.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
“A life spent making mistakes is not only
more honourable, but more useful than a
life spent doing nothing.”
Tel: +27 (0) 13 243 1166
- George Bernhard Shaw E-mail: info@randagri.co.za
Web: www.randagri.co.za
Address: 24 Samora Machel Street
Middelburg, MpumalangaYou can also read
