Increased milk production and lower demand, leading to lower milk prices
21 August 2018
South African milk production significantly increased in 2017, a 4% year on year increase was reported compared to 2016. The 2016/17 summer grains production season received good rains, which led to surplus soybean and maize production. Large feed supplies, lead to lower feed prices therefore positive milk-to-feed price ratios. Lower feed prices encouraged milk production from June 2017. The sustained uptrend in domestic production and limited consumer demand has in return lead to lower prices from May 2018.Current milk production during April 2018 was 6% higher when compared to the same time last year. The number of dairy farmers continue to decline per year over the long term we see a decline of 400 farmers per year, currently the country only has about 1300 odd producers. Production however has increased over time.
In the first half of 2018, Eastern Cape had delivered 23% of South Africa milk (11-12% higher than milk delivered in 2017). Kwa Zulu-Natal had delivered about 26-27% of the nation’s milk in 2018 (about 15-20% higher than the previous year). The coastal region producers (KZN, EC, and WC), produce milk at a lower cost than inland producers. During June 2018, inland producer prices were around R4.20-R4.30/litre. At this price levels coastal milk producers still manage to produce at a profit.
Grains & Oilseeds
- Local maize prices gained some ground despite lower international prices, finding support from the weaker Rand. 64070 tons of maize was exported for the week ending 3 August 2018. This brings cumulative exports for the season to 1.031 million tons. According to industry, there were some logistical issues and the exports for the 3rd August 2018 fell short of expectation.
- Local wheat prices was supported by the weaker local currency. The Southern Cape remains dry and crop development conditions are worrisome. The Overberg region and Swartland region received good rains over the past weeks. The wheat conditions and potential crop size is still uncertain. Prices will continue to follow international prices and exchange rate fluctuations.
- Slightly higher wheat import tariff of R298.45/ton was triggered on 14 August 2018 could potentially offer some support to producers, when it is eventually published on the Government Gazette.
- Weekly (week ending 10 August 2018) sunflower seed producer deliveries were 8246 tons and the cumulative deliveries to date for the season amount to 824800 tons. These deliveries are well above the CEC crop estimate for the 2018/19 season. We anticipate more sunflower seed production to be recorded in the next CEC report.
- The December sunflower/soybean seed spread widened this week. The sunflower seed outperformed the soybean seed market. These highs were last seen during June 2018.
- Locally, lower supply, weaker Rand all added to the bullish tone to the wool market. The wool market opened quite strong on the 14-15 August 2018. A producer from Graaf-Reinet received a record R233 price for 17.5-micron wool. A weaker local currency provided support to the local wool price. Supplies remain short and demand active. Wool price expected to remain high. Next auction will be on 22 August 2018 and +/- 8589 bales will be on offer.
- Locally, the derived SA cotton prices traded 0.11% higher to close at R28.86/kg. The 7th crop estimates for the 2017/18 production year estimates a cotton crop production of 191310 lint bales. . Lower maize prices induced by large maize stocks and crop production coupled with renewed interest has supported cotton planting in South Africa.
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