Senwes Scenario August / September 2016 | Page 44

••• CO L U M N GRAIN MARKET PROSPECTS > CONTINUED FROM PAGE 41 on American yields and this is also making the market nervous, as in the case of South Africa. LOCALLY Exchange rate movement The rand/dollar exchange rate strengthened somewhat since January 2016 (Graph 4). However, the exchange rate remains volatile. After the results of the British referendum the rand weakened, as did the currencies of many other developing markets. The rand/ dollar had a huge influence on the price formation of crops on Safex and it is said that the exchange rate movement is absolutely unpredictable. This makes decision-making very difficult. White and yellow maize As we know the South African maize crop is very small and significant tonnages of white and yellow maize will have to be imported. The frost came late this year and green grass could still be seen in some maize fields by the end of June. The late frost resulted in the further development of maize, particularly in the western areas of the summer planting area. A higher maize crop estimate by the NCEC will not be surprising. White and yellow maize prices form an import derived price level at present and the fluctuating rand/dollar exchange rate and the American corn price play an important role in the price formation process (Graph 5). Graph 6 reflects the historic and future price movements of the calculated import parity and export parity, as well as the Safex price movement of white maize. At this stage white maize is trading at slightly above the calculated import parity. The market is already discounting a large white maize 42 AUG/SEP 2016 Graph 6. Derived import and export parities for white maize (USA corn) Safex Randfontein based. crop and the Safex price of new season maize is significantly lower than the current season white maize. This trend will probably continue until new fundamental news regarding the new season crop becomes known. Oil seed complex Sunflower and soybeans Sunflower and soybeans have to be imported this marketing year. The prices of the two commodities form at a level of the import derived price of the two commodities. The price levels of the said commodities are therefore fairly high at this stage. The prices of oil cake meal and oil available abroad are used for the calculations. The prices of the new season sunflower and soybeans are not dramatically lower as in the case of maize. Exchange rate movements and the international price of the commodities have a huge effect on the price formation process and should therefore be monitored. SUMMARY AND CONCLUSION All the most important South Af- • SENWES Scenario rican grain and oilseed prices form on an import derived basis due to the fact that South Africa, as a result of the drought experienced over the past season, will have to import some of the commodities. The situation will probably continue until there is more certainty regarding planting progress and prospects in respect of climate for the new season. This situation can continue until February 2017 in respect of certain crops. We know that South Africa's situation can change from an import situation to an export situation. This can have a material effect on the commodity price levels. In the case of white maize the calculated import parity of white maize was in the region of approximately R4 687 per ton at the time of the writing of this report and the calculated export parity was R2 242 per ton. The difference is therefore R2 445 per ton, which is the potential price movement in one marketing year. Speak to your Senwes Grain­link grain procurer and draw up a marketing plan in good time.