Senwes Scenario August / September 2017 | Page 45

••• • • G R A IN MA RKE T PR O SPE CT S • • net margin is currently between $0,02 and $0,18 per gallon of ethanol produced. It means that the American corn price is not receiving much support from the current crude oil price. Price drivers in the domestic grain and oilseeds markets Graph 3. Calculated carry-over stock levels of white maize in South Africa. South African maize price is not receiving much support from the American maize price. International commodity prices The Americans are quite con- cerned about their corn, soya bean and spring wheat yield prospects. It is fairly dry and various market participants predict lower yields, which means that the prices of the commodities concerned are increasing. The international maize pro- duction and consumption are increasing consistently, particularly since 2000. The calculated car- ry-over stock as percentage of con- sumption decreased significantly over the past two marketing years, which supports the international price to some extent. Large areas in the American maize production area are still dry, which supported the price over the past few days. Although the USA is experiencing moderate climate conditions, cli- mate plays a huge role in the price forming process. The world soya bean carry-over stock as percentage of consump- tion is 26,7% at present, while the world wheat carry-over stock as percentage of consumption is 35,5%. Relatively high carry-over stock levels put pressure on prices to some extent. The next graph reflects the latest production, consumption and carry-over stock expectations in the USA. Energy prices As we know, the Americans use approximately 35% of their total maize crop for ethanol produc- tion. Maize used for ethanol pro- duction represents 44% of their local consumption. The crude oil price is at a reasonable level at present and Brent crude oil was in the region of $43 per barrel in June 2017. At the current inter- national crude oil price and the price at which maize is trading on the CBOT, the net margin of eth- anol producers is very small. The White and yellow maize price trends on the South African exchange There is some concern about the possibility of exporting a signif- icant portion of South Africa's calculated white maize surplus. Export possibilities for white maize seem to be limited at this stage. According to the National Agricultural Marketing Council (NAMC), the surplus white maize stock levels will be 2,2 million tons at the end of the 2017/18 marketing year. Meteorologists predict a neutral phase of the ENSO-phenomenon, which is usually associated with good grain yields. The question remains: Will we produce another surplus next year and for how long will we hover around the calculated export parity level? The carry-over stock levels of yellow maize, as calculated by the NAMC, do not seem to be prob- lematic. Exports from South-East Asia have already commenced and various market participants are positive that we will be able to limit yellow maize carry-over stock levels. For this reason the price of yellow maize is R110 per ton higher than the price of white maize. However, there is quite a movement in respect of the con- sumption of white maize for ani- mal feed. The question remains: How long will we hover around the calculated export parity levels? > CONTINUED ON PAGE 44 SENWES Scenario • AUG/SEP 2017 43