Senwes Scenario December 2016 / January 2017 | Page 40
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G RAI N M AR K E T P R O S P E C T S
November 2016:
Market movements
SENIOR GRAIN ANALYST, SENWES GRAINLINK
THYS GROBBELAAR
THE OBJECTIVE OF THIS ARTICLE IS TO PROVIDE A BROAD
MARKET OVERVIEW, SINCE
THERE IS A SIGNIFICANT TIME
LAPSE BETWEEN THE WRITING
OF THIS ARTICLE AND THE
PUBLICATION THEREOF.
Price drivers in the grain and
oilseeds markets
A schematic representation of the most
important variables which impact on
world commodity prices and locally at
present is contained in this article. We
focus on most of the variables.
Fundamental factors
International
• Expected economic growth
• Energy prices
• Exchange rate movement (particularly
in respect of the dollar)
• Carry-over stock
– Production
– Consumption
Locally
• Exchange rate fluctuations
• Carry-over stock
– Imports
– Consumption
– Expected production
» Expected rainfall
» Expected area to be planted
» Climatological prospects (rainfall
distribution, temperatures)
38
International
fundamental factors
INTERNATIONAL ECONOMIC
SITUATION
Not much has changed on
the international front since
the writing of this article. The
American election dominated
the international markets.
Expected economic growth is
still slow.
ENERGY PRICES
The international crude
oil price is in the region of
$46.5 per barrel. America
uses approximately 35% of
their total maize crop to produce renewable fuel ethanol.
At the current price levels
of American maize and the
international crude oil price,
the gross margin with regards
to the production of etanol,
is in the region of approximately $26 and $33 per ton
of maize. Ethanol plants are
still making money but the
margins are not astronomical.
Energy prices are not supporting the maize price to a large
extent.
INTERNATIONAL GRAIN AND
OILSEED SITUATION
World carry-over stock levels
in respect of all grains and
oilseeds are still at reasonably
high levels. The summer grain
harvesting process is nearing
completion in the Northern
DEC 2016/JAN 2017 • SENWES Scenario
Hemisphere, with good
crops in most cases. 95% of
America's maize and 99% of
its soybeans have been harvested. Their summer oilseed
and grain prices should follow
the normal seasonal trend
and should slowly move in an
upward direction.
Locally
EXCHANGE RATE MOVEMENT
Graph 1 indicates the absolute
volatility of the South African
rand. The rand weakened
from R13 to R17.20 per dollar from October 2015 until
January 2016, which supported our commodity prices
to some extent. The current
political uncertainty weakened
the rand over the short term,
but it strengthened again over
the past week. However, commodity prices have received
support from the rand.
WHITE AND YELLOW MAIZE
NCEC-crop estimate
At this stage two factors are
dominating the price movement in respect of summer
crops, namely the expected
area to be planted and the
climate for the coming season.
The area to be planted per
commodity will contribute to
the calculated carry-over stock
and eventually the price. The
NCEC increased planting
intentions in respect of white