Senwes Scenario December 2016 / January 2017 | Page 40

•••• 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