Agri Trends 08 May 2015

Absa Bank Limited, Reg No 1986/004794/06, Authorised Financial Services Provider. Registered Credit Provider Reg No NCRCP7 Page 1

Wheat import tariff due for an adjustment The current wheat tariff of R461/ton is now due for an adjustment. The tariff became due for an

adjustment after the US Nr2 HRW fob price traded for a number of three weeks for more than $10/ton

lower than the base price of $254/ton. Since the start of April global wheat prices traded sharply lower.

SAGIS indicated in their latest report that the duty on wheat may consequently increase from R461/ton to

R800/ton. In general, ITAC recalculate the new tariff level after a request is received from industry. The

previous adjustments to the tariff took normally between 4 to 6 weeks before implementation. It is

expected that the new tariff will not lead to an increase in flour and bread prices but it will significantly

support the sustainable production and production capacity of wheat in South Africa. The new tariff will

support South Africa’s self-sufficiency in wheat and national food security without an increase in food

prices to the consumer. Producers already indicated that they may increase the planting of wheat which

corresponds closely with the efforts of industry and Government to turn the distressed industry around.

Hopefully, the new tariff will be published before the end of June thereby supporting wheat producers

currently planting wheat and who risk expanding their production of wheat production this season.

Beef Market Trends

International: New Zealand steers

and cows traded sideways at NZ$ 463

and NZ$ 318 per head respectively. In

the US, beef traded mostly higher as

follows: Top side traded higher at

$292,57/cwt, Rump traded lower at

$467,23/cwt and Strip loin traded higher

at $700,80/cwt, Chuck traded slightly

higher at $272,39/cwt, Brisket traded

higher at $271,01/cwt which gave us an

average carcass price of $366,40/cwt.

Good demand for steaks in the US, and

a decline of imports from Australia and

New Zealand are expected to keep beef

prices higher this summer. Both countries were among the top three exporters of beef to the US,

with farmers in these countries having rushed drought stressed cattle and dairy cows to slaughter.

In the New Zealand market, schedules have softened in recent weeks, and are expected to remain

at these reduced levels. Beef plants remain full, processing cows.

Domestic: When compared to last week, prices traded mixed. The prices of the different meat

classes were as follows: Class A prices decreased by 1.13% to 33.20/kg, Class C prices increased

by 1,58% to R27.00/kg and Contract prices increased by 4,34% closing at R35.48kg with the fifth

quarter included. The weaner prices traded slightly lower compared to last week at R19.32/kg. The

average hide price traded slightly higher at R18,25/kg.

Page 2

Outlook

Internationally, tight supplies and good demand are expected to support prices in 2015. This will be

reinforced by the expected lower slaughter rates and reduced exports from Australia, as producers are

rebuilding their herds. Locally, prices are expected to trade sideways to downwards in line with seasonal

trends. It is a norm for Class C price to seasonally improve at this time of the year, on the back of higher

demand. There is a shift in demand towards stewing cuts as we have moved away from the grilling

season.

Dairy Market Trends

International: International dairy

prices have declined at the morning's

GlobalDairyTrade (GDT) auction on the

6th of May, with the GDT price index

losing 3.5% since the last auction in

mid-April. The uncertainty about New

Zealand’s production during the months

of January and February helped support

prices, but prices have decreased since

then. Prices in Europe have reportedly

being weighed down by higher volume

of milk on offer as production in many

countries nears its seasonal peak. Strong growth in the supply has been reported in Ireland,

Netherlands and France as a result of the removal of the milk quota. Dairyco has also revealed

that data from Australia, New Zealand, the US and the EU, the four world’s main exporting areas,

show that milk production in the first two months of the year remains above the 3 year average.

Domestic: The local milk producer prices have increased marginally during 2015. Import parity

prices are currently trading at levels above the local producer price, which can put some pressure

on prospective importers. The January, February and March 2015 production figures came out

higher than production volumes that were reached the same time a year ago. It also seems that

the market is able to cope with the current production levels. A study by persistentmarketresearch

has revealed that the UHT milk market in South Africa has been growing at a fast rate, and is

expected to continue to improve during 2013-2019. This is as there has been an increasing

acceptability of UHT milk among all economic classes and the ability of companies to maintain

stable retail prices, the report further showed. Persistent market research further indicated that

increasing population and the poor cold-chain infrastructure in developing countries were factors

which were additionally driving the market.

Outlook

Internationally, prices are soft on the back of the global oversupply in the market. Future supplies will play

an important role in determining prices in the medium term. Locally, demand for dairy products is

expected to grow, however at a slow pace.

Page 3

Mutton Market Trends

International: The New Zealand

lamb and mutton traded sideways to

slightly higher this week compared to

last week; lamb closed the week at

NZ$73,3/head for 15kg. Ewes closed

slightly higher at NZ$51.1/head for a

21kg ewe. Import parity prices for

lamb was slightly lower at R49.14/kg

and for mutton was slightly lower at

R28.73kg respectively. Lamb prices

remain under pressure in New

Zealand, with only few sales being

made as demand is quiet. In Australia,

lamb prices however improved in

auctions during the mid-week on the back of lower supplies. An additional tightening in supply of

lambs is expected by analysts, and this is expected to lead to further increases in the market. All

Australian major mutton markets have recorded declining exports in April, following a decline in

slaughter.

Domestic: The mutton prices traded sideways to slightly higher during the past week. Class A

traded slightly lower at R52.61/kg and Class C traded higher at R38.07/kg compared to the

previous week. The price for feeder lambs traded slightly higher at R24.03/kg. The average price

for dorper hides traded slightly lower at R95.00/hide and merino also traded lower at R63.33/hide

respectively. The landed imported price of mutton rib from Australia and New Zealand traded

sideways at R 23,25/kg compared to the previous week and mutton shoulders also traded

sideways at 47,00/kg according to (Association of Meat Importers and Exporters) AMIE.

Outlook

Internationally, in the short term, prices are expected to remain soft due to well supplied market and softer

demand. In the medium to long term, prices are expected to be supported with expected tight supplies

from Australia and New Zealand as nations are rebuilding their herds. Rain in these two nations could

limit supplies. Locally, prices are expected to trade sideways to upwards in line with seasonal trends.

Page 4

Pork Market Trends

International: US pork prices

traded higher over the past week, due

to decreases of 3,50% in loads.

Carcass prices traded 8.22% higher at

US$78.72/cwt, Loin traded slightly

higher at US$94.70/cwt, Rib prices

traded 6.34% higher at US$179,70/cwt

and ham traded higher at

US$60.83/cwt. The import parity price

increased slightly due to the higher

international prices. Last week was a

good one for hog prices. The

Thursday's negotiated carcass price for

plant-delivered hog averaged

$72.96/cwt, which is $9.96 higher than

a week earlier. The increases in price were driven by a seasonal decline in hog slaughter as well

as a sharp decline in slaughter weights. Meanwhile, FAO has predicted that the global meat

production is expected to increase by 1.3% in 2015, on the back of higher production of pork and

poultry.

Domestic: Domestic prices were slightly higher over the past week with Porker prices slightly

higher at R25.43/kg while Baconer prices were slightly higher at R23.75/kg. Higher maize prices

could influence negatively on the margins for the livestock industry.

Outlook

Internationally, the seasonal decline in hog slaughter could support prices, however, the reported

additional supply of pork in storage and large hog slaughter numbers are factors that could pressure

prices. Domestic prices are expected to move sideways with a possible downward pressure on the back

of good production volumes in the market and in line with seasonal trends. In the medium to long term,

prices could improve as demand improves.

Page 5

Poultry Market Trends

International: The poultry prices

in the US traded sideways to slightly

higher over the week compared to the

past week. Whole bird prices traded

0.16% higher and at 108.0USc/lb.

Breasts traded 11.69% higher at

172,0USc/lb and leg Quarters traded

2.7% higher at and 38,0USc/lb

respectively. The bird flu condition in

the US continues to worsen, with

more cases announced daily in Iowa

and Minnesota. The spread of the

virus is expected to be bullish for

turkey and egg prices while bearish for chicken since most of the poultry operations in these

states are turkey and egg producing farms. Chicken producers continue to struggle with a build-

up of leg quarters, the price of which is down about 40% from a year ago. Exports to China and

Russia have been cut off completely while exports to Angola in February were down by more

than 80%.

Domestic: Poultry prices traded higher during the past week compared to the previous week

as there isn’t any build-up of stocks in the market. Frozen birds traded 1.88% higher at R22.18/kg

compared to the previous week. Whole fresh medium bird prices traded slightly higher at

R23.18/kg while IQF traded slightly higher at R20.26kg. Short stocks in the market have been

reported, especially on the low value products, which could continue to give some support to

prices in the short term.

Outlook

Internationally, prices are expected to continue to be soft as broiler production is growing as less-costly

feed produces larger flocks of heavier birds. The lack of export demand and higher domestic supplies has

resulted in more chicken going into freezers, with a further downward pressure on prices. Locally, prices

are expected to continue being supported by the current short stocks in the market, which could possibly

also encourage imports.

Page 6

Livestock Prices

(R/kg)

08 May 2015

Beef

Mutton

Pork

Poultry

Current

Week

Previous

Week

Current

Week

Previous

Week

Current

Week

Previous

Week

Current

Week

Previous

Week

Class A / Porker

/ Fresh birds 33.20 33.58 52.61 52.71 25.43 25.41 23.18 22.91

Class C/

Baconer /

Frozen birds

27.00 26.58 38.07 37.17 23.75 23.74 22.18 21.77

Contract /

Baconer/ IQF 35.48 34.00 55.01 53.22 24.59 24.58 20.26 20.07

Import parity

price

49.44 50.08 28.73 28.96 24.31 22.05 14.05 13.63

Weaner Calves /

Feeder Lambs/ 19,32 19,86 24,03 24,00 - -

Specific

Imports: Beef

trimmings

80vl/b/Mutton

Shoulders/Loin

b/in /chicken

leg1/4

49,65 49,65 47,00 47,00 35.50 35.50 20.51 20.51

Yellow Maize Trends

International: When compared to

the previous week, the average US

yellow maize spot price closed the

week 0.53% lower at US$167.55. The

maize price saw a decrease due to

good planting weather still present on

the majority of the maize-belt and the

sharp selloff in the US wheat market

which caused a spillover weakness.

China’s increased imports of maize

could swing global prices that are not

far off a five year low. The US maize

export progress is lying slightly behind

the average seen for this period and

the US maize prices are currently higher than the South American prices.

Page 7

Domestic: The local maize market for yellow maize traded 0.24% higher at an average of

R2340.20/ton over the past week. The average exchange rate for the week was weaker at

12.04/US$ compared to 11,87US$ the previous week. The all futures prices traded lower as

follows: May-15 contracts increased by R48/t to R2370/t, Jul-15 increased by R52t to R2404/t,

Sep-15 contracts increased by R45/t to R2434/t, Dec-15 also increased by R49/t to R2471/t, Mar-

16 increased by R8/t and traded at R2418/t, May-16 decreased by R3/t to R2380/t, while Jul-16

decreased by R49/t to R2301/t. Due to Zimbabwe’s poor maize harvest this season which is 35%

less year on year, South Africa’s exports will be positively affected. Over time South Africa and

Zambia have been major suppliers to Zimbabwe. The 2015 Zimbabwe maize imports totaled 700

000 tons. The weekly South African maize exports for the week concluding 1st of May suggested

that 8 763 tons of maize was exported.

Outlook

Internationally, the western and northern parts of the US Midwest are expected to experience some

rainfall in the coming week which could slow planting; however the maize already planted will benefit.

Locally maize prices will continue to receive support from the smaller maize crop and the weaker Rand.

The USDA report of the first estimates for the 15/16 marketing year to be published on the 12 May will be

carefully watched locally and internationally.

Yellow Maize Futures:

08 May 2015 Jul-15 Sep-15 Dec-15 Mar-16 May-16

CBOT ($/t) 153.09 154.91 157.03 160.89 165.30

SAFEX (R/t) 2404.00 2434.00 2471.00 2418.00 2380.00

Sep-15 Dec-15 Mar-16

Ask Put Call Ask Put Call Ask Put Call

2,480 166 120 2,520 202 153 2,460 228 186

2,440 143 137 2,480 180 171 2,420 206 204

2,400 123 157 2,440 159 190 2,380 185 223

Page 8

White Maize Trends

International: The US white maize

spot market traded 0.60% lower at an

average of US$ 153.68/t over the past

week. Import parity prices traded

slightly higher, compared to the

previous week due to the change in

exchange rate from 11.87/US$ to

12.04/US$. The Southern plains and

maize-belt experienced heavy rains

which added pressure to the market

over the last week. The grains were

assisted by the lower US dollar.

Nearly 55% of the maize crop has

been planted. Brazil is predicting a

large maize crop for the approaching marketing year.

Domestic: The rand has weakened slightly against the dollar during the week. The local

average white maize spot price traded 1.87% or R47.87/t higher at R2609.20t compared to the

prior week. The futures prices all traded higher as follows: May-15 contracts increased by R110/t

to R2681/t, Jul-15 increased by R106/t to R2715/t, Sep-15 contracts increased by R107/t to

R2759/t, Dec-15 also increased by R110/t to R2801/t, Mar-16 increased by R114/t and traded at

R2796/t while July-16 traded R6/t higher at R2423/t. The South African maize prices were able to

gain some ground even with lower US prices. July prices traded higher over the last week. Local

prices were supported by the weaker Rand and the stronger buying interest as indicated in the

last SAGIS report.

Outlook

Internationally the good planting progress to date in the US and the expected substantial increase in

maize production for Brazil and Argentina will weigh on global prices. Locally the maize prices will

continue to be supported.

White-Maize

Futures

08 May 2015

Jul-15 Sep-15 Dec-15 Mar-16 Jul-16

SAFEX (R/t) 2715.00 2759.00 2801.00 2796.00 2423.00

Sep-15 Dec-15 Mar-16

Ask Put Call Ask Put Call Ask Put Call

2,800 184 143 2,840 220 181 2,840 261 217

2,760 162 161 2,800 198 199 2,800 239 235

2,720 142 181 2,760 177 218 2,760 218 254

Page 9

Wheat Market Trends

International: The average weekly

wheat spot price traded 1.72% lower

compared to the previous week at

US$199.8/t. Soft red wheat traded

2.15% lower at US$189.32, while

hard red wheat traded 1.34% lower at

US$210.22. Import parity traded 0.1%

lower. US wheat saw further declines

from the bearish export sales. Some

support was given to the HRW wheat

due to quality concerns where 43% of

the winter wheat headed out and 43%

of the crop rated good to excellent.

There were sufficient widespread

rains in the US winter wheat areas which have improved the crop rating. The US spring wheat

crop gained 20% over the last week which leaves 25% still to be planted. This planting progress

is also ahead of the 5-year average. As from the 15 May Russia are preparing to remove their

export duty on wheat. This duty will however be replaced by a smaller tax which is rumored to be

near one euro/ton.

Domestic: The average SAFEX wheat spot price increased from last week’s levels of

R3763.75 and traded at R3806.00/t. May-15 futures increased by R68/t to R3819, Jul-15 futures

traded higher by R56/t to R3840/t, Sep-15 traded R62/t higher at R3868/t while Dec-15 futures

traded R95/t higher at R3853/t. Despite the lower US wheat prices the South African wheat prices

gained, with a contributing factor being the weaker Rand value. Year on year the human

consumption of wheat is lower this year and is currently sitting at 3.100 million tons.

Outlook

Internationally, Egypt requiring an unstipulated quantity of wheat from the world market will support global

prices. More widespread rain is for most of the main winter wheat producing areas of the US. Locally, the

weaker rand and prospects of a revised import wheat tariff will support prices however the import tariff will

have the greatest impact on the future contact months.

Wheat Futures

08 May 2015 Jul-15 Sep-15 Dec-15 Mar-16 May-16

SAFEX (R/t) 3840.0 3868.0 3853.0 n/a n/a

CME ($/t) 191.88 194.75 201.00 206.88 210.62

Jul-15 Sep-15 Dec-15

Ask Put Call Ask Put Call Ask Put Call

3,880 99 59 3,900 131 99 3,900 177 130

3,840 77 77 3,860 109 117 3,860 155 148

3,800 59 99 3,820 90 138 3,820 135 168

Page 10

Oilseed Market Trends International: Soybean prices week

on week traded higher at US$

361.71/t. Soya meal traded at

US$316,82/t, which is lower compared

to the previous week while soy oil

traded 3.8% higher at US$32.64/t

compared to last week US$31.46

Import parity increased by 0.9%. The

soybean prices were supported by the

Chinese buying of soybeans and the

global import demand increasing

substantially. The soybean crop in the

US is currently 13% complete. The

probability of Argentina’s strikes

continuing in the port of Rosario

helped prices as Argentina is major soybean exporter and a prominent soy oil exporter. The

exports of soybeans form the US is above the 5-year average for this time period.

Domestic: The average soybean spot prices traded 1.23% higher at R4766.80/t compared to

the previous week. The average sunflower spot prices for the week traded 0.30% lower at

R4813.00/t compared to the previous week. The vegetable oil imports decreased close to 30% in

the first quarter of the year due to the increase in local vegetable oil production in soy oil,

sunflower oil and palm oil. The South African oilseed prices concluded varied in the prior week

with soybeans acquiring some support on the back of the higher US soybean prices and the

weaker rand.

Outlook

Internationally in the medium term the Chinese buying activity on the global market of soybeans will have

a significant impact the development of exports and prices. The threat of continued strikes in Argentina

will play a role on the soybean price. The local oilseed price will feel pressure should the rand strengthen

against the dollar this coming week.

Page 11

Oilseeds Futures

08 May 2015 Jul-15 Sep-15 Dec-15 Mar-16 May-16

CBOT Soybeans (US $/t) 358.69 351.64 352.00 353.55 354.58

CBOT Soy oil (US c/b) 32.96 32.99 33.11 33.37 33.66

CBOT Soy cake meal (US $/t) 306.40 307.90 309.60 306.00 305.7

SAFEX Soybean seed (R/t) 4859 4937 5002 n/a n/a

SAFEX Sunflower seed (R/t) 4950 5060 5100 n/a n/a

SAFEX Sorghum (R/t) 2580 2585 n/a n/a n/a

Sunflower Calculated Option Prices (R/t) Absa Capital Trading Desk: 011 – 895 5524

Jul-15 Sep-15 Dec-15

Ask Put Call Ask Put Call Ask Put Call

5,000 199 149 5,100 290 250 5,140 383 343

4,960 178 168 5,060 268 268 5,100 361 361

4,920 157 187 5,020 248 288 5,060 340 380

Fibres Market Trends

International: The Australian wool

moved 5,89% higher for the week in the

market and closed on Au 1241c/kg. The

wool price has sharply increased since

just after Easter, on the back of strong

demand from China, but also with

support from European and Indian

buyers. Analysts have pointed to a

decision by Chinese authorities to free

up credit and the banks' lending

capacity in late April as one of the

significant catalysts for the rise. In the

US, steady US dollar and some increased demand in the week have helped to increase the volume

of wool that is being traded. Cotton has traded 1.20% lower over the past week and closed at

US64,00c/lb. Cotton growers in the Texas High Plains are experiencing the best pre-plant soil

moisture conditions, and facing a difficulty of whether to plant or not. ICE cotton futures fell to their

lowest level in two weeks on Friday, due to the stronger dollar and a reaction to a weekly US export

sales report.

Domestic: The last wool auction took place on the 29th April 2015. The local market traded

higher and closed 5.31% higher to close at R126.68/kg (clean). The increases were reportedly

resulting from strong demand from China as well as the approaching close of the season. SA cotton

prices traded higher or a 0.27% increase to close at R19.36/kg.

Page 12

Outlook

Internationally, prices in Australia are expected to improve due to improved demand from China,

European and the Indian buyers, which is supportive to prices. Supplies are expected to also be tight until

the end of June. For cotton, even though prices are less attractive compared to competing crops, its

position has improved over the last few months. The Cotton Advisory Committee has however reported

that prices are expected to be pressured by the high stocks which are held outside China. In the medium

to long term, prices might be supported by the fact that lower prices may lead alternative crops being

planted. Local wool prices are expected to continue with the upwards trend in the next few weeks due to

improved demand.

Fibres Market Trends

Week ending 08 May 2015

Wool prices SA prices

(c/kg)

Australian

prices

(SA c/kg)

Australian

Future Jul -

2015 (AU$/kg)

Australian

Future Sep –

2015 (AU$/kg)

Wool market indicator 12168 11734 - -

19μ micron 12687 13206 12.70 12.50

21μ micron 12093 12462 12.30 12.10

Cotton prices

SA derived

Cotton

(R/kg)

New York A-

Index (US$/kg)

New York

future Jul-2015

(US$/kg)

New York

future Oct-2015

(US$/kg)

Cotton Prices 19.36 1.61 1.44 1.44

Vegetables Market Trends

Cabbage: Cabbage prices

decreased this week by 2,8% week on

week to R3339/t. The price decrease

was due to a 24,8% increase in

volumes. Prices are expected to move

sideways to lower in the short term in

line with seasonal trends, but move

sideways to upwards in the medium

term.

Carrots: Carrot prices increased by

6,3% week on week to R4919/t. The

price increase was despite an

increase of 21,7% in the volumes of carrots. Prices are expected to move sideways to

downwards in line with seasonal trends.

Onions: Onion prices increased by 4,5% week on week to R3543/t. The price increase was

despite to an increase of 23,1% in volumes compared to the previous week. Prices are expected

to trade sideways to downwards in the short to medium term in line with seasonal trends.

Page 13

Potatoes: Potato prices increased by 0,5% week on week to R3027/t. The increase in prices

was despite to increases in volumes of 23,7% compared to the previous week. Prices were under

pressure during January until March. Prices increased after March, due to rainfall which was

experienced towards the end of March month which resulted in lower volumes supplied in the

market. Prices can continue to trade higher due to lower volumes, and trade sideways in the

medium term. It is however a norm for prices to decrease after the Easter period.

Tomatoes: Tomato prices increased by 13.2% week on week to R8696/t. The price increase

was due to decreases in volumes of 0,4% during the past week. Prices are expected to move

sideways as a result of lower volumes.

Vegetable Prices: Fresh Produce Market

(Averages on the Pretoria Bloemfontein Johannesburg Cape Town and Durban markets)

Week ending

08 May 2015

This week’s

Average

Price (R/t)

Previous

week’s

Average

Price (R/t)

This week’s

Total

Volumes (t)

Previous week’s

Total

Volumes (t)

Cabbages 3339 3435 1380 1106

Carrots 4919 4626 1627 1337

Onions 3543 3392 6649 5401

Potatoes 3027 3012 13565 10970

Tomatoes 8696 7684 3417 3432

Enquiries: Karabo Takadi/Julie Hayward Absa Agri-Business E-mail:karabo.takadi@absa.co.za/ Julie.hayward@absa.co.za

Disclaimer: Although everything has been done to ensure the accuracy of the information, Absa Bank takes no responsibility for actions or losses that might occur due to the usage of this information.