QUARTELY WHEAT MARKET ANALYSIS & OUTLOOK BULLETIN 1 OF 2015

Transcription

1 QUARTELY WHEAT MARKET ANALYSIS & OUTLOOK BULLETIN 1 OF 2015 INTRODUCTION The following discussion is a review of the wheat market environment. The analysis is updated on a quarterly basis 1 and the interval covered in the current issue is from October 2013 to December This period is divided into five 3 months long quarters. The key issues discussed in the review are trends in production, prices, trade, growth and volatility. 1. PRODUCTION TRENDS 1 Quarter 1 (January to March), Quarter 2 (April to June), Quarter 3 (July to September), Quarter 4 (October to December) 1

2 Source: Statistics and Economic Analysis Figure 1 above indicates that the period under analysis opened with lower volume of wheat production in October This was followed by a significant increase in the volume and value of wheat production in November Figure 1 reveals that wheat production volumes were generally very low from between March 2014 and September This can be well attributed to the fact that wheat is planted mainly in winter with the subsequent harvest occurring in the fourth quarter of the year. It is also clear from the figure that between the month October 2014 and December 2014 there was a substantial increase in the production volume. The period under analysis closed with lower production volumes for wheat in December Wheat production volume/supply in December 2014 was about 24.43% lower compared to the volumes that were available in the local market during the corresponding month in It is also clear from Figure 1 that the GVP followed a similar trend with production volumes over the period under analysis. 2. PRICING TRENDS 2.1. Domestic Wheat Producer Prices Figure 2 gives an indication of average prices received by wheat farmers from October 2013 to December 2014 in South Africa. The figure indicates that the period under review opened with relatively higher producer price in October 2013 and this was followed by a slight decline in producer price for wheat in November In general, producer prices for wheat ranged between R2 732/ton and R3 582/ton over the period under analysis. The highest producer price for wheat was attained in April 2014 while the lowest was observed in November The wheat producer price during the closing month of the period under analysis (December 2014) was 7.68% higher compared to the price of the same product during the corresponding month in

3 Source: Statistics and Economic Analysis (DAFF) 3

4 3. WHEAT IMPORTS AND EXPORTS Figure 3 shows exports of wheat from October 2013 to December The figure indicates that exports of wheat were volatile throughout the period under analysis. The period under analysis opened with low volumes of wheat exports and this was followed by substantial increase in the volume and value of wheat exports between May 2013 and December The highest export volumes and values were attained in December 2014 while the lowest were recorded in November The period under review closed with relatively high volumes of wheat exports in December 2014, which is % higher compared to exports of the same product during corresponding month in Source: Statistics and Economic Analysis (DAFF) Figure 4 below indicates that the period under review opened with moderate volume and value of wheat imports in October The figure further indicates that imports of wheat were highly volatile throughout the period under analysis. The general observation from Figure 4 is that South Africa imports wheat in larger volumes due to the fact that the locally produced volumes are currently not sufficient to meet the domestic consumption requirements. The highest wheat import volumes were attained in September 2014 while the lowest were observed in October The period under analysis closed with low volumes of wheat imports in December The imported volumes in December 2014 were % higher compared to what was imported in December

5 Source: Statistics and Economic Analysis (DAFF) 4. PARITY PRICES According to this market analysis bulletin the export parity price is defined as the price that farmers receive if they sell their Wheat on the international market. This price is calculated by adjusting the international commodity price by a factor to account for the difference between the location and the quality of Wheat, as well as the costs that are incurred to export Wheat from Durban or Cape Town. The import parity price reflects the price that Wheat traders and feed manufacturers would pay if they had to buy imported wheat Indicative Import Parity Prices For traders and feed manufacturers who would like to import wheat from the United States of America, Table 1 depicts the indicative import parity prices that they would pay as on 12 March Table 1 Country USA Import Parity Price FOB Value ($/ton) Freight rate ($/ton) Insurance ($/ton) 0.74 Cost, Insurance and freight ($/ton) Cost, Insurance and freight (R/ton)

6 Country USA Import Parity Price Financing Costs (R/ton) Cost, Insurance, Freight and Financing Costs (R/ton) Discharging costs (R/ton) at: Cape Town Harbor Durban Harbor Import Tariff F.O.R (R/ton) at: Cape Town Harbor Durban Harbor Delivered Price: Durban Randfontein Railage (R400.09/ton) Delivered price (R/ton) Exchange rate (1$=) Source: SAGIS Table 1 indicates that a ton of wheat from the USA costs US$ After taking into account the freight cost of US$30.00/ton and insurance costs of $0.74ton, the CIF price for wheat adds up to US$275.74/ton which is equivalent to R /ton at an exchange rate of R12.16 to a US Dollar. When discharging costs of R100.58/ton are added, the landed cost for a ton of wheat would be R at the Durban harbor. When railage cost of R400.09/ton is added to this price, a ton of wheat will have cost R by the time it gets to Randfontein Indicative Export Parity Prices In the international market a ton of wheat is sold at a price of US$ In the case of exporters who would like to export wheat to the international market through the Durban harbor, a ton of wheat will earn R After financing costs of R22.65 per ton, railage cost of R per ton, and loading cost at the Durban harbor of about R per ton are subtracted from FOB price, an exporter would receive R for a ton of wheat. Table 2 Commodity USA Wheat FOB Gulf value ($/ton) Difference in SA quality and locality from SA wheat: (Plus US$10/ton) SA FOB price ($/ton) - Exchange rate (1$=) FOB Gulf value (R/ton) Marketing Costs Financing (at 9.0%- 30 days Prime rate) (R/ton) 6

7 Commodity USA Wheat Railage: Randfontein - Durban (R400.09/ton) Loading costs (R/ton) at: Durban Harbor Export Realization (R/ton): Durban Harbor ( FOB price less Marketing costs) Source: SAGIS GROWTH, VOLATILITY AND STABILITY Wheat industry growth was calculated and the volatility and stability measures were determined by calculating the coefficient of variation for the various wheat industry statistical series. The formulae for these values are as follows: Growth Rate G = [(B A)/A]*100 where: G = Growth Rate B = Values of Variables during the closing month of the duration under analysis A = Values of Variables during the corresponding month of the previous year Volatility and Stability analysis x V i N where: V = Coefficient of Variation = Standard deviation = mean = observation in months i x i N = Number of months The results or the outcomes of these growth and volatility calculations are presented in Table 3. They are calculated using monthly statistics and covered the same five quarter period under review starting from October 2013 to December Table 3: Wheat Industry Growth Rates and Variation Coefficient (October 2013 to December 2014) Category Subcategory Growth Rate (%) Coefficient of variation Production Volume Volume Gross Value Value Producer Prices Value

8 Category Subcategory Growth Rate (%) Coefficient of variation Exports Volume Value Imports Volume Value Source: Calculated from Statistics and Economic Analysis Data Table 3 indicates that domestic wheat production decreased by 23.43% in December 2014 compared to what was produced during the corresponding month in The gross value of production has decreased by 17.56% over the same period. At the same time, producer prices for wheat increased by 7.68%. Exports increased by % and % in volume and value respectively. On the other hand, imports of wheat increased by 81.18% and 82.08% in volume and value respectively. The wheat industry was highly volatile with regards to production volume, gross value of production, exports volume and value, as well as imports value. Imports volume and producer price remained relatively stable over the period under analysis with coefficient of variation of 0.98 and 0.08 respectively. 8

9 6. ACKNOWLEDGEMENT Acknowledgement is given to the following information sources: 1. Directorate: Statistics and Economic Analysis 2. South African Grain Information Services For more information contact: Director: Marketing Tel: (012) Fax: (012) Deputy Director: Commodity Marketing Tel: (012) Fax: (012) Senior Agricultural Economist: Field Crops Marketing Tel: (012) Fax: (012) Disclaimer: This document and its contents have been compiled by the Department of Agriculture, Forestry and Fisheries (DAFF) for the purposes of detailing the wheat industry. Anyone who uses this information does so at his/her own risk. The views expressed in this document are those of the Department with regard to the industry, unless otherwise stated. The Department or any of it officials therefore, accepts no liability for losses incurred resulting from the use of this information. 9