January 26, 2011

South Africa may see wheat harvest at its lowest

South African farmers may generate its lowest winter-wheat harvest in 19 years as crops are damaged from bad weather and after reduced prices at the beginning of the season led to a fewer plantings.

Farmers may reap 1.51 million tonnes of the grain this season, 3.8% less than earlier forecast, according to the government's Crop Estimates Committee. That would be the least since 1992, when 1.32 million tonnes was produced.

This season, South African farmers planted the smallest acreage of wheat since the "early seventies or even before that," according to Piet Faure, a trader at CJS Securities Inc. in Johannesburg. "Prices were low last year, which is why the acreage was low this year, though yields per acre have risen on better fertilizer use," he said by phone from the city yesterday (Jan 25).

South Africa is the continent's fourth-largest wheat producer after Morocco, Egypt and Algeria. Prices for the grain on the South African Futures Exchange have climbed 40% during the last 12 months, and were 1.1% lower at ZAR3,107 (US$440) per tonnes at the midday close yesterday (Jan 25).

"I don't think the size of the South African crop will affect prices as much as the world price of wheat," Faure said. "We will likely have to import about 1.4 million tonnes of wheat, which in itself is another record."

Wheat fell for the first day in six in Chicago yesterday (Jan 25) on speculation that a rally to a five-month high will reduce demand from investors. Wheat for March delivery slid US$0.13, or 1.5%, to US$8.225 a bushel at 1:14 pm London time on the Chicago Board of Trade, having yesterday climbed to the highest price since August 6 last year.

Earlier, the South African Crop Estimates Committee cut its winter wheat production forecast because of lower output from the Western Cape, Free State and Northern Cape provinces, where crops have been damaged and destroyed by floods.

That committee's forecast of 1.51 million tonnes missed the median estimate of eight, who had expected the forecast to be reduced by 1.4 % to 1.55 million tonnes. Forecasts in the survey ranged from 1.4 million tonnes to 1.57 million tonnes.

The Committee also reduced its canola estimate by 0.9 % to 37,620 tonnes.