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NAMC Market Intelligence Report week 41

From the report - Grains and Oil Seeds

Global Perspectives
According to the United States Department of Agriculture (USDA), global oilseed production estimates for 2020/21 declined by 1 million tons in August to 609 million tons in September 2020 (See Table 1). The decline was due to lower soybean and sunflower seed production more than offset gains in peanut and rapeseed production. In the United States (US), the soybean production went down by 3 million tons. The offset production gains were recorded in Brazil, Canada and India. A decline in production from Russia, Ukraine and Argentina led to a decline in sunflower globally while greater rapeseed production in Canada and peanuts in India and the US increased commodity forecasts higher. In terms of trade, oilseeds increased by 1 million tons and reached 190 million tons due to higher soybean exports from Brazil and peanuts from India and the US (USDA, 2020). World ending stocks of oilseeds decreased by 1 million tons which due to lower soybean carry over and lower production in the US.

Domestic and Regional Perspectives
In South Africa, sunflower is one of the most significant oilseed crops and it is the largest source of vegetable oil together with by soybeans and canola. According to NAMC’s Supply and Demand Estimates (2020), the total production supplies including carry-over stocks of sunflower seed was estimated to increase from 906 785 tons in July to 926 735 tons in August 2020 while the total demand was projected at 793 150 tons. The projected closing stock level for sunflower seed as of the 28th day of February 2021 is 133 585 tons. Figure 1 below presents weekly deliverables for sunflower and soybean to commercial silos on indicated dates. South Africa’s soybeans production supplies including carryover stocks is estimated at 1.6 million tons for the 2020/21
marketing season, while the total demand was forecasted at 1, 4 million tons. The projected closing stock level by the end of 2020/21 market season is 155 155 tons. At an average processed quantity of 120 833 tons per month, this represents available stock levels for 1.3 months or 39 days.

Key areas to unlock growth in Grains and Oil Seeds
The domestic oilseed industry is not as big as grains such as maize, and there is a balance between the local supply and demand of sunflower seed. The basic argument behind this statement is that the total crushing capacity of 1.7 million tons is sufficient to satisfy the current demand for sunflower oil and cake. And if local production for sunflower is to be increased for example, the local prices of oil and cake would break away from import parity levels and trade lower thus negatively affecting crushing margins of the plants. This is likely to result in a decline in demand and possibly lead to lower producer prices for sunflower seed. Perhaps to develop the industry, new black emerging entrants should be assisted at the level of processing and not necessary at
primary production stage. Structurally, this is the way the industry has been set up, and this structure is not bound to change anytime soon. Therefore, no structural shifts can be anticipated in the sunflower industry over the medium term, and producers can only boost profits by improving yields and implementing efficient production systems.

NAMC Market Intelligence Report week 37