Are historians or official meteorologists going to win out in South African crop production?
New crop white maize futures extended a marked recovery, boosted by worries over a third successive dryness-affected harvest in South Africa – despite history suggesting that rains are on their way.
Futures in white maize, a food staple in southern Africa, for July 2017 delivery soared 2.3% to 2,941 rand a tonne in Johannesburg on Tuesday – taking above 11% their recovery in a week.
The performance contrasted with a 0.9% drop to 3,460 rand a tonne in December 2016 futures, the best-traded old crop contract, down 6.0% over the past week.
Indeed, the premium of the December 2016 lot to the new crop July 2017 contract has halved over the week, to 519 rand a tonne.
The shift reflects in part ideas that South Africa may overcome objections over genetically modified crops to import white maize from the US, and rebuild stocks depleted by a weak harvest last season, and this year's dismal 7.5m-tonne harvest, the worst in a decade.
South Africa corn production forecasts, 2016-17
USDA: 13.0m tonnes
IGC: 12.9m tonnes
Stellenbosch University: 12.3m tonnes
Agbiz: 11.8m tonnes
Absa: 11.7m tonnes
New crop futures are being support "by the uncertainty about the weather forecasts, and the predictions of above-normal temperature [in] the summer", said Luan can der Walt at GrainSA.
"The weather forecast is uncertain and the markets are likely to remain sensitive towards the weather conditions, especially the new-season contracts."
However, at industry group Agbiz, Wandile Sihlobo, head of economic and agribusiness intelligence, stood by expectations of a significant recovery in South African crops in 2016-17, including a forecast of a bounce to 11.8m tonnes in maize output (including both white maize and yellow maize, used mainly as livestock feed).
"Many other weather institutions see a higher chance of La Nina," which is associated with better rains in South Africa, Mr Sihlobo said, citing outlooks from the likes of the US-based Earth Institute and from official Australian meteorologists.
Indeed, historical data shows that South Africa rarely sees sustained rainfall deficits, with amounts typically bouncing back after a year or two, as in 2013, when average precipitation rebound to 551mm from 449mm the year before.
"Looking at historical data on rainfall distribution, going back to the 1800s, you see there is always a spike back up" from depressed levels, Mr Sihlobo told Agrimoney.com.
Furthermore, even if the Saws forecast is right, an outlook that conditions could improve by mid-summer in western corn belt area could prove significant – given that optimal sowing conditions for corn last until the end of December in the region.
Average South African rain, by year
2016 (so far): 365.5mm
That applies to soybeans too, for which output could return to 1m tonnes in 2016-17, from the 742,000 tonnes produced in the latest harvest.
Meanwhile, output of peanuts, or groundnuts as they are called in South Africa, is on track to recovery from the 18,850 tonnes produced in 2015-16 which, besides being down two-thirds year on year, was the weakest harvest since 1946.
"We are optimistic that domestic groundnuts production could recover in the next season," Mr Sihlobo said, citing the weather outlook "as well as favourable market prices".
The poor groundnut harvest has left South Africa, typically a net exporter of the crop, looking at imports of 30,000-50,000 tonnes in 2016-17, "record import level on a dataset stretching as far back as 1998", he added.
"People have not stopped eating peanut butter," he said.
As of the end of August, South Africa had imported 20,734 tonnes of groundnuts, mostly from Argentina, but with some supplies coming from Brazil, Mozambique and China too.
By Mike Verdin