AgVantage Commodities Market Report 15/05/2017

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As this week brought out the US Dept. of Agriculture’s world agricultural supply and demand estimates (USDA WASDE), it was much softer than first anticipated. However, the fact that there will be less grain produced globally in the 2017/18 season, compared to this season, means that less of a production shock is needed to relive the supply side pressure on global balance sheets.

As the dry weather over the past couple of months we have seen growers well in to cotton picking and as well sowing to get the new crop in to the ground with what moisture is already present. Many growers taking the dry weather and forecast for winter in their stride and spreading income through to the next financial year to get the most out of their current funds. Cotton this year so far is closer to average than above, prices ranging form $550-60/bale for 2017 and $530-40/bale for 2018. Cotton futures finally rallied in to the green after a dull week, with a big emphasis on old crop and new crop.

Within the export market we have seen this week that milling wheat is still very firm and there is a strong potential for demand to continue on the rise. Barley has made a substantial spike of roughly $10 in raging from $220-35 delivered Darling Downs in some bids, where Sorghum has also rallied in the same range with Sorghum 2 increasing at the same pace of Barley with a $10-15 lift delivered Newcastle.

Interest on Faba Beans has been low but there is still a flutter with interest at $200 Ex-Farm Moree/Narrbari. Chickpeas are still very strong for old crop at $1050 Ex-Farm. 17/18 new crop is $20 off the high. Canola very tight this week with interest south of Narrabri pricing roughly at $580/mt Ex-Farm.

AgVantage Commodities Market Report 23/03/2017

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CBOT wheat futures have given up further ground in the last week, however, Northern NSW wheat prices have remained steady to $2 per tonne lower over the last week. The domestic market has done some work to the down side on the back of rain during this time. Whilst the rain has been patchy, large areas of the winter crop growing regions have received falls of 50mm or better. Whilst these regions require more rain to fill their soil profiles, its certainly been a good finish to a very hot & dry summer. Whilst some of the heat has come out of the domestic feed market, the milling market for high protein wheat is largely unchanged. APH1 (min protein 145 & max screenings 5%) is bid ~$280.00 delivered Narrabri packer, with APH2 (min 13% max 5%) less $10/mt at $270.00/mt. We still remain I the camp that wheat prices will find it difficult to rally strongly in the coming months due to global & domestic supplies. Ultimately, it will largely come down to how well we can get a new crop planted in April, May/June. We still have solid demand for high protein wheat, both with low & high screenings in the bulk system & xfarm.

Feed barley & sorghum have been similar to domestic wheat, although sorghum has held on better than barley. Currently F1 barley is bid around the low $220’s & sorghum low $250’s delivered Darling Downs.

Chickpeas have once again found life after floundering for the last couple of months. Speculation that the sub continent will not produce the amount of chickpeas they first thought has brought them back to the market earlier than we first anticipated. This has resulted in a price rise of around $50/mt. This is good for the new crop scenario for Australian chickpea demand as we need to be able to sell our current crop so we don’t have a large carry over into this year. New crop chickpeas price signals are positive with values around $790 delivered Darling Downs, & $765/mt delivered Narrabri packer. However, after last year, we would caution growers selling October/November without a December option at least. Faba beans remain the poor cousin to chickpeas & we suspect many growers will leave them out of their rotations this year. Currently faba No.3’s are bid around $180 xfarm Narrabri. With little export interest, they continue to be difficult to move due to many domestic consumers being covered for the months ahead.

AgVantage Commodities Market Report 17/03/2017

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US wheat futures have had a mixed week, although the one thing they have maintained is a downward trend.  U.S. production prospects for CBOT (APW1 type wheat) seem comfortable in relation to Kansas (H2 type wheat). The reason for the increase in Kansas futures is on the back of crop weather concerns for the hard red winter growing regions in the U.S.  Nearby weather forecasts, while mixed, are tipping for some major HRW areas to largely miss out on forecasted rains. This has positive spin offs for Australian protein wheat & we are currently seeing buyers in Australia finding it difficult to source protein of 13% or better & screenings under 5%. Export sales from the U.S remain lacklustre, & continue to lag behind other origins, although there was some positive news out this week that reported a sale of HRW wheat to Algeria. At the end of the day, the global balance sheet for wheat remains heavy, & prices need to be at a level that can buy demand. With the last weeks decline in U.S futures values & an appreciation of the AUD/USD, we expect Australian wheat prices will have to decline in order to maintain our large export task ahead. Locally on the  Australia east coast, recent rains over the last few days has taken the spark out of our domestic market. Whilst the rains were patchy, buyers sentiment has turned bearish – which was always going to be the case with rain. It remains to be seen whether the rains continue, which they must if the east coast is going to have a full, & on time, plant again this year.

Chickpeas has a rally last week, but have come off around $20/mt. They hit a high of $900 delivered Brisbane, $885 delivered Darling Downs. We recommend growers selling chickpeas at these prices, as it’s a greater risk to hold on if the price falls, than to lock in profit at current values.

As previously said above, the recent rain has seen the feed grain complex come off around $5/mt. Delivered Downs – SFW wheat is around $245, F1 barley $225, & sorghum $250.

APH2 is $310 NTP Brisbane & Newcastle, with strong demand. We are also see strong demand for minimum 12% protein H2 & high protein & screenings AUH & HPS, both on farm & in the bulk system.

Faba beans are still the poor cousin to chickpeas, with the main markets being domestic. The odd export market raises its head, but we are finding they are being offered out of south Australia cheaper than northern NSW.

Cotton remains well supported on the back of solid export sales out of the U.S. Current Australian values are $535 to $540 this week.

AgVantage Commodities Market Report 12/01/2017

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HEADLINES:

Forecast of substantial rain in the southern Plains early next week saw the U.S Hard Red Winter Wheat market lower. However, Minneapolis Spring Wheat held firm as protein spreads widen further (ie. protein wheat well supported).

USDA to release its WASDE report at 4:00am Sydney time (ie. Friday morning our time).

USD Index has big range as market reacts to Trump press conference. AUD goes it alone closing substantially higher against major currencies.

NSW experiences heatwave this week – what does this mean for moisture deficient summer crops?

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Grain futures have generally increased since harvest on the back of northern hemisphere weather related speculation & short covering. However, we still believe the market to be hamstrung by burdensome global supplies ie. whilst the market can/will bounce around, we don’t see any major upside until the supply problem has been resolved, & that will take time. The AUD/USD reached $0.7471 at the time of writing, taking the shine off in AUD/tonne & bale terms.

Lower grade high protein (HPS/AUH) grades have gradually increased in value, or closed the spread between what is considered normal quality protein wheat (H2 & APH) & lower quality protein wheat. We have strong demand for high protein wheat – both low & high screenings quality in the system & xfarm. We continually add value to growers by structuring multi grade contracts to reduce cliff face pricing & reducing the risk of rejection. This not only add value, but also creates peace of mind. We are also specifically chasing a large volume of SFW-70/10 wheat north & west of Moree for xfarm pick-up. Please contact us to discuss.

The spread between malt & feed barley has narrowed to ~$5/mt. F1 is trading at $152 in NNSW sites like Garah & Moree with CO1 at $157. F1 is bid $195 delivered Downs for January + carry of $2.50/mth. We traded F1 in GNC Burren Junction this week at $132.

The supply chain remain choked with grain & pulses, resulting in future delivery periods moving further out into the future. This is further magnified with chickpeas. We saw a firm rally in chickpeas between Christmas & New Year on the back of weather concerns in Pakistan & India. The market has eased ~$50/mt since then, & whilst prices are still firm, many growers are asking why. We believe it’s a combination of;

1.     Speculation on sub-continent weather – the market will continue to see-saw on forecasts as they cone through. We still believe the fundamentals are little changed & demand will remain firm for CHKP through the year, although we should expect natural price fluctuations.

2.     The AUD/USD has rallied strongly, resulting in lower AUD/mt prices.

3.     The Indian crop is about to be harvested in Feb/Mar/Apr. We may well see traditional cyclical demand return to the Australian CHKP market as India goes quiet as they harvest & consume their own crop.

4.     Low depth in the market ie. there is finite logistical capacity available to ship CHKP out of the country resulting in price spikes being hit by sellers quickly & therefore are short lived.

Sorghum has firmed & is now bid $220 delivered Downs, $250 delivered Brisbane, $225 delivered Newcastle, $200 delivered Narrabri.

AgVantage Commodities Market Report 16/12/2016

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Harvest is well underway in the north west. Yields have been anywhere from 3mt/ha to 5mt/ha for wheat & barley, which will go partly towards compensating on prices. Late last week, & early this week saw the AUD/USD strengthen to the high $0.74.97 mark. This made Australian wheat exports less competitive. Coupled with out appreciating exchange rate, we saw volume selling & hedging on CBOT wheat futures forcing them lower & this was a double whammy for local prices & they fell $10/mt over the week. Last night, however, we saw our dollar fall back to $0.7385 at the time of writing which will assist the price decline in AUD. The global grain complex is still focussed on the surplus supply of mid quality wheat, so Australian prices have to remain competitive in order to compete for export business. Protein wheat is still in high demand, although price have weakened $10/mt over the last week. We still encourage growers with off spec grain to try & store on farm & deliver post harvest. The packers are paying premiums over the bulk system for this kind of wheat. We also have demand for wheat with minimum 12% protein that has black tip staining. This quality grain is certainly better priced exfarm. Barley prices increased last week & through mid this week, however did succumb to wheat selling pressure later this week. Chickpeas prices have stabilised this week, with premiums & carry now in the market for January onwards. This presents an opportunity for those growers with on farm storage to carry the grain & deliver post harvest & avoid the peak congestion period. It’s pleasing to see that we now have chickpea exporters pricing chickpeas in the bulk system at the true cost of executing this grain back out of the system & delivered to the closest packer. This had made prices in the bulk system a better option for growers that don’t have on farm storage.

AgVantage Commodities Market Report 1/12/2016

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Harvest is well underway in the north west. Yields have been anywhere from 3mt/ha to 5mt/ha for wheat & barley, which will go partly towards compensating on prices. Late last week, & early this week saw the AUD/USD strengthen to the high $0.74.97 mark. This made Australian wheat exports less competitive. Coupled with out appreciating exchange rate, we saw volume selling & hedging on CBOT wheat futures forcing them lower & this was a double whammy for local prices & they fell $10/mt over the week. Last night, however, we saw our dollar fall back to $0.7385 at the time of writing which will assist the price decline in AUD. The global grain complex is still focussed on the surplus supply of mid quality wheat, so Australian prices have to remain competitive in order to compete for export business. Protein wheat is still in high demand, although price have weakened $10/mt over the last week. We still encourage growers with off spec grain to try & store on farm & deliver post harvest. The packers are paying premiums over the bulk system for this kind of wheat. We also have demand for wheat with minimum 12% protein that has black tip staining. This quality grain is certainly better priced exfarm. Barley prices increased last week & through mid this week, however did succumb to wheat selling pressure later this week. Chickpeas prices have stabilised this week, with premiums & carry now in the market for January onwards. This presents an opportunity for those growers with on farm storage to carry the grain & deliver post harvest & avoid the peak congestion period. It’s pleasing to see that we now have chickpea exporters pricing chickpeas in the bulk system at the true cost of executing this grain back out of the system & delivered to the closest packer. This had made prices in the bulk system a better option for growers that don’t have on farm storage.

AgVantage Commodities Market Report 10/11/2016

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Just when we though that the weather had thrown in everything bar the kitchen sink in 2016, we wake up to find the kitchen sink has arrived as well with the news of Donald Trump as president of the United States. Global financial markets have responded with volatility on the back of Trumps campaign rhetoric leading up to the election. Now it will be a wait & see game to determine what the actual ramifications will be to U.S government policy. Like the Brexit decision, markets will take time to digest, & we hope the sky does not come falling down – the worst usually doesn’t happen!
 
On the local front, harvest is now underway around most areas of our region. Faba beans have been disappointing with low quality & lack of demand being the main issues. We are currently working hard to find domestic markets & encourage growers to call us with their stocks so we can contact them when markets become available. Barley & wheat has not escaped the quality issues either, with some growers being hit with black point staining in their crops. No chickpeas have been harvested in our area, & the market remains optimistic on quality, however with rain this week, risk remains & we continue to caution growers. Prices vary greatly from location to location & we encourage growers to speak with us in order to understand the best location for their individual circumstances.
 
F1 barley is bid $130 xfarm around Narrabri. Wheat delivered local packer: APH1 $280, APH2 $270, H2 $230, APW $205. Little demand for fabas in the export market, but there is renewed interest in the domestic market – calling for offers. Canola is bid $500 xfarm Narrabri on a flat oil & admix basis. Chickpeas are $795 local packer for first half of December delivery.

AgVantage Commodities Market Report 4/11/2016

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Harvest seems to be coming in ever so slowly with faba beans barley, & some wheat delivered this week. It seems that the faba bean wows we have been warning about have come true, with many growers not being able to make number two quality due to seasonal weather effects. We would expect that if the quality issues continue, that the spread between number 1 & number 2 quality will widen, & number 3 quality will only be valued in the limited domestic market. Early barley & wheat yields are pleasing with Walgett APH2 coming off at 4.5mt/ha. On the international stage, nothing has really changed for the wheat complex, & Australia will need to compete in this space. With the current burdensome global supplies of wheat, we don’t expect prices to rally in the next twelve months. Protein wheat remains well priced. The December delivery period for chickpeas remains uncertain, but is showing signs of demand weakness. This will be something to watch closely, as many growers in northern NSW will be delivering in the last week of November to the first half of December. Canola is well priced with growers achieving $500 xfarm for first half November delivery. We recommend that growers understand their oil quality to find the best markets, that is, flat priced oil with no premiums or discounts, or if they have 425 oil or better, they will normally be better off going to an oil bonification market. Most growers in northern NSW have completed cotton planting, & whilst the cool temperatures have created some challenges, most growers are reporting that their cotton is looking good. Mungbeans are an opportunity crop worth considering this year & growers looking for details can contact us. With the next few weeks of weather looking warmer & fine, we expect that harvest should finally get under way & give growers a window of opportunity delivered packer.

AgVantage Commodities Market Report 28/10/2016

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It seems waiting for harvest is like watching the kettle boil this season. On the back of a very wet & cool winter & spring, harvest has been delayed beyond the traditional period, leaving many anxious to get in & get the crop off. Whilst when the crop is ready is largely out of our control, what is in our control is planning for harvest. When I say planning, I don’t mean the obvious of having machinery, labour & logistics lined up, I’m talking about grain management on farm in terms of quality, segregation ability, & marketing strategies. In a year like this, it will be paramount to be able to manage off spec grains – especially pulses like chickpeas & faba beans. Due to the late harvest, meeting delivery periods will be critical. Growers should be sure they are prepared to deal with off spec grain by having the ability to clean the grain on farm by having their own grader, or a sub contract grader, or know that their delivery location can handle off spec grain if they have it. Grain quality will be important this year for wheat also. Protein wheat will have a strong premium over low protein. We recommend growers with 12% protein or above try & segregate if possible on farm. Low protein APW should go the bulk system, but if you can store on farm, their might be some container interest this year.

Currently the chickpea market is in turmoil with the delayed harvest, with most forward business done for October/November delivery. The delayed harvest has created a logistical & contractual nightmare for both the trade & growers who have taken positions in the market. We urge growers strongly who have forward contracts to contact their brokers or buyers to discuss delivery. Currently, there are discounts to extend contracts for December of up to $90 per tonne. Whilst we believe this spread with narrow, it is certainly a risk that growers with forward business must understand & manage. The reason for the discount is that for chickpeas shipped in December in containers, it’s a 40 day sailing time on the water, then around 10 days at the wharf at destination, then another 7 days to move up country to market. This equates to approximately 57 days. Sub Continent harvest traditionally begins in February, so when you do the sums, December shipments out of Australia could be competing with sub continent new crop. Having said this, the sub continent new crop is not planted as yet, & it too might be delayed, or at least is unknown, so it’s a game at the moment between Australian suppliers & sub continent buyers jostling for positions.

Faba beans are still very much the poor cousin of chickpeas. We’ve been highlighting now for some time that Egypt’s (or major export destination for Australian faba beans) demand is lack lustre due to poor economic conditions. Throw into the mix the large chickpea program, & this equals low demand for faba beans. With the current chickpea mess at the moment, buyers with logistical positions on chickpeas have the majority of packing space booked, & unless they decide to release some of this space, faba beans just won’t get a look in. We encourage growers that have genuine number 2 quality to contact us as we do have a limited domestic home. Other than this, growers who cant find a harvest buyer, will have to store faba beans & we hope that export demand will pick up in the New Year, after the chickpea debacle has been sorted out.

 

We have some old crop wheat shorts available due to the delayed harvest.

AgVantage Commodities Market Report 25/10/2016

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Whilst the world is still awash with grain, we have seen a steady rally over the past fortnight on the back of short covering from funds – why?. Investment funds have been selling off wheat due to burdensome global supplies of grain. Short covering is when these sellers buy back their contracts to close out their position. Some in the market have deemed global grain prices to be cheap, relative to other investment opportunities, so have been buying wheat futures. This buying causes a snowball effect & hence why we have seen wheat futures rally. Its important to understand why a market is doing what its doing in order to make informed decisions that suit your business. At the end of the day, the wheat market is rallying on short covering, not demand. Global stocks remain very high, so growers should look at capitalising on these rally’s where it fits with their risk profile & existing marketing program.  The AUD/USD continues to remain extremely resilient, & at the time of writing has rallied back to 0.7721. The strength in the AUD is off setting some of the value in the rally in wheat futures in AUD terms. Australian wheat is still over priced when compared to export parity on the east coast of Australia. This means that wheat futures need to continue to rally to allow basis to weaken, or our prices need to decline by around $10 per tonne to be competitive. As Australia is well on track for an exportable surplus on the east coast, our wheat has to be competitive in the export market in order not to build large carry over stocks.

Chickpeas remain firm for November delivery with bids at $1,060 delivered Narrabri. December deliveries are holding up with bids at $970. Faba beans are holding steady at $280 Narrabri, less $20 for No.2’s. We now have some domestic feed demand, so growers should contact us if they have old crop, or think their new crop will not make export quality. Growers should be aware that packers will only receive faba beans until chickpeas come on line. Once chickpeas receivals commence, the packers will drop faba beans like a bad smell. DR1 bids are up to $350 NTP Newcastle, this is an increase of $40 per tonne in a few weeks. Growers with protein wheat this year will be rewarded if they can segregate. We still believe growers with old crop barley should be selling before new crop & there are a few small shorts out there which add to the small window of opportunity. Old crop low protein wheat is also a sell, with value remaining for growers with old crop protein wheat. Canola is sort after, both on farm & in the system.

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