A Year in Review
Well it’s difficult to condense everything that’s happened this season/year into a few short paragraphs so if you’re keen to read on you’d best kick back and make yourself a cuppa or crack open a beer!
From a price perspective, the continued drought in the north has held wheat prices firm this season with basis remaining at very strong levels through the entire season. Whenever futures fell, our basis strengthened as local prices remained firm. Recently, we have seen futures gain momentum and local prices again haven’t shifted. In early 2014 wheat became wheat and premiums for high protein wheat disappeared. Slowly this premium re-emerged and local container packers chewed up remaining stocks of high protein wheat as the 14/15 crops progressed. With what was a tough growing season, crops held surprisingly well.
2014/2015 multigrade prices spiked in June and we saw heavy sellers of new crop emerge from the Central West region as their season was in much better stead than the NNSW/SQ crops. 14/15 forward contracting prices peaked around $316-320/mt track Newcastle and for a week every buyer pulled their bids by mid-afternoon as trading limits were reached daily. During this period, NNSW growers were unable to take this opportunity to forward sell as production risk at that point in time was still too great.
Since the end of May, new crop Multigrade APW prices in Newcastle traded in a range from $276 to $302/mt in generic sites and only spiked to $330 track towards the end of November. NNSW sites attracted a premium as they’ve been priced off a delivered Downs number, less road freight and in/out charges.
Since the end of May, the Brisbane track APW Multigrade values only dipped below $300 for a few days at the end of September and the range was $296-338/mt track. Premiums for APH ranged from $15/mt out to $40-45/mt and wider spreads into the container market. Growers were heavy sellers of high protein wheat at harvest either delivered to local packer, in the system or to domestic millers. At times, the premiums for delivery into the packers was $40/mt. Of course, at harvest there are lengthy delays and a part of this premium is paid due to the inconvenience, but we always encourage growers to use any on-farm storage where possible and deliver post-harvest rush.
Durum plantings were significantly lower this year with a low price outlook combined with crown rot and disease management controls forcing growers to remove durum from their programs. Early on, growers were happy with this decision as prices weren’t attracting much of a premium over breadwheat. Durum prices crept up to $360-370/mt site on the LPP, growers started selling. This was back in mid-July. At that stage, fundamentally, there was no reason for Durum to take off and given the spread to APW was $110-120/mt it was a ‘good sell’. What we didn’t expect was that Canada would experience a wet harvest and quality issues. This sent the durum market into a spin and for weeks leading up to harvest there was no selling as prices were jumping up to $40/mt a week! There was a scramble from buyers to own durum and it was trading up to $30/mt above published bids each day.
DR1 peaked between $570-580/mt at site with a $20-30/mt discount to DR3 and growers that didn’t sell were holding out for $600 site. Within days we saw two major players exit the market and bids dropped sharply before any remaining buyers also exited. We are yet to see anyone enter this market. There have been one or two trades that have happened in the past week or two but only if you are in the right-place at the right-time. Buyers are ensuring they make sales before purchasing any more from the grower.
New crop sorghum Newcastle track has been bounced in a range from $262-280/mt from June to late October and in mid November we saw these prices rally significantly to $300/mt track and remain there. This week at $310-312. Brisbane track has been mirroring the Newcastle movements but at a premium of $10/mt on most days. Currently that spread has narrowed and is around $5/mt, putting Brisbane track bids at $315/mt.
Barley is always a ‘hit and miss’ commodity and a lot of the time is considered wheat’s poorer cousin. Barley tends to trade at a $25/mt discount to wheat so when deciding whether to sell or not, that spread is something to keep in mind. If there is a barley short somewhere, that spread can narrow and is a clear indication of a short and to sell. This season we have seen growers sell barley sometimes at a discount as narrow as $10/mt to wheat, but it’s usually short-lived. This year we saw minimal forward selling in the north and a lot more forward selling from LPP growers in the lead-up to harvest. This year also saw more ex-farm sellers as strong premiums are achieved over system prices. We also saw a lot more barley move from Boggabri, Mullaley & Emerald Hill region into northern markets as cheap freight rates made it more competitive to do-so rather than selling to local LPP destinations.
With fairly dismal chickpea prices throughout most of the year, there were still large stocks of 13/14 chickpeas held on-farm. Delivered Downs numbers through the year for old crop ranged from $415/mt at the start of January, up to $465/mt by the end of January and back down to $440 by mid-Feb. This rollercoaster ride of prices continued rallying $30-40/mt, a few thousand tonnes would trade and the price would drop again. This has been consistent with offshore demand. India hasn’t had a large demand for Aussie peas and most of the trades have been with Bangladesh and Pakistan, who only purchase a few thousand tonnes at a time. New crop prices started to come online towards the end of May and prices didn’t fluctuate much from $445-450 delivered Downs until early August where we saw a jump to $475 delivered Downs but settled back to $440-450 during the peak harvest period.
With historically low prices at harvest, the only growers selling were ones that were forced to sell due to cash flow requirements. Thankfully, we have seen those prices rally significantly this past week and today are $500/mt delivered Narrabri, $510/mt delivered Downs and $530/mt Brisbane. Delivery periods have been pushed out until March/April in some cases, which reflects the offshore demand which is for April shipment. These prices include carry through to March/April. While these are strong prices, a lot of growers are reluctant to price 3-4 months in advance. As always, we remind growers still holding stocks that chickpea prices can be quite volatile and large swings in the prices are a regular occurrence. We encourage growers to sell the rallies.
2014 saw a strongly reduced faba bean crop planted as planting conditions weren’t ideal. Narrabri through to Gurley saw the largest planted acreage of any region in the north. Prices simmered along throughout the season around the $400/mt delivered Narrabri mark and when we saw a spike of $20/mt there was some heavy forward selling. Due to these prices, we saw a large portion of the crop forward sold this season. Quality was mixed with crops north and west of Moree struggle to meet No1 spec in a lot of instances. Closer to Narrabri the quality was a mixture of No1/No2 and some product falling outside of these specs. Faba bean values held fairly well during harvest and we saw most of the crop priced at harvest if it wasn’t already committed. What isn’t already sold is held on farm predominantly around Edgeroi/Wee Waa but these are destined for the feed market into the New Year.
Canola this year has also seen a significant shift into the domestic market. In previous years growers have viewed system deliveries as their only option or to deliver direct to the crushing plant in Newcastle. Last season we saw a slight increase in canola use in the domestic market but this season it was a significantly larger push. We saw a large portion of the crop between Narrabri and Moree contracted on hectare contracts at $500/mt ex-farm for harvest pick-up and we have also had minimum 38% oil, flat-priced contracts available that have been widely accepted by growers, especially where oil was lower than the minimum 42%. Even today, the delivered Newcastle feed market values are above the crushing prices.
The start to this season’s summer cropping program hasn’t been very convincing with a lack of water certainty for irrigators and no moisture for dryland growers forcing them to explore options outside their usual cotton/sorghum programs. There has been a large shift towards mungbeans this season from cotton acreage as prices remain strong at $1200/mt delivered packer and returns for water-use is far outweighed. Mungbeans have ticked a lot of boxes this year and we’ve contracted more than we have in previous seasons to-date.
With a large reduction in planted area for cotton for the 2015 crop and a low price outlook we welcomed a sharp decline in the AUD. This has boosted cotton values to as high as $480-490/bale in the last week. Without this, we would be staring at some pretty unattractive prices, as futures sit around the 60 cent mark.
We thank you for your continued support of AgVantage Commodities in what has been a tough season. We, like you, are dreaming of a wet Christmas/New Year period and a better outlook to next season than we’ve had the past two.
Erin & the AgVantage team
One phone call, multiple Buyer’s and Seller’s. It’s to your AgVantage
AgVantage Commodities Pty Ltd ABN: 36 132 582 720
Narrabri: Head Office: PO Box 395, Narrabri, NSW 2390 Ph: 02 6792 2962 Fax: 02 6792 2932
Email: firstname.lastname@example.org Internet: www.agvantagecommodities.com.au
We are still attracting significant premiums for wheat with 14% protein but there is a sharp decline to 13% protein or high screenings. APH1 delivered Narrabri today is pushing $340/mt and the discount to APH2 is $23/mt. The domestic 70/10 market has strengthened slightly this week to $334/mt delivered Downs for Jan/Feb delivery. We also have demand for prompt movement of HPS1 in the north. Please call for individual parcels.
New crop sorghum last week ended the week at it’s high’s into Newcastle at $310/mt delivered and today is a dollar or two higher. In the north we are seeing a slight premium for Jan/Early Feb delivery over generic Feb/March delivery as the early Downs crop will come online then.
Chickpea values remain around $480/mt delivered Narrabri, $460/mt delivered Moree and $500/mt delivered Downs but these delivery periods are pushing out to Feb/March delivery for Narrabri and Downs destinations. Faba beans continue to be difficult to move, and the container market is dead at the moment. Any fabas on-farm now will move into the domestic market over the coming months.
Growers are enquiring about Summer crop options at the moment with windows closing rapidly. Mungbeans are still encouraging with prices remaining strong and a no-risk hectare contract available. Sorghum planted now will face moisture issues when harvesting although these prices are still considered at good levels, currently $285/mt delivered Narrabri and $310/mt Downs.
Since Tuesday we have seen a jump in values for chickpeas, however delivery is now pushed out until Feb/March for Narrabri. Moree is currently priced around $445-450/mt delivered for January and the Downs close to $500 for Jan/Feb/March. Demand looks like it should remain strong for peas into the New Year period as most buyers would be keen to own it for these periods, with most growers not willing to price this far in advance.
New crop sorghum delivered Newcastle has been above $300 this week and today is $308 delivered, with track at $303. There is still a premium for old crop sorghum delivered Downs with these values close to $300 delivered for Jan/Feb and $290 for new crop. Some of the early sorghum crops on the Downs are starting to turn and we expect to see some of this hit the market by the Australia Day break. Yields on these crops aren’t expected to be outstanding and for some of these crops, the rain received this week has come too late. The later crop will certainly benefit.
We have seen wheat values for higher grades in the system drop in the past few weeks, and at the moment spreads between APH and ASW is around $13/mt, whereas 2-3 weeks ago this was closer to $25-30. We still have demand for high protein wheat ex-farm and delivered Gherkes/Narrabri and HPS1 this week has traded at $300/mt delivered Narrabri for min 14% protein.
There has been a lot of focus on mungbeans in the past week. Prices remain well supported and we have zero min/max hectare contracts available into Narrabri/Willow Tree/Goondi/Dalby, with freight rebates available to certain destinations. We have seed still available however Jade is difficult to source. We did have a few tonnes remaining but it will be first in first served. Crystal stocks are still abundant. Seed prices are $2.40/kg and are landed nearest depot. If we have enough orders in the next few days, we are trying to get a farm-delivered deal.
Typical Summer storms over the past week have been patchy and dumped reasonable rain in some areas while other’s missed out or received disappointing falls. Bellata had it’s fair share of rain and some falls recorded for the week have pushed 90mm, plus. Pilliga received good storms and over 100mm in patches. Narrabri measured around 40mm while Walgett received bugger all. Liverpool plains have received good falls in parts as well which will benefit summer crop programs.
At the moment, we are seeing demand for wheat and barley in the north and LPP but mostly for Jan and further out delivery. Prompt homes are harder to come by, especially on the LPP. Wheat delivered Downs today is $326/mt for Jan, $306/mt delivered Ntl and $297-8/mt delivered LPP. We still have demand for high protein wheat delivered Narrabri, with HPS1 today bid at $300/mt delivered for 15%+ protein.
New crop sorghum values are currently around $290/mt delivered Downs, and above $300/mt delivered Newcastle, with a $15/mt discount to SOR2 in Ntl. Delivered local LPP destinations are in the high $270’s for new crop. Mungbean hectare contract enquiry has sparked again with some rain around, and prices still around $1200/mt delivered Dalby for No1 processing quality. Processing quality has increased $50/mt and is now at $1150/mt delivered. This is for a Summer crop, for Feb/March/April delivery.
With our Dollar now around 0.825USD, it has given a boost to cotton prices as futures continue to decline. Today, bids are $472/bale for 2015 crop.
The forecast of rain has certainly had an effect on our local commodity prices over the last week. We have seen a number of traders soften their prices with the prediction. Whilst we know rain now won’t create grain immediately, it will benefit summer crops already planted and a fall greater than 50mm will see more sorghum planted.
The Australian dollar has been flirting around the 85 cent mark the past week and has dropped below on occasions. CBOT wheat futures have found strong ground across the board in recent days on the back of fears of winterkill during the dormancy period. All this being said we have seen little change in the domestic wheat price. On a dollar-for-dollar move, local values should have jumped $10-$15/mt in the last week but we have only seen a $2-$5/mt change at best, and on some grades we have lost ground. This has shown the east coast grain move closer to export parity, as basis levels have absorbed the futures gains. Delivered Downs SFW values have dropped from $330/mt earlier in the week to low $320’s for Jan/Feb delivery. There is still a strong premium for high protein wheat into local packers. APH1 numbers are sitting at $337/mt delivered, compared to the system site price for Narrabri $310. The durum market has become a ghost town, with all traders stepping out of the market as some filled their positions and others found themselves in the position where prices exceeded their buying capability. Chickpeas have now moved out for the Jan/Feb delivery period with a $5/mt carry. Prompt homes are proving hard to find. Bids remain strong at $470/mt delivered Narrabri & $510/mt delivered Brisbane as an indication. We don’t believe these numbers will change too much before we know whether or not the Indian government will implement a 10% import tariff, which would increase the cost of Aussie peas and most likely reduce demand. Cotton values remain in the high $450’s today, with little-to-no grower selling.
This week everyone from growers to consumers are closely studying the weather forecast and waiting with bated breath as to what actually falls. Futures have seen some strong rallies this week but we have seen domestic values soften. Of course, if the rain doesn’t eventuate, we expect the market to correct.
Old crop fabas into the domestic market are difficult to place with the forecast, and most traders are saying that two weeks ago consumers and local farmer demand was present but today it’s not. The export market for fabas is pretty flat also. Bids range from $380-425/mt delivered Narrabri but most buyer’s positions are now square and don’t want to take on ‘bits & pieces’ type parcels.
Demand for prompt barley on the Liverpool Plains is strong. We currently have a slot for 120mt pick-up today/tomorrow around $255-260/mt ex-farm, depending on location. Wheat into the LPP destinations is $295/mt delivered and Newcastle $312/mt. At this spread, most LPP growers will deliver to local homes and the Newcastle destination will be filled by Central West grain.
In the past week we have heard of grain being priced around Narrabri/Moree for $290+ XF for December pick-up of 70/10. These prices are very strong and most traders are telling us they are sourcing grain cheaper either through the trade or from the Central West well below these values. We expect these prices are to fill immediate shorts and should be given serious consideration.
AGP in the system at Narrabri today is around $270/mt site. This makes it an equivalent of $329/mt delivered Downs for prompt delivery. If you compare it to Nyngan, where AGP at the site is around $236/mt, it’s delivered Downs equivalent is $310/mt, $19/mt cheaper than Narrabri wheat!
Chickpea demand is predominately for the New Year period and remain around $510/mt delivered Brisbane for Jan/Feb and $490/mt delivered Downs. Narrabri values are $470 for the same period. We should have a better handle on the Indian crops by this period, as well as a determination on whether they will impose an import tariff or not.