Harvest has kicked off, albeit only early crops in the northern areas, but it has started. Because the start to the season was so different for many areas, we believe that harvest will be all over the shop as well. Wheat and barley prices have traded in a tight range over the past week, with no real direction from the corn or wheat futures market. A few wheat and barley shorts have arose, but buyers are not there for big tonnage knowing sellers of new crop will be just around the corner, we have genuine interest for wheat – min ASW for 200mt, indications $280 XF Moree prompt. Chicago wheat futures were up 9UScents for the December contract overnight due to the USDA quarterly stocks report showing about 1.5 million tonnes reduction in the trade forecast, which is quite significant at this point in time. Although there wasn’t a sharp rise as world stocks and production continue to outweigh production.
For prices to increase here domestically on the wheat, barley and sorghum we would have to see a dry summer, and by all reports that is what it is shaping up to be. Our basis is currently quite low compared to where it was 3 months ago, with futures down and domestic consumers sitting back as they wait to see how big the crop actually is. If sorghum plant is down compared to last year due to dry weather we could see feed grains spike here, and see our basis move back up.
Physical chickpea demand has picked up again this week, the futures market has moved higher and the low AUD is obviously helping, with slots now available for January it has taken the pressure off harvest delivery. Delivered packer price has been bid at anywhere from $755/mt to $780/mt in the north, with early peas at a premium. Track wheat has been bid at $292/mt with SFW XF for Jan pickup bid at $255-60/mt XF Narrabri – which shows a good selling opportunity. New crop sorghum has traded at $240/mt XF Narrabri this week, with barley the poor cousin of both with bids around $210-5 XF with no real interest at the moment. APH1 del packer is also trading at a premium over APW multigrades in the system.
The chickpea market has fallen heavily over the past week, we have seen a significant drop in prices over the past week, Narrabri was bid $800/mt and the downs at $840/mt. The Chana futures in India has fallen by about 15% on the back of the governments implementation of a 35% margin call on all futures contracts. This has resulted in speculators and holders of physical product selling futures so they do not have to pay the government the margin call. Overnight the Chana futures steadied to be up about 0.2% for the December contract. This is the first day is has finished higher in the past week and a half, so this is good news moving forward.
Chicago Board of Trade wheat futures remain under US$5/bushel for the December contract, and with our crop production getting more certain week by week prices seem to have plateaued for the time being. Growers expecting high protein wheat should seriously consider looking at other options than putting grain into the system or storing on farm to market later, there is a significant premium for APH1 & 2 delivered packer – yes this may not be the best option for harvest delivery, as the packers have a history of having a very slow turnaround, but if growers can manage their stacks and trucks effectively it will be a good option to snag a few extra dollars.
The arc for F1 barley and SFW1 wheat going to the downs or northern NSW for new crop is shaping up to be much smaller than what we have seen throughout the year.. January contracts are paying a $10-15/mt carry so growers who are able to store their feed grains on farm will be at an advantage to those who can’t. Faba beans have struggled to find a home, with bids of $330/mt delivered most packers – still traditionally good numbers but significantly lower than 6 weeks ago, where bids were well above $400/mt delivered packers.
A low Australian dollar is really helping commodity prices stay afloat at the moment, at the time of writing it was $0.6978 after losing over half a cent in Wednesday nights trading session. Generally most of the futures markets have traded in a tight range over the past week, with only 4 sessions, for the American exchanges due to the US public holiday on Monday. Nothing to eventful has come to fruition – global wheat stocks are still very comfortable, with reports that French wheat is struggling to be competitive with Black Sea origin supplies. USDA report is out this week, and will show some clarity on global supply and demand.
Domestically we have seen a little bit of grower selling of wheat and barley as harvest gets closer and closer, and the realisation that for the near term prices don`t have any bulls behind pushing them upwards. Australian wheat crop estimates still remain well over 25 million tonnes for the upcoming harvest and most growers will realise great yields, another fall of rain at the end of the month will cap off a remarkable season for many in the north west.
The Jan/Feb delivery slot is certainly trading at a premium with $230/mt achieved for F1 barley ex farm Northern NSW this week, compared to a $210/mt bid for harvest pickup. If growers can store their grain at harvest it is certainly showing at the moment that its worthwhile. Multigrade milling wheat contracts delivered Narrabri packer is a much better option for growers if they know their quality will be in the higher protein grades, on Wednesday APH1 was bid at $308/mt delivered with the best price in Narrabri Graincorp for APH1 on a multigrade contract at $261.50/mt, showing a worthwhile premium. Chickpeas demand remains sporadic to say the least, as pricing isn’t changing too much, demand to buy them comes and goes on a daily basis. They reached $800/mt delivered Narrabri this week for Nov/Dec, and $770 delivered Wee Waa, but we cannot say for sure where they will be today. Cotton has been the main commodity benefiting from the lower dollar with 2016 cotton bid of $518/bale today.
We currently have interest for 25mt of SFW XF Gunnedah or Tamworth. Durum wheat also.
Positive influences have been hard to come by over the past week, Chicago board of trade wheat futures have continued to find new lows, with the December contract closing at 479.50USc/bushel on Wednesday night and our basis continuing to weaken. For new crop wheat in the Newcastle zone our basis has halved, yesterday it was sitting at a positive AUD$24/mt down from $48/mt at the start of August. Current global wheat stocks remain very comfortable and the outlook continues to have production above consumption for the coming season. Cheap tenders continue to be traded out of the black sea region, but as there quality is not as good as many other exporters there is still hope for the Australian export market to keep our basis at relatively decent levels. The El Nino continues to weigh in on grower confidence in the southern hemisphere. Australian growers have been hesitant to sell new crop just yet, with prices falling and a dry finish which could still spell trouble, although unlikely.
Barley and sorghum has followed wheat lower, and haven’t found any real support on the export market, especially with reduced confidence out of China as to how much they will demand in the coming season. China has bought about 1.8 – 2 million tonnes of about 2.2 million tonne sorghum crop just gone, and about 4 million tonnes of barley last year, so we are heavily reliant on them being able to take similar levels of stock especially as our crop forecast is expected to outweigh production from last year.
The reality is that prices that we saw earlier in the season have now gone and are not looking likely of returning anytime soon, if the El Nino kicks in Spring/Summer then we will probably see more domestic demand come into play from March but until then there aren’t too many bullish factors in the market to help wheat and barley find support. Chickpeas have been quite fickle – not that the price has fluctuated greatly, more so, which buyer is willing to participate at any given time. Buyers have been present delivered Wee Waa packers this week at $770/mt and delivered Gundy at $780/mt. Narrabri packer buyers have gone quiet for the time being but there are options delivered into the GrainCorp sites of Narrabri, Bellata, Burren Junction and Moree. Cotton has found support with the weakening dollar and relative steady futures, with 2016 cotton bid at $512/bale on Wednesday.