On a positive note, central & northern NSW has received saturating rains over the last month. Whilst some areas have possibly received too much rain in the context of emerging crops, the overall benefits should out way the costs. We see growers willing to plant remaining area out to mid July. After this date we expect most growers to pull up stumps & carry any intended area for winter crop out to summer crops, or fallow through to next winter. Most areas have enough moisture to see the rain disappear for the next 2 months, but many areas will be reliant on a kind finish to the season with respect to moisture & temperatures.
Cotton prices have been firm again this past week with current crop reaching $490 per bale & new crop $500. Unfortunately, the grains complex has continued its downward trend as U.S futures continue to be sold off. This has been due to market sentiment on burdensome inventories (especially for global wheat stocks) & a firming U.S dollar on the back of Brexit. We made comment in last weeks column, that whilst we expected some volatility over the result, we also expected markets to settle down over time as they realise the sky will not fall in. The positives for Australian growers with the firming U.S dollar has been the weakening of the AUD, which has helped to reduce the effects of falling U.S futures values.
Feed quality & high protein wheat has remained steady over the last week, whilst generic milling grades have fallen away. APH & HPS with minimum protein levels of 13% is still highly sort after. The higher the protein & lower the screenings the higher the value. APH1 (min 14% protein & max 5% screenings) is still fetching above $300 delivered Narrabri with APH2 (min 13% protein & max 5% screenings) ~$275. HPS13 (min 13% protein & max 25% screenings) is $235 & HPS14 (min 14% protein & max 25% screenings) is $245 delivered Narrabri. Out of spec barley (FB2 & FBX) is still attracting reasonable spreads to FB1 of ~$185 to $200 ex-farm Narrabri depending on test weight & screenings. Sorghum 1 is bid $200 ex-farm Narrabri which has slipped ~$10/mt. Chickpeas have steadied at $925 delivered Wee Waa, with grower selling virtually non existent. Faba beans are still offered at $450 with bids around $320 delivered Narrabri equivalent. We expect some liquidity to increase in the first half of July as many growers have held on to stock for taxation purposes. It will be interesting to see if these grower will engage the lower market, or continue to hold their stocks.
Its been a week of mixed emotions with market volatility & rain – some say too much rain in certain areas!. Global wheat & corn futures have had a week of declines, with soybeans, canola & chickpeas being choppy. Northern & central NSW has seen falls in excess of 100mm over the last fortnight. Whilst this rain has replenished much needed soil moisture, it has sparked concerns of crop damage due to water logging & planting delays. Whilst its certain there will be some damage, its too early to call how much it will be, but one things for sure, the benefits we receive from the rain will out way the costs.
Global wheat & corn (correlated to our sorghum market) markets have seen a drastic decline over the last week as the weather risk premium that was built into these markets dissipates. Corn has been the main driver & was bid higher on the concerns of dry weather in the U.S & production concerns in South America. U.S weather forecasts have improved for the short term resulting in a rapid sell off which had a spill over effect for wheat. Global wheat supplies are burdensome, meaning that Australia, being a net exporter, has to compete in the world market for sales. Due to the large global wheat surplus, Australia has had fierce competition from non traditional suppliers of wheat to south east Asia. Global freight rates have also been historically low which has allowed these non traditional exporters to reach our markets. The AUD/USD has also appreciated back to $0.75 which as had a double whammy effect on our prices in AUD. We expect foreign exchange & financial markets to settle down after the Brexit result is determined. We are confident that the world will determine that the sky will not fall in irrespective of the result of the vote.
We have been advising growers for the last month to sell into this rally for the fundamental reasons above. Our view has not changed, however we advise sellers to be patient after this recent decline & not chase the market lower, as we don’t believe there is considerable down side in local values for wheat, barley & sorghum. New crop values are a similar story in that we don’t advise growers to be chasing new crop track Newcastle wheat values as the inverse between current & new crop is too large & we believe there will be opportunities in the future to capture better values. Over the last season we have seen consistent opportunities for growers that have stored grain on farm to capture better prices than delivering into bulk handing system. This trend will continue & really separates the forward thinking sellers from the rest.
Locally demand has been quiet this past week with the bid offer spread widening. Demand for high protein wheat remains steady with stark premiums delivered grain packer over the bulk system. APH1 $305, APH2 275 & H2 $265 delivered Narrabri. There has been opportunities to achieve price spikes where buyers have been paying well above their bids sheets ($10 to $15) when loading trains & vessels. It pays to be in contact regularly as these bids are not published. Barley demand has had some traction this week, especially for off grade FB2 & FBX achieving $185 to $200 exfarm depending on quality. FB1 values around Narrabri are $220 exfarm. Sorghum has taken the lead from CBOT corn declines & is bid $210 exfarm for June/July around Narrabri. SFW1 delivered Darling Downs is in the mid to low $280’s, however most growers have been firm at $250 exfarm & achieving their offer. Feed barley is bid mid to low $250’s (making a $220 exfarm a great bid) delivered Downs. New crop chickpeas have been volatile & we believe demand will remain firm for the rest of the season. It’s too early to be pricing large percentages of estimated production as production risks are high with a wet winter forecast, & whilst demand remains firm, why put your head on the block? New crop multi grade APW1 wheat values are bid around $275 NTP Newcastle. If you take $40 off that for the rail differential it gives you $235. You could conservatively add $20 for APH2 which brings you to $255 Narrabri. If we then take off an average of $15 road freight to your silo at harvest, it equates to around $240 exfarm. Current APH2 is bid $275 delivered Narrabri. Take off $15 freight to farm & you get $260 exfarm. Faba bean demand is still non existent for new crop, but this is not unusual for this time of year. Cotton values have come off the boil this week with prices reaching $490 early this week only to pull back to $475. We have traded $500 for new crop. Lets hope we can get some more run off in the storages & growers can get the confidence to take forward opportunities.
Global weather concerns ease as northern hemisphere winter crops near harvest and summer crop plantings near completion. Wet conditions that have plagued US winter harvest have eased with the HRW harvest at 11% completed, now ahead of last years pace. Weather related quality concerns have not surfaced, with higher yields adding to an average lower protein harvested to date. The increased harvest pace and forecast weather has pressured prices. EU weather conditions have improved and added weight to the falling values. The USDA WASDE report out last Friday reinforced the comfortable global stocks position, with the large carry to expand through 2017 with ending stocks rising 14mmt. US warmer weather had provided some support for firmer Corn futures values but has eased in up coming forecasts. US plantings are complete with crop ratings unchanged from last week and equal to last year. WASDE reported a lowering of global corn stocks by 1.32mmt, by way of usage outstripping production. End of month USDA planting report is expected to reduce corn area and increase soybean, which may provide support to the corn market. Soybeans have eased this week as weather concerns globally ease. WADE has 2017 ending stock reducing 5.89mmt with stocks to use ratio, still a healthy 20%. US plantings are at 92%, with crop ratings ahead of last year. Upward revisions of the US crop are expected on increased planted area in the end of month report. The condition of the northern hemisphere canola crops improved last week on favourable weather, easing supply conerns.
US cotton plantings advanced to 89%, as drier weather eases market concerns. Futures have eased and strength of the $A has contributed to lower local values with 2016 crop now below $470 and 2017 in the $470-$480 range.
Global financial markets have concerns on the pending UK vote on remaining in the EU, while US interest rate rises talk remain pending and Chinese data no inspiring any market direction.
Local markets have held steady to softer for both old and new crop wheat with sporadic spot demand for higher protein grades achieving firming values. Barley and sorghum bids are stronger for x farm and delivered markets up to $7 stronger with track bids $1-$2 firmer. Buyer interest has been keen for lower grade barley, with discounts to F1 narrowing. Chickpeas bids continued to firm over the week for new crop with $935 Newcastle port and delivered Namoi and Macintyre Valley packers at $920 delivered October – November, with December delivery discounts range $20-$30. Hectare contracts remain available at $80 discount to the fixed tonnage options.
Forecast major rain event leading into the week end appears to be of mixed fortunes, which may limit the full extent of plantings across the northern cropping region for this winter crop or at least delay plantings to the later end of the window.
Global weather continues to influence the speculative sector of the market, with global grain futures markets holding a weather premium, with tropical storm events across south east US, hot conditions early in the summer for the mid west US and wet / flooding condition across parts of the EU, raising concerns on disease levels and quality of crops. This is against a back drop of US corn plantings at 98% and soybeans at 83%, with crop ratings above those of last year. The wet conditions continue to delay the HRW and SRW harvest with HRW crops ripe and more susceptible to sprouting, while SRW crop are delayed with rust disease posing a threat to grain quality, as will aflatoxin levels limit market access. Spring wheat crop conditions have improved on last week across North America. Chinese weekly auctions of stock piles have had minimal impact on markets to date. Brazilian corn harvest has replenished depleted local stocks and reduced prices.
USDA report is out on Friday [US time] to provide a picture of global stocks positions. Reuters have reported global wheat ending stocks to increase 15mmt to 257mmt for 16/17, with corn down 1mmt at 205mmt and soybeans down 6mmt to 66mmt. These levels remain historically high and will provide a sound buffer if production were to not to meet expectations.
US cotton is 75% planted, on par with last year, but behind the 5 year average, with delays due to wet conditions, mostly in Kansas. New York cotton futures rallied to 9 month highs in the spot contract which held 2016 prices in the $470 – $480 range with 2017 above $480 with grower selling interest increasing and buyers looking to hold GTC orders at higher levels to capture current and future price movements.
The Australian Dollar firmed on Reserve Bank decision to hold interest rates, following on from earlier in the week the US decision not to increase interest rates this month, but have indicated they will rise gradually over time as economic conditions are supportive.
Last week rains provided the break needed for all regions to be planted from Central Queensland and through-out northern NSW, and enable dry sown crops to germinate. Some re sowing will be needed in water logged paddocks. Grain bids have held steady to firmer over the week for wheat and sorghum, in both delivered and track markets. Barley delivered bids are firmed while track bids are weaker. Buyer interest for high screenings /gradings has been stronger over the week.
New crop wheat multi-grade bids are firmer $5-$10, while sorghum has held steady. Barley bids for northern NSW sites are back $5-$8, with no change to other NSW locations.
Chickpeas bids recovered from pre rain declines to be at $900 Newcastle port and delivered Namoi and Macintyre Valley packers just shy of $900 delivered October – November. Increased area will now be planted to chickpeas this season and given average seasonal growing season it will be the markets role to meet early market demand in both container and bulk exports.