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.
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.
It has been a nice change to have experienced a week of fine weather, although temperatures have been variable from the low to mid 20’s to low 30 degrees Celsius. Whilst the fine weather has promoted winter crop growth & recovery, along with drying out of saturated paddocks, the cool temperatures are still posing challenges for summer crop plantings & chickpea flowering/yields. Growers are busy in the fields planting summer crop & preparing for winter crop harvest.
Chickpeas have traded through $1,000/mt this week into local packers, to $1010/mt for November delivery. There is a significant discount to December deliveries of up to $95/mt reflecting the premium packers are willing to pay to make the early shipments prior to the sub continent new crop in March/April 2017. Winter crop harvest will be delayed this year due to the season, & we don’t see many chickpeas being delivered in November in northern NSW. Chickpeas in the region are still flowering, & we expect them to continue until the end of this week at the earliest. Its 30 days from the last flower to final seed maturity, then a minimum of 7 days after that if the crop is desiccated until its ready for harvest. When you do the math, this puts harvest in late November (& that’s without further rain delays). Most growers have October/November delivery periods on forward contracts, & it will be these growers that will be hitting the delivery lines at the same time trying to fit a volume of grain within a narrow period of November. We have encouraged growers with existing contracts with October & November delivery periods to speak with their buyers & negotiate a December option. No doubt there will be challenges receiving the crop this year & everyone in the chain will be stretched from the grower with yield, quality & delivery issues, to the carriers keeping up with the headers, & the packers/receivers & shippers providing the ability for growers to delivery. Quality will be an issue this year & we expect weed seeds, immature seeds, & dirt to test growers who will be fighting the clock & weather for delivery. Receival sites will also be under the pump to be able to receive the deliveries within the required time frame. This will be a year when you don’t want to be turned away at the site for a load that is out of spec! We see value I selling new crop multi grade wheat into Moree. This is at a premium to generic track values.
The local weather looks fine through this week coupled with warmer temperatures which will assist with the further development of crops & some drying out for access. As we get closer to the business end of the winter crop harvest, there are still many uncertainties with future weather, grain quality, yields & delivery periods. We recommend growers remain cautious with crop management & forward sales. Quality management will be critical this harvest, if quality is effected. Quality grain will be at a premium to anything that might be down graded due to defects or not meeting specifications for any reason. Protein wheat will be at a greater premium than average this year if the protein profile comes in as expected. Growers that can segregate &/or blend to increase their quality will benefit. On farm storage, testing, grading & handling equipment to allow this will naturally pay off.
Chickpeas into Narrabri are around $1,000/mt. These prices are reflecting domestic shorts/washouts in the current market, & not destination export markets. Whilst the export market is not at these levels, we still believe prices will be supported through November on short covering. Whilst we can’t say prices will remain at 1,000/mt, we can say we are confidence that prices will remain well supported which removes the need to sell before you have a known quantity, quality & ability to meet a delivery period. Faba beans are bid at $280 delivered Narrabri packer for No.1 quality. With the current lack of packing space & export demand, we think this market will come under pressure when growers commence selling. We recommend selling fabas at $280+ at harvest, but if you decide to store any unsold fabas, we recommend storing on farm where possible & not in the bulk system, or sites where they can’t pack.
Wheat, barley, sorghum – we recommend selling any low/feed grades of old crop prior to winter harvest. New crop is a wait & see based on quality.
We have received many calls about grain pools for this harvest. Our advice is that pools are for swimming in, & a vehicle for marketers to take zero risk, whilst charging a management fee to make their revenue. Whilst pools do offer cash flow management & tax management structures, growers can manage this themselves. Naturally if this is not something you want to do yourself, a pool, or a managed service might be something you consider. We would argue that most growers will be able to get better rates of interests from their banks, whilst deferring tax is manageable in many ways. By delivering into a pool, you as an individual lose control of your grain. Pool in our opinion, are better placed in export oriented market zones like South Australia & Western Australia. In this day & age, with the market dynamics of this region, we believe growers are better served by keeping control & taking advantage of the many different markets available. This includes container, bulk system exports, xfarm, delivered & domestic markets. Quality & freight arbitrage opportunities are also important, & play a role in the marketing mix. There are many service providers out there that offer individual management services for marketing your grain & produce, that base decisions on your individual circumstances. Pools take a “one size fits all” approach, & more importantly, zero risk for the pool manager.
With the current delay in harvest this year, the delivery window is narrowing. Weeds are common in crops, along with immature chickpea seeds. Its will be critical to have a clean sample at delivery. Ensure you have a grading option available, or order your Kwik Kleen grain cleaner now to ensure you don’t miss out, & you can deliver with confidence this harvest, saving you time, stress & MONEY!!!. See the links on this report & our website on the Kwik Kleen Grain Cleaner.