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.

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