The USDA released the March World Agricultural Supply and Demand Estimates overnight. To summarise, they were largely benign. The market was expecting the USDA to increase global stocks of wheat & corn slightly, so the fact that this did not happen could be seen as slightly bullish. Having said this, we need to keep the macro picture of the global grain complex in perspective, & the facts are there is a surplus supply of grain both domestically & globally. The theme from the report continues in that global stocks for wheat, corn, soybeans and cotton are all surplus to needs and production is again going to out way consumption. Production stocks for wheat were trimmed by 1Mmt, which saw wheat futures rally. Production was brought back due to less optimistic estimates from Indian and Australian crops. Corn production was also cut, down 1.8Mmt, although this caused the futures to drop slightly, as current stocks are still very high. Cotton futures again fell overnight despite Indian and Pakistan production being lowered by 1m bales and 200k bales respectively. Another important factor to keep in mind is that Australian growers are largely unsold – we estimate 50% in northern NSW. This is playing into the hands of the exporters who have been bleeding money over the last few years through buying up the crop at harvest &/or buying expensive shipping slots, then not being able to make sales. This year, they have been happy for the grower to carry the crop & come in & buy when they have made a sale. This means the grower is paying the cost of carry which includes financing the crop.

Domestically, we have seen another week of lacklustre demand & hence limited selling from the growers. New crop selling has all but vanished as temperatures have held above 35 degrees for most cropping areas on the east coast. Listing to the BOM this morning, we’ve experienced 43 days of these temperatures in a row with no moisture relief. Bids have continued to decline on wheat, barley & sorghum. Old crop chickpeas have remained steady, with new crop being influenced to the downside by a firming AUD/USD. The AUD has really squashed any rallies in commodity futures markets, as it hit $0.75 on Wednesday night against the US.

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