Negative macro data and a rush away from commodities has resulted in sharp declines across the agricultural futures. The weaker than expected GDP data for the first quarter of the year coming out of China can be seen as the instigator for the decline in the market along with more weak data coming from the US. The resulting risk off attitude saw global sharemarkets slump, and significant drops for gold, silver, crude oil and copper. A silver lining to this is the Aussie dollar falling almost 3c over the past week to find itself close to $1.03, with the AUD being closely associated with economic performance in Asia and the fortunes of the commodity sectors. Ag commodities were not immune to the widespread liquidation, with wheat dropping 21USc to close at 693.6USc/bu. The fall in wheat was compounded by weather forecasts which indicate better precipitation for their yet to planted spring crop along with reducing concerns for the winter crop which is coming out of dormancy at the moment. Concerns do remain for the winter crop as it is susceptible to frost damage at this time. Corn lost 11.6USc to finish at 646.6USc/lb and soybeans 18USc at 1395USc/lb, with the better weather outlook also having an impact on new crop potential. It is also interesting to note that hedge funds are currently holding their most bearish position on agricultural commodities in several years, with net long positions in the market well below where they usually rest.
Cotton had losses of 134 USc in the May contract and 162 USc in the July contract, with the July closing at 86USc/lb. The cotton market is in the process of rolling from the May contract in to the July, with ECOM commodities anticipating the July contract to soften to similar levels as where the May contract is, around 84USc/lb. This is on top of losses over the course of the last fortnight which has seen prices steadily decrease from highs in the 90s. Weaker economic data out of the US and Europe has certainly had an effect on the demand side of the market, while mills continue to operate on a hand to mouth basis with purchases. The drop in the AUD should provide some cushioning to domestic prices holding around $430/bale.
Domestically, there is demand for any stocks of ASW to 70/10 grades of wheat either in the system or ex farm. Chickpeas delivered in to Dubbo at $500 also represents a good selling opportunity, with reports from buyers showing business being done in the trade at $490 DCT. This market has struggled to gain much momentum over the last few months and the potential for price increases going in to the Ramadan period being uncertain. New crop pricing has slightly increased to now hold at $450 delivered Downs for a hectare contract. Sorghum demand continues for April. We have a strong belief that once April/May positions are square traders will pullback buying as there is a large inverse in the market from April through to June/July. We’ve heard that US Milo is trading into Japan (our main destination) for August shipment at levels equivalent of $210-220 Newcastle track (parity), that’s $49-59/mt potential downside on the export market. We have been trying to price sorghum for June delivery and all buyers are unable to give bids due to the inverse, which is making sales for them very difficult to make, especially when Japan is sourcing much cheaper US grain. Although futures took a dive last night, sorghum values for April delivery into Narrabri and XF have remained at yesterdays levels. Demand into Narrabri is for April and limited to 1000-1500mt and because it is going into containers, it is a specific shipping period and not likely to extend through May. For anyone looking to price sorghum for prompt movement, please call our Goondi, Narrabri or Dubbo offices.