Market Report 5/9/2013

Weather is once again the main driver of futures movements, with wheat and corn taking a back seat to a large drop in soybean values overnight. Traders in the states are extremely sensitive to any change in the forecasts, and the possibility of a turn slightly wetter in growing regions over the next week is enough to see selling taking place en masse, with the new crop contract losing 34 USc/bu. The large volatility seen recently in all futures markets could see these losses made up very quickly with a tilt to drier conditions in the future. Losses for wheat and corn were only marginal, which reflects the advanced state of these crops, with potential yield becoming more certain. The progress of the Australian crop is beginning to take a more prominent role as well, with traders coming to grips with what local growers have known for some time now, that production estimates of up to 26 million mt are significantly overestimating the true state of affairs. The continued dryness, along with frost damage which is becoming more apparent as the weeks go on, has seen the likes of CBA, Cargill and Rabobank make downgrades to their earlier estimates, with Rabobank claiming a 2.5 mmt overestimation. ABARES will release their estimate of Australian production later next week, with the total likely to be closer to 23 mmt.

The conflict in Syria is also having some impact on markets, most directly on the movements of the Aussie Dollar. If the US eventually make a military strike against the Syrian regime we would expect an strengthening US dollar, putting pressure on the local currency. At the moment it is holding above 0.915.

With no substantial rain in the forecasts in the next couple of weeks, basis is remaining very firm for grain in the Newcastle and Brisbane lines, particularly with support coming from domestic feed markets in the North. Newcastle track values have pushed above $305 for Northern sites, while Brisbane track numbers are now pushing up to $315. While canola prices have softened over the last fortnight after reaching $563 last week, we currently have a hectare contract available for early movement, if this is of interest please give the office a call. Faba Beans and Chickpeas are now pricing at pretty similar levels, with $400 delivered Narrabri being available for both commodities. Strength in fabas has been held from domestic demand, with reports of Australian faba beans being up to $100 over what would be achieved in export destinations, while chickpeas is still reliant on export markets which are already well supplied with the pulse. There is still an expectation that India will come to the market at some point, but the tonnage they will require will be limited and their demand may be shortlived.

There is a very important contest on this weekend, and at the risk of alienating some of our client base I am going to make my allegiance known. Moree Bulls are facing off against the Narrabri Blue Boars this Saturday in what should be a cracker. Go the Blue Boars!!