Market Update Wednesday, October 10 2018

Domestic Market

Wheat
One of the worst winter crop growing seasons on record for the east coast of Australia continues to throw up challenges for those that are still in with a chance of seeing a harvest. After a prolonged dry period, crops across much of Victoria were hit with frost in recent weeks and are now in the process of being cut for hay. This has brought the production forecast for the southern state back inline with the trend of NSW. As a result, we saw new crop track markets in the south rally to as high as $445 for APW. We are now forecasting wheat production for Australia in the 18/19 season to be between 15 and 16 million tonnes of which less than 4 million tonnes will be grown on the East coast.
As has been widely reported in recent months, we are now seeing bulk cargo ships loaded with wheat arrive on the east coast from Western Australia. As of last week, there has now been volume booked to unload boats in all three of the eastern states to continue supplying the local domestic consumer. East Coast grain pricing delivered to the end user is now tied to west coast values and the costs of executing grain around on vessels.
More recently, we have seen some patchy rainfall for the Central West of NSW which will do very little to salvage much of the crop in those areas but will provide some relief to drought feeders. More rain on the forecast for the next 7 days, particularly for southern QLD, seems to be keeping new crop pricing under pressure on the prospect of the looming sorghum plant as well as potentially some reduced feedlot demand for white grains if we see feeder cattle prices begin to recover on the back of the rain.

Barley
Feed barely continues to hold its value relative to wheat particularly on old crop where consumers who have not been able to switch to a cheaper alternative are keeping the market well supported on thin volumes. With barley crops more advanced than wheat in the south, they have borne the brunt of the recent frost damage and production forecasts are well back as a result.

Sorghum
With the rain for northern NSW and southern QLD drifting onto the forecasts, the new crop Sorghum market has drifted down with it. We are still yet to see any planting activity across the board, however with a huge fallow, the potential for a large sorghum crop is intact. All eyes in the market are now fixed on the weather maps, waiting for moisture profiles to fill up and kick us off to what will hopefully be a successful growing season. Old crop markets remain tight, trading on thin volumes to drought feeders and the odd domestic consumer at around a $50-$60 discount to wheat.

International Market

A dry growing season throughout northern Europe and the Black sea has world production of wheat well back year on year. The export pace of the Russian crop is drawing a lot of attention with many speculating that officials will seek to slow down or even stop exports from the country to ensure enough wheat stays put for the domestic consumer. Whilst the government is broadcasting the message of no need to act, it appears that the current export pace will exhaust any surplus of stocks well before the next harvest. Any interruption to the export program from the region will see USA wheat exported in a higher volume and an upward impact on chicago futures values.

The challenging growing season in Australia has kept values here above parity to work into any of our usual export destinations in South East Asia and the middle East. Demand for Aussie wheat from these regions has now been pared back to absolute minimums with specialist inelastic consumers being the only buyers at current market values.

Whats on at Agracom?

In September, with the inception of the Agracom Southern Trading arm, we welcomed Simone Dax on board as a senior commodity trader. Based in Melbourne, Simone brings with her a vast wealth of knowledge and experience in the grains industry centred around Victoria and Southern NSW. With a strong reputation built on integrity, it is a pleasure to have welcomed her to the Agracom team.

Categorised in: Market Report

This post was written by agracom