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Oct 25 2016

Weekly Strategy Update 12/10/16

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Wheat; The market has hit a bit of stand-still to wait for harvest to begin sot hat everyone can get confirmation on the quality and quantity of grain being delivered. That being said, we suggest holding off on entering into any contracts until we know what product is being delivered.

Barley; Still has a tighter balance sheet than other feed grains, would suggest holding off on sales of feed if sales of alternative grains can be made, not much reward at current price levels. Malt premiums however are reasonable at this stage. It may be worth covering off against some of the current malt spreads using a MG contract.

Canola; Most growers should have reasonable level of price cover on 16/17 canola. With harvest now upon us and prices holding a reasonable level of value we recommend continuing to make sales of canola off the header as true production levels become known.

Oats; Still seems to be the cereal with the greatest value at present. It is however important to check the OAT1/OAT2 spread as they do vary from buyer to buyer.

Oct 25 2016

USDA Summary – October

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OCTOBER USDA WASDE REPORT SUMMARY

USDA report mainly bullish grains and bearish oilseeds. Wheat saw another month of support with less production, more consumption and less stocks, whilst the USDA lifted the Australian wheat production by 0.8 million MT from last month (we believe they are 2 million MT on the high side for AUS). Barley continue to get tighter every month in these reports, and this month was no exception with production down, consumption up and stocks down. Globally corn saw lower production in the US and a better Brazilian crop could not help that. Stocks of corn are down 2.6 million MT this month. Beans were the most bearish with record US yields and higher global production by 2.8 million MT. Ending stocks jumped 5.1 million MT.

WHEAT BULLISH

World production DOWN 4 million mt.
Biggest changes
- Australia unexpectedly UP8 million mt. This should definitely change once harvest gets going.
- Canada UP 1 million mt.
- EU DOWN 2 million mt.
- US DOWN 3 million mt.
Consumption UP Close to 1 million MT (US consumption down close to 2 million MT)
Stock levels DOWN 7 million MT and stocks to use ratio down 5 point to 33.76%

BARLEY BULLISH

World production DOWN close to 1 million MT (mainly in Russia and EU)
World demand UP close to 0.5 million MT
World stocks DOWN 5 million MT with stocks to use ratio down a solid 32 points to 15.61%

CORN BULLISH

World production DOWN close to 1 million MT (mainly EU and US whilst Brazil actually up 1 million MT)
US yields now forecast at 173.4 bu/acre
World demand DOWN 5 million MT – mainly in the EU and “Other” countries
World stocks DOWN 6 million MT
World stocks-to-use ratio DOWN 31 points to 21.28% (and US ending stocks projected to be down as well)

SOYBEANS BEARISH

World production UP 8 million MT – (US up 1.8 million MT and Brazil up 1 million MT)
US yields up to 51.4 bu/acre
World demand DOWN 5 million MT
World stocks UP by a massive 5.1 million MT (in Argentina, Brazil and China)
World stocks-to-use ratio UP 185 points to 27.06%

Sep 30 2016

Weekly Strategy Update 21/09/16

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Wheat; Old crop; sell remaining tonnes. Look to lock in noodle spreads early, especially if no quality hiccups reported in WA. If cash flow dictates a need to sell, price average sales over the next 6-8 weeks. Basis likely to weaken once harvest is underway. Grain95 should be considered to lock in basis with exposure to international wheat rallies. Wheat presents better cash sales opportunities than feed barley currently.

Barley; Sell Old crop; If looking at above average production continue to consider pricing a portion of your crop with farm gate margins in mind. Malt premiums are also worth fixing, season is looking favourable for malt so get some protection at current levels.

Canola; Continue to view as most favourable pricing opportunity. Growers will be viewing as cash crop off the header so protect against harvest pressure on price. Large Canadian crop likely to put pressure on canola.

Sep 30 2016

September USDA Summary

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The USDA report was mostly bearish with a few surprises. Wheat took a good chunk out of ending stocks again by reducing EU, India and China down solidly (and Australia up). USDA left US wheat ending stocks unchanged. Corn saw global production and ending stocks down, and in particular we saw US corn yields down from the August estimate which took a good chunk out of US production – most of it expected though so market did not react much. Beans saw the biggest surprise with US yields up well more than most traders expected – and a resulting 3.8 MMt increase in US production.

WHEAT BULLISH – CBOT SRW DEC UP 5.80 USc/bu

World production for 16/17 UP 4MMt. EU (2.2MMt) & China (2MMt) both DOWN. Kazak (1.5MMt), Russia (7MMt) Aus (1MMt) India (2MMt) all UP.
World consumption UP 1MMt (Mostly India & Morocco.)
World stocks-to-use ratio DOWN again to 33.81%. (Fourth downward revision in a row).

BARLEY BULLISH

World production DOWN 5MMt (Mainly EU & Russia).
World demand UP 13MMt.
World stocks DOWN25MMt.
World stocks-to-use ratio DOWN 19 points to 15.92%

CORN NEUTRAL to BULLISH – CBOT Corn DEC DOWN 1.60 USc/bu.

World production DOWN 7MMt (Mostly China, U.S & EU)
World demand DOWN5MMt (Mostly U.S & EU).
World stocks DOWN4MMT.
World stocks-to-use ratio DOWN 12 points to 21.59%.

SOYBEANS BEARISH – CBOT Soybeans NOV DOWN 16 USc/bu.

World production UP12MMt (Majority US which is UP 3.8MMt).
World demand DOWN1MMt.
World stocks UP9MMt.
Stocks-to-use ratio UP 42 points to 25.20%.

Sep 06 2016

Farm Gate Returns – Wheat 16/17

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This week we will focus on farm gate returns and how they look for the 2016/17 crop compared to previous seasons. Obviously this year we are seeing much weaker pricing than recent years and for most growers much stronger yields. So the question is, are we any better off than last season for farm gate returns?? Below’s numbers are based off a $40/t farm gate adjustment which is roughly a grower 200km from port. Cost of production is $300/ha which is roughly what a grower in a medium rainfall zone would be looking at this year.

Chemical and fertiliser applications are up but fortunately prices and diesel are down. So based off these basic assumptions, if you were to grow last year 2t/ha with an average sales price at $290 FIS, you would be making $200/ha. This year to make the same $200/ha margins you would need to grow an additional 0.5t/ha with the prices $50 less ($240).

Sep 06 2016

Weekly Strategy Update

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30/08/16

Wheat; Old crop wheat should be 100% sold as per our previous strategies. Hard wheat could
be the exception with East Coast markets showing strong +20 spreads on H2 from APW1. New
crop, we believe that growers should not be selling at these levels unless comfortable with
production. We believe noodle growers should grab opportunities that are presenting (+20
APW1). Strong yields expected in traditional noodle areas is likely to see an oversupply by the
time harvest has wrapped up. If not comfortable at current pricing, sell with exposure to
international futures (Grain95).
Barley; For most growers, we believe that new crop barley should not be sold at current levels.
If very confident on production (3.5t/ha+) and you require harvest cash-flow, consider some
sales now as farm gate margins still positive. Fix malt spreads as season looking to have
adequate malt supplies.
Canola; We believe that growers should be aggressive in forward sales of new crop GM and
Non-GM canola. Prices are still very strong and growers across the country will see the canola
as this years cash crop. Not enough buyer demand to fill supply if growers across the board are
aggressively selling canola leading into harvest. Basis very strong still. Worth being proactive
with strong yields across the board.

Aug 25 2016

Weekly Strategy Update

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Wheat; With a recent rise in FOB sales values, Western Australian new season wheat is finally priced into
Indonesian markets, all be at very tight margins. Buyers are still very much hand to mouth so appetite is
limited with a likely big WA crop on its way. Worth holding off on sales of new crop, sell old crop with
Grain95. Hard wheat the possible exception with export sales priced at +18 on APW1 and WA to unlikely
see much of it this year.
Barley; Very similar to wheat. Western Australian barley is now nearly at export parity into some markets
(Algeria). Not a traditional home for our barley but no complaints here. Worth holding at these levels,
especially if a high chance of malt barley.
Canola; With new season canola sitting at $550 FIS all ports, this is the obvious sale for most growers.
Strong yields and lower risk of frost should see those chasing harvest cash flow being aggressive on GM
and Non GM canola. Oil demand is strong due to strong crushing margins so more upside is not out of the
question, but it is the best sale at this stage.

Aug 25 2016

August USDA WASDE Report Summary

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The USDA report was overly bearish with a few surprises although not enough to significantly shift markets. Most changes were U.S. based and were the main driver for increases to global stocks-to-use ratios. With no significant threats forecasted Southern & Northern Hemisphere crops we pretty well know we will need a large and dramatic shift in demand or a major problem to occur within the row crops to break out of these low prices.

WHEAT Bearish – CBOT SRW SEPT Down 1.50 USc/bu

World production for 16/17 UP up 5MMT. EU DOWN 9MMT, Ukraine/Kazakhstan UP 2MMT ea, Russia UP 7MMT, Australia/Canada UP 1MMT ea.
World consumption UP 3MMT ( Mostly Russia & U.S.)
World stocks-to-use ratio down again to 34.52%. (Third downward revision in a row).

BARLEY Bearish