Aug 25 2016

It’s Time to be Pragmatic about Wheat Pricing.

Posted by GBA Administrator | Grain Brokers Australia News, Misc | No Comments

15/08/16

The latest USDA report was generally bearish for wheat due to a 5mmt increase in production. World consumption was increased and stocks to use lowered but the march towards Aussie harvest in the face of these fundamentals is now starting to demand some clear strategy. We must think in terms of cash flow requirements and less so about recent price history.

For a couple of weeks now there has been a fair bit written about the effects of wet weather on the quality and production of Western Europe’s wheat crops. It has been a positive story for wheat price outlook in the face of burdensome global stocks and another year of solid global production. Last week’s USDA report on world supply and production took the shine of that glimmer of hope, production in the EU was reduced 9mmt but it was cancelled out plus a bit more by increases to Russia and Black sea of 11mmt and Australia, Canada and the US, 3.6mmt. All together global production has been predicted to increase 5mmt.

Thankfully the lift in production forecast was offset somewhat by a reduction in Stocks and an increase in consumption of 3mmt, in signs that the pace of consumption is increasing due to lower global prices. The bottom line is this, bar some kind of unpredicted disaster, be it weather driven, political or some other form of intervention we are now most likely on track for a continuation of low wheat prices. Protein could continue to be an important factor in marketing your wheat and due to lower protein levels in Northern hemisphere harvests and some of the weather related quality issues we could see protein premiums continue to increase. Be sure to push for the best price and the best quality spreads when contracting. If you have low to no cover on 16/17 price we now suggest taking some cover on price at current levels to ensure cash flow and protect against being a forced seller in a potential buyers’ market come harvest time.

Tom Wake

Jul 27 2016

Markets Focus on Supply Fundamentals

Posted by GBA Administrator | Grain Brokers Australia News, Misc | No Comments

Last week we had the latest USDA report into US planted acres and grain stocks. While we expected some increases to US hectares for wheat and soybeans (we got them but not as big as expectations) it was corn that surprised the market. Corn has been well supported on the perception that it had lost out to bean hectares and not had the timing at the back end of the sowing window for the market to ‘buy hectares’.

US wheat was expecting a total area somewhere between 48 and 53million acres, USDA has reported 50.8m acres down on the 54.64m acre figure from last year but still above average area of 49.8m acres. US winter wheat harvest is adding to market pressure with growers in a selling mode despite a 7 year low in the wheat market.

Beans were expected to come in somewhere between 82 and 85.7million acres, the estimate came in at 83.7. Higher than predictions in March but lower than expected overall. With strong US sales continuing to be made US soy futures have been the light in the darkness for grains and oilseeds over recent sessions.

Corn was acres were expected to fall in a range between 92 and 94milliion acres instead the USDA gave the market an additional 500,000 hectares over the March estimate, coming in at 94.1m acres. Coupled with stocks that were again above the upside expectation, at 4.7billion bushels vs 4.6billion and corn was hit hard on Chicago futures markets last week.

With wheat and corn competing for a share of feed markets the big interruption to corn markets has sucked wheat into the downdraught somewhat. We are now looking globally at a two speed wheat market, with very cheap general purpose wheat eroding values. However we are seeing demand pick up for the lower, cheaper grades and this will eventually be the solution to oversupply though it will take some time. Holding onto physical old season wheat does not look to be a rewarding exercise from here on in. Grain Brokers can discuss a number of alternatives on this front so please contact one of our brokers at any time.

Jun 23 2016

Grain Brokers Australia Aghaul Truck being filled

Confirmation on APW2 please

Posted by GBA Administrator | Grain Brokers Australia News, Misc | No Comments

Last harvest saw the implementation of the planned phasing out of APW2. For a long time WA has differed from the remaining wheat growing states by receiving APW2 as the base grade for wheat deliveries where APW1 is the norm. In a move to raise the export standards of Australian wheat it’s a process that is unanimously backed by all of the wheat exporting business operating out of WA. Despite CBH publicly announcing the planned removal of APW2 as a delivery grade or pay grade for 16/17 there are suggestions there is now uncertainty around the final implementation of this decision.

Currently there are only a couple of grain buyers offering spreads for APW2 on 16/17 contracts with the majority expecting the proposed change to be fully implemented this harvest. However if the need to segregate APW2 remains and CBH are considering retaining the grade for harvest growers will need to consider where they stand at this stage of production.

Without APW2 growers will be inclined to feed crops, particularly due to the season so far. With many growers in parts of the state making the decision to invest significantly in inputs in the hope of achieving the protein required for APW1. If we suddenly backflip on the decision where are we left in terms of contract management with individual buyers and their decisions to price APW2. We expect more buyers to begin pricing the spread to APW2 due to the confusion surrounding its inclusion as a delivery grade for the 16/17 season, make sure you discuss their approach to the grade at the time of contracting.

Jun 23 2016

Man standing in Wheatfield arms open | Grain Brokers Australia

Countryman 17/5/16

Posted by GBA Administrator | Grain Brokers Australia News, Misc | No Comments

It is great to see such a positive start to the season for most across WA with solid early rains seeing the first fully wet plant in some time. Let’s hope this continues throughout the season and those in the north can pick up some solid rains to get them up and running with the rest of the state.

Old season pricing has been unusual to say the least over recent weeks with basis remaining strong in all port zones (and strengthening in Kwinana) despite futures strengthening and our dollar weakening against most other major currencies. This is contrary to the general belief that basis will weaken when international prices rise in Aussie dollars.

With shipping slots being pushed back towards the back half of the year and many being cancelled, it is hard to see how basis can continue at these levels with such a large wheat carryout expected. Further to this, we are seeing a strong inverse between old and new crop pricing in WA despite there still being considerable carry to the forward contracts in the Chicago, Kansas, Minneapolis and even Matif wheat exchanges. This should signal alarm bells that old season local wheat prices are overvalued or new season prices are undervalued. If you are holding a large proportion of your old season wheat, this is the type of scenario you will want to avoid.

Pricing out old season crop over the short term is the simplest strategy but for more information on the above or to see how Grain Brokers can add value to your business, please don’t hesitate to call one of our team.

Jun 14 2016

JUNE USDA WASDE REPORT SUMMARY

Posted by GBA Administrator | Grain Brokers Australia News, Misc, USDA WASDE Report | No Comments

Not a report full of surprises on Friday night, more just in line with expectations. Wheat saw big increases in production, but nothing that we didn’t know beforehand. HRW wheat also got a boost of production. Beans and Corn ending stocks cut in the US, but as global figures were cut less than expected, no real change there.

Wheat Neutral to Bearish – CBOT SRW JUL Down 15c

World production for 16/17 up nearly 4 million mt, comprising mostly of the US, EU and Russia.
World consumption up 3.4mmt, mainly India, the EU and the US.
World stocks to use ratio down slightly to 36%

Barley Neutral to Bearish

World production up 3.1 million mt, mostly EU and Ukraine
World demand up 2.7mmt, mostly EU, Saudi Arabia and Iran
World stocks up .6mmt
World stocks to use ratio up slightly to 16.41%

Corn Neutral to Bearish – CBOT Corn JUL Down 3c

World production up 0.7 million mt – All Mexico
US ending stocks below traders estimates
World demand up 1.2mmt – mostly US
World stocks down 2 million mt
World stocks-to-use ratio down to 20.25%

Soybeans Neutral to Bullish – CBOT Soybeans JUL Up 1c

World production down 0.5mmt
World demand up 0.6mmt
World stocks down 2mmt
Stocks to use ratio down a considerable 72 points to 23.12%

Nic Sewell

Apr 19 2016

Weekly Report 8/4/16

Posted by GBA Administrator | Grain Brokers Australia News, Misc | No Comments

BARLEY/CORN

Unlike Wheat, Chicago May-16 corn futures closed up on the week. The increase is thought to be prices recovering from the previous week’s losses due to the USDA report release and poor US planting conditions.

Corn settled at 361.4 US¢/bu, up 10 US¢/bu for the week.

Argentina’s corn sowings for 2016/17 is forecast to increase to 4.2Mha in light of policy changes. The corn area is expected to have a year-on-year increase of 24%.

The change is due to farmers being more incentivised to plant corn, because of new policies and better returns. The changes in policy include the elimination of export taxes and limitations for corn and wheat. Also with better crop practices, i.e. Crop rotations after years of back to back plantings of soybeans and improved seed technology, yields are expected to be high.

Following on from last month’s announcement of China scrapping its 9 year corn stockpiling scheme, China’s ministry of agriculture is planning on reducing the area planted to corn by 3.3 million ha in favour of increased soybean plantings.

To read the full report click the below link.

Weekly Report 16_04_09

Apr 19 2016

Weekly Report 2/4/16

Posted by GBA Administrator | Grain Brokers Australia News, Misc | No Comments

WHEAT

Wheat futures ended the month of March up, as dryness continues to build in the US southern states.

CBOT March 16 futures finished the week at 473.2US¢/bu up 10.2 US¢/bu from the previous week.

Eyes continue to remain focused on the US weather. Parts of Texas, Oklahoma and Kansas experienced low temperatures last week, raising concerns about potential damage to winter wheat crops. Conditions have also been drier than ideal, with incidence of drought increasing, 20% of Oklahoma was classed as experiencing some form of drought as at 29 March, up from 14% a week earlier Drier than usual conditions are also persisting in the northern spring wheat areas.

Last week the USDA released their prospective plantings report – This year’s total wheat area is estimated at 20.1 million ha, below the lowest trade and represents a 46 year low. The decline in the US wheat area has been driven by drops in both winter and spring wheat sowing – with spring plantings of 4.6 million ha, the lowest since 1972. The winter wheat area is expected to be 8% lower year-on-year (14.7 million ha).

French winter crops continue to be reported in good condition. Ratings as at 28 March are broadly comparable to 2015 and unchanged week-on-week for winter wheat at 92% rated good to excellent.

Russia is forecast to produce 61 million mt of wheat which would result in an export task of 23 million tonne and the Ukraine despite a rough start to their crop establishment in some regions is now forecast to produce a record 27.25 million tonne and to export a record 15.5 million tonne.

To read the full report click the below link.

Weekly Report 16_04_02

Mar 16 2016

Markets Find Support

Posted by GBA Administrator | Grain Brokers Australia News, Misc | No Comments

Last week we saw the latest report from the USDA on global supply and demand. It focused on production and stocks as well as demand for grain and exports globally. Grain markets on a whole probably reacted a little more positively to the report than was expected with wheat corn and soy all making positive moves following the report and backed up by more positive gains during the week. A stronger Australian dollar and a basis that weakened recently has offset local prices though.

Northern Hemisphere weather markets are now starting to come into play with the wheat dormancy period starting earlier due to warmer and drier weather, leaving US winter wheat susceptible to a late freeze. Dry areas throughout the US may come under pressure and this threat along with damaging rain and hail recently in India’s Northern wheat growing areas have since aided the market. A quick snapshot of the latest USDA WASDE report as is most relevant to us here in Aus.

Wheat; a continuation of the recent bearish themes with an increase to stocks. Increases to the production forecast were made for Europe, China and the Black Sea, decreased in Brazil while notably a change to Aussie production decreased to 24.5mmt, finally. The market saw a decrease in US planted acres as a positive and was the main driver of Chicago markets in a US centric view on trading directly following the report.

Barley; again the report was not supportive of barley with supply up mainly in China and Russia. Global supply was increased 0.6mmt up from 145.16mmt to 145.83mmt. Demand was up by roughly the same figure. Stocks were increased from 23.6mmt to 24.2mmt.

Corn; bucked the trend and was slightly bullish. Chinese, Russian and US production was down by a combined 2mmt but the biggest drop came out of South Africa of 4mmt where the country has been gripped by drought. The market was most surprised by the cut to US corn yields however. Global supply decreased by 6mmt from 973.87mmt to 967.9mmt. Global demand was also decreased tempering the reports decrease to supply down 4mmt from 970mmt to 966mmt. Global stocks were decreased by close to 3mmt.

Soybeans; Beans were bullish with both greater consumption and forecast lower production. The reduction of US hectares was seen as key to reducing production overall by 1.4mmt. Global supply decreasing 1.1mmt overall, decreases to the US offset somewhat by increases to China production. Demand was increased by a healthy 1.85mmt form 270.86mmt to 272.7mmt.Stocks were decreased by 3.3mmt overall.

Tom Wake