From all of us here at Agracom we wish you and your families a very safe and happy Christmas. We thank you for your support in 2018 and look forward to adding value to your business in a prosperous 2019.
Harvest is all wrapped up for the majority of the East Coast and for the large part the grower seems to have remained unsold. Without being able to source tonnes off the header, we are seeing domestic consumers and trade buyers alike turning back to the trade to fill shorts which is keeping wheat well supported for the time being. These tonnes for the large part will come from the West Coast which sets us up for a potential logistics squeeze early into the new year. During the East coast harvest period, it appeared that the import boats slowed in anticipation that local grower tonnes could substitute as an alternative for a short period of time. With that notion not forthcoming, the pipeline from the West is now down to fumes as we wait for the first new crop boats to arrive at our ports. Watch out for a potential supply squeeze in January if these boats cannot reach our shores in time to fill the gap! The trend of a higher protein crop has continued right down the East Coast which has somewhat played into both the bulk handler and flour miller’s hands. Strong bids posted by the flour millers at bulk handling sites for H2 and above has helped GrainCorp and the like receive better than forecast volumes. If the flour millers can find a way to prize this wheat from growers who have warehoused, it will soften the blow of such a small crop. This higher protein crop has of course made it more difficult for the stock feed consumers to get their harvest fill from local sources as growers seek the protein premium offered by other buyers. The other dynamic at play in the wheat market currently is the looming sorghum crop. With recent rains across much of the sorghum growing regions, we are eking ever closer to a sorghum crop that could play a significant role in solving the stock feed short here in the East. This is keeping wheat values for March forward capped at a discount to January values on the Darling Downs.
After being pushed off the cliff by the Chinese anti dumping investigation announcement back in November, feed barley has spent much of the recent weeks drifting, not really able to find a solid floor of demand. Feed barley dipped to approximately $35 under SFW wheat before finally finding some love. At this level, it has become an attractive partial substitute to wheat for feed lotters here in the east. West Australian origin barley is now also working into overseas destinations including Saudi Arabia which will continue to draw down on the balance sheet. So for now it looks like values have found some support albeit at a significant discount to wheat.
With parts of the Darling Downs sorghum growing region receiving more than 200 mms of rain on Sunday, the prospect of a large sorghum harvest is now in play. Track Brisbane values are reacting accordingly trading through at levels approximately $10-$12 under the Newcastle market in the low 360’s. Here on the Liverpool Plains, falls whilst patchy, seemed to average out for the week at or just above an inch. Sorghum continues to push the boundary discounting itself to wheat at a historically high level. Even so, we still struggle to find buying interest either from off shore or the Domestic feed market. Whilst the weather pattern continues to deliver favourable conditions, particularly in QLD, it is hard to say where the next support level for sorghum values will come from. But it looks like, the discount to wheat needs to expand before we can see some solid domestic demand to put a bottom on this market.
International markets continue to trade on political rumours with the main focus being Russian supply and Chinese demand. It seems that every week, fresh rumours surface of government intervention from the Kremlin to quell demand for Russian wheat as remaining stocks there begin to dwindle. Whilst none of these rumours have yet proved to be true, Russian cash values have begun to creep higher as wheat stocks begin to dry up. It feels like we (amongst most others in the trade) have been reporting this story for months now. The balance sheet still remains tight for Russian wheat supply and it becomes a question of how this tightness can impact Chicago wheat futures values. By way of tariff, or just good old scarcity, Russian wheat needs to find a way to be consistently less competitive into its traditional export destinations, which will see demand flow toward USA wheat. If this happens, we expect to see a Chicago futures rally as a result. In other news off shore, there have been a number of rumours circling that Chinese buyers will seek to purchase US Wheat and Corn. This is not a traditional trade flow for US grown grain which would also be supportive of Chicago wheat values.
What’s on at Agracom?
It is a sad week here as we say goodbye to Tony Todd after 14 years of loyal and dedicated service to the business as Financial Controller. We wish Toddy all the best in his next adventure. Mr Bree Gowland joined us 8 weeks ago and takes over the Financial Controller role and brings with him a wealth of experience and knowledge to the business.
Indicative Grower Bids
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Categorised in: Market Report
This post was written by agracom