Grain Brokers Australia News Archives | Grain Brokers Australia

US-China trade deal ‘totally done’…

Posted by | Grain Brokers Australia News, Weekly Commentary | No Comments

Farmers in the United States have received an early Christmas present after Beijing and Washington finally arrived at a preliminary agreement to lift some tariffs of Chinese imports in exchange for purchases of a range of US goods and services, including agricultural commodities.

China was first to announce the deal, which follows almost two years of protracted negotiations, punctuated by Trump’s tariff hikes and Beijing’s immediate retaliation.

The US trade representative Robert Lighthizer was quite upbeat about the phase one deal saying it was ‘totally done’ and would be signed in January. However, the Chinese were far more guarded in their comments, stating that they would act reciprocally and that they had not decided when they would ink the deal.

The US is ostensibly retaining 25 per cent tariffs on US$250 billion of Chinese imports while halving the tariff rate it imposed in September on US$120 billion of Chinese goods from 15 per cent to 7.5 per cent. The US has agreed not to proceed with 15 per cent tariffs scheduled to take effect on December 15 on almost US$160 billion of Chinese imports, and Beijing has cancelled its retaliatory tariffs which were due to commence at the same time.

China has committed to increase purchases of US agriculture products by US$32 billion over two years, but this appears to fall well short of Trump’s boast in October that China would increase purchases of US farm goods to as high as $50 billion annually in two years.

The increase will be measured against the 2017 level of US agricultural and related product exports to China, the last full year before the trade war commenced. In that year, China’s purchases totalled $24 billion, bringing the annual commitment to just US$40 billion, or US$10 billion short of Trump’s objective.

Lighthizer said Beijing would aim for an additional US$5 billion in farm purchases annually, but there were no guarantees. He said broad targets for Chinese acquisitions would be released publicly. There would also be more specific targets for purchases on a range of products, but those would not be made public to avoid distorting markets.

US exports of soybeans have been hit hard by the trade dispute, and China said they would immediately increase their purchases of US beans. However, they did place a significant caveat on that action saying imports would be based on domestic demand, and the US had to be competitive compared to alternative origins.

Lighthizer confirmed that notion by declaring Beijing would be free to buy “when it’s the perfect time to buy”. Given that from February onwards, South American soybeans are generally cheaper than US imports, even without tariffs, it begs the questions as to eventual subsidies by the Chinese government on purchases of US soybeans.

The China trade representative stated that they would increase their buying of US wheat and corn, not hard since they bought nothing over the last year, but the quantities would be subject to quotas. In any case, the deal is supposedly bullish on corn, with potential for an additional 3-4MMT of imports from the US, and as one market pundit said, ‘corn is the locomotive that pulls the wheat train”. 

But many in the trade question whether it is actually feasible to achieve the additional purchases of US$16 billion per annum in 2020 and 2021. Under China’s Tariff Rate Quota (TRQ) system for certain agricultural products, the total quotas of 9.2 million metric tonne (MMT) for wheat and 7.6MMT for corn equate to just US$3.5 billion.

On the futures market, it was a case of buy the rumour, sell the fact. The news of an impending deal surfaced on Thursday last week and corn, wheat and soybean futures were all up. Come Friday, the markets started the day in positive territory but gave away those gains when the deal was announced. A very subdued response from the funds which are sitting on short positions in both corn and soybeans.

Given the conflicting rhetoric throughout the negotiation process, it would be understandable if the funds and traders want to see more details and some supporting action from China before they get too excited.

Early celebrations could also be embarrassing knowing that China still holds hefty tariffs on US soybeans and pork, only waived at their discretion. And there is the prospect of a record Brazilian soybean harvest in early 2020, much of it driven and financed by China’s tariff on US soybeans.

The trade deal with China comes at a critical time for Trump, just a couple of days before a new round of tariff increases were set to take effect. The impeachment process has also been stealing the headlines in recent weeks, and Trump is desperate for some good news to deflect attention away from the impending trial.

Next year is an election year in the US and Super Tuesday, the first big test of voter sentiment, is only eleven weeks away. More delegates to the presidential nominating conventions can be won on Super Tuesday than on any other single day on the primary calendar, and it is a critical test for presidential candidates from both sides of US politics.

In an attempt to keep the good news rolling, Trump said negotiations on a “phase two agreement” with China would begin immediately, instead of waiting until after the 2020 election.

Hopefully, news of the trade deal is not another empty political promise to farmers, but the beginning of a commitment to right the vast amount of damage done to the global agricultural economy over the last two years.

Mixed fortunes for Canadian farmers…

Canadian farmers can’t take a trick this year…

Posted by | Grain Brokers Australia News, Misc, Weekly Commentary | No Comments

Canadian farmers produced the smallest canola crop in four years on the back of lower plantings and unusually wet autumn weather that left crops sitting in the paddock unharvested, the latest blow in a miserable year which started with the Chinese ban on canola imports.

The heavy snow and rain during harvest across the Canadian Prairies have left around 810,000 hectares of canola buried under snow until spring.

Crops that remain in the fields over the winter are subject to wildlife damage and moisture spoilage, but some of it can usually be salvaged and marketed at a discount in the spring. However, the need to harvest the previous crop once fields dry can seriously delay the commencement of the spring planting program in affected districts.

Statistics Canada released their Production of Principal Field Crops report last Friday the more than 700,000mt was dropped off the countries 2019/20 canola production. Estimated production came in at 18.65 million metric tonne (MMT), down 8.3 per cent on last season, and 2.9 per cent below the five-year average.

The total harvested area fell 8.8 per cent to 8.34 million hectares but yields did rise by 0.5 per cent compared to the 2018/19 season to 2.24 metric tonne per hectare.

Canada is the world’s biggest producer and exporter of canola, and the crop has long been regarded as the most profitable for the Canadian farmer. China, Japan and Mexico have traditionally been the key export destinations, with the seed primarily used for the production of cooking grade vegetable oil and canola meal for stockfeed rations.

In the absence of their largest export customer, demand has been falling, inventories have been rising, and prices have been lower as a result. Nonetheless, Canadian farmers are adjusting to the reality of life without China by working on cutting costs, improving efficiency and modifying crop rotations to decrease their reliance on canola.

As of November 24, Canadian canola exports had decreased by 9.5 per cent compared to a year earlier. But the decline is much less than many had feared and is a reflection of the success in finding alternative consumers for the surplus export stocks. Several European countries are importing more Canadian canola for biofuel production, and shipments to the Middle East have also picked up in recent months.

In terms of wheat, Statistics Canada estimated current season production at 32.3MMT, a minor reduction of 140,000 compared to their previous all wheat production forecast. This put production around 0.5 per cent higher than last season and 6.5 per cent above the five-year average.

While all wheat classes were revised lower compared to the September estimates, it was a year-on-year rebound in spring wheat production that drove wheat production higher overall.

Spring wheat production is forecast to rise by 7.2 per cent to 25.67MMT, the largest spring wheat crop in six years. The harvested area is estimated to be 6.5 per cent higher than last year, and the average yield of 3.48 metric tonne per hectare is slightly higher than the 2018 harvest.

Canada western red spring makes up 86.4 per cent of all spring wheat produced, up from 83.7 per cent in 2018/19, well above both the five and ten-year averages. Durum production was estimated to fall by 13.4 per cent to 4.98MMT, with a year-on-year increase in yield unable to offset a 22.6 per cent decline in the harvested area.

Barley estimates were revised higher compared to those released earlier in the northern hemisphere autumn. Statistics Canada put total production at 10.38MMT, an increase of 23.9 per cent over the 2018 number and 28.2 per cent above the five-year average. The increase was due to harvested area, up by 13.9 per cent, and yields, which rose by nearly 9 per cent to 3.81metric tonnes per hectare.

Agriculture and Agri-Food Canada are suggesting that year-on-year barley stocks will double, quite a bearish scenario, particularly for the Canadian farmer. Up to the end of November total barley exports for the current marketing year sat just north of 600,000 metric tonne, 4.4 per cent behind the 2018/19 pace. With the world well supplied for malting barley requirements, feed channels would appear to be the best hope of boosting exports.

Even the humble oat, now considered a ‘superfood’ in eateries across the globe, benefitted from the swing away from canola with the crop 21 per cent up on last year, at 4.16MMT, and 23.7 per cent above the five-year average.

Statistics Canada revised both the soybean and corn numbers lower compared to their September estimates. Soybean production came in at 6.05MMT, down 18.5 per cent from 2018 and 11.7 per cent below the five-year average. The corn crop is forecast at 13.40MMT, down 3.5 per cent from 2018, just below the five-year average. 

Unlike Australia, where a dry season has decimated national grain production, in Canada the wet has made 2019 a year to forget. Not only has it severely hampered the winter crop harvest, summer crop farmers are calling it the ugly trifecta. Late planting, far too much rain and snow through harvest and high-moisture grain meaning substantial drying costs will be incurred to bring it down to a market acceptable level. On top of the unharvested winter crop area, the adverse autumn weather has left many farmers facing unharvested corn paddocks into December and possibly beyond. Of all the issues the Canadian farmer has faced this year corn left standing in the paddock deep into the winter is perhaps the one they dread most.

Harvest action heats up in Europe …

Weather outlook great for harvest but not for summer crop prospects…

Posted by | Grain Brokers Australia News, Weekly Commentary | No Comments

A couple of big weeks in the header has pushed the Australian winter crop harvest well past the half-way mark as we enter the month of December. However, total production, particularly wheat, continues to decline as yields disappoint. A national wheat crop of under 14.5 million metric tonne (MMT) is looking highly probable.

In Western Australia, total receivals will be lucky to top 10MMT, a fall of almost 40 per cent on the 16.2MMT received last season. Canola receivals will certainly edge past the 1MMT mark but will struggle to go much higher as the harvest has finished in most regions.

The barley harvest is also winding down across the state, even in the southern reaches of the state. Yields have not lived up to expectations, and total production of less than 3.2MMT is expected. The malting barley selection rate has also been quite poor. While it has improved as the harvest has progressed south, at around 23 per cent (including Malt2), it sits well below the long term average.

The Western Australian wheat harvest has been an even bigger disappointment with yields coming in well below expectations, and total production could easily be less than 5.5MMT. While it shouldn’t be surprising considering the hard finish, protein levels have been well above that of recent years with only 10 per cent of deliveries going into the ASW bin, down from 46 per cent last season.

This has led to a rally at the low-quality end of the market as exporters scramble to buy wheat to blend away on feed shipments into Asia. The grade spreads narrowed across the week. Kwinana H2 was up around $5 week-on-week to finish Friday at around $339 Free in Store (FIS). APW1 rallied $8 to close the week at $338 FIS, APW2 was up $11 to $335 FIS but the biggest rise for the week belonged to ASW, up $13 to $334 FIS, only $5 under H2.

The story on the eastern side of the Nullarbor is not much different. While production of wheat, barley and canola in South Australia will each edge higher than last year’s drought-ravaged numbers, the difference will only be minimal.
At this stage, it looks like wheat production will exceed 3MMT, but only just, unless the yields in the south are better than expected. Barley yields have surprised to the upside pushing production north of the 1.7MMT produced last season, and canola deliveries are projected to be around 320,000 by the time harvest has concluded.

High protein has also been a feature of the South Australian wheat harvest, but the spread between H2 and ASW has remained relatively constant at around $8-10 over the last couple of weeks.

Victoria has fared the best this season with a substantial turnaround in production compared to last year’s drought impaired yields. The hot, dry and extremely windy weather mid-way through November did take its toll, particularly in paddocks that were ready for harvest, but yields continue to hold up reasonably well.

Production of around 3.5MMT and 2.5MMT for wheat and barley respectively is on the cards. As harvest pressure has mounted in recent weeks, prices have dropped enough to entice domestic consumers and the trade to buy up, especially with Western Australia and South Australia now finding export demand for both wheat and barley.

Meanwhile, the Bureau of Meteorology (BOM) released its summer outlook last Friday and the news was not good for large tracts of the Australian continent. The outlook summary suggests that the December to February period will be drier than average for much of the nation, particularly across eastern states, and there is a high likelihood of warmer than average days and nights for a majority of the continent.

The dry signal is expected to contract to the east of the country as the summer progresses with much of the Western Australian coastline, particularly the Gascoyne, Pilbara and parts of the Kimberly regions, having a high chance of being wetter than average in January and February.

While the outlook for drier than average conditions may ease for some areas heading into 2020, several months of above-average rainfall would be required to see a recovery in soil moisture levels due to the sustained dry.

A positive Indian Ocean Dipole (IOD) continues to be the primary climate influence in Australia, although it has progressively weakened slightly from record levels throughout November. Under positive IOD conditions, the southern two-thirds of the continent typically experience below-average rainfall and warmer than average temperatures. This is broadly in line with the BOM’s summer outlook.

The IOD’s influence over Australian weather is historically lower in the summer and early autumn months. However, the strong IOD combined with the delayed migration of the monsoon into the southern hemisphere this year suggests that it will continue to be a major driver well into the summer period.

The Southern Annular Mode (SAM) is the other significant climate influence at the moment, and it remains in negative territory. SAM refers to the (non-seasonal) north-south movement of the strong winds that blow almost continuously in the mid to high latitudes of the southern hemisphere. This belt of westerly winds is also associated with storms and cold fronts that move from west to east, bringing rainfall to southern Australia.

A negative SAM typically means drier conditions for eastern Australia and wetter conditions for Tasmania as the winds have not migrated north over southern Australia leaving the rains falling south of the Australian landmass.

The last three months have not been kind to those looking for rain, and the 2019 spring was officially the driest in the BOM’s 120 years of rainfall records. Of course, now that we are into the winter crop harvest dry conditions are welcomed, and a summer drought is the norm in the southern third of the continent.

However, the soils across the Australian summer cropping regions are parched, and virtually no sorghum or cotton has been planted to date. According to satellite imagery, of the 1 million hectares of arable land in southern Queensland, less than 10,000 hectares have been sown to any crop (including fruit and vegetables). And the planting window is closing fast with the prospects of a wide-scale plant are quite remote.

The smaller the sorghum crop, the bigger the transhipment task from South Australia and Western Australia over the next twelve months and the lower the exportable surplus available to meet inelastic Asian demand.

China’s pork plight intensifies

Posted by | Grain Brokers Australia News, Weekly Commentary | No Comments

African Swine Fever (ASF) continues to decimate the domestic pig herd in China with hundreds of millions of animals now lost, either dying as a result of the devastating disease or killed in an attempt to contain the spread of the highly contagious virus.

According to the Chinese government, 40 per cent of the countries pig population has been lost since the outbreak was first discovered in August 2018. However, unofficial reports suggest that Beijing is being extremely conservative, and the world’s biggest swine herd is now more than 50 per cent lower than before the outbreak was announced. That equates to around 250 million pigs or almost 20 per cent of the global herd.

The double-stranded DNA virus causes a haemorrhagic fever with extremely high mortality rates in domestic pigs. In many instances, death can occur as quickly as one week after infection.

Infected pigs develop a high fever but show no other noticeable symptoms for the first few days. They then gradually lose their appetite and become depressed. In white-skinned pigs, the extremities such as ears, nose and abdomen turn blueish-purple. Eventually, they become unsteady on their legs, enter a comatose state and die.

The virus is amazingly resilient to a variety of curing methods and environmental conditions. There is currently no vaccine, it can endure extreme temperatures and can survive in frozen meat for several years.

The Chinese love their pork. It is a staple in their diet and accounts for more than 60 per cent of the country’s meat consumption. In 2017, the last full year before the outbreak of ASF, they consumed an average of 33 kilograms per capita. To put that in perspective, the average Australian consumed 28 kilograms, and in the US per capita consumption was 23 kilograms in the same year.

The significant decrease in the pig herd has led to an unprecedented shortage of pork in the world’s biggest pork market and has seen the ex-farm price increase by more than 125 per cent since July this year. Retail prices are said to have increased by almost 150 per cent in 2019. The soaring prices have been a significant contributing factor to rising inflation in China which hit an annualised rate of 3.8% in October.

In a bid to meet demand and arrest the surge in prices, the Chinese government has begun auctioning frozen pork from its state reserves. However, analysts indicate that deploying the pork reserves will not be enough to stabilise prices let alone reduce them, and they are expected to continue rising in the run-up to Chinese New Year in January.

One of the first ASF control measures implemented across the country last year was to close down small pig farms. In quite a controversial backflip, and despite the continued spread of the epidemic, Beijing is asking local government to reverse this policy in an attempt to arrest the production decline and shore up future supply.

The combination of strong demand, falling production, and spiralling prices have also put a rocket under Chinese imports. In September 2018, China imported 94,000 tonnes of pork. Twelve months later that number had increased by more than 71 per cent to 161,000 tonnes. And in October they were up to 177,500 tonnes. That pushed year-to-date imports past 1.5 million tonnes, an increase of 49.4 per cent on the previous corresponding period.

In addition to traditional suppliers such as Spain and Germany, China has been scrambling to approve new import origins such as Brazil, Argentina, Britain and Ireland. In early November they lifted a ban on imports of Canadian pork and beef that had been in place since June. This action suggests that Beijing does not want to be overly reliant on pork imports from the United States, especially as the “phase one” trade negotiations enter a critical phase.

The increase in global trade has led to a rise in pork prices in the major exporting regions. Pork prices in the European Union, China’s major supplier, have risen by more than 35 per cent since the beginning of 2019. And this trend is unlikely to reverse unless there is a significant, and quick rebound in Chinese production.

One positive sign is that China’s inventory of breeding sows rose by 0.6 per cent in October, the first monthly increase since April last year. On the 13,000 farms with pig production of greater than 5000 units per annum, the sow stocks increased by 4.7 per cent in October.

The total pig herd still declined by 0.6 per cent in October but was much lower than the 3 per cent drop in September. The October number was the smallest month-on-month contraction in more than twelve months and possibly signals the start of the recovery in the Chinese pig population. Only time will tell!

The Chinese government have stated that there will be a 10 million tonne shortfall in pork supply this year. And that will undoubtedly increase next year. The challenge here is that in 2018 total global pork exports were only 8 million tonnes. The global exportable surplus of pork is simply too small to fill the supply shortfall.

In a direct flow-on effect of the need for protein, Chinese imports of beef have also been increasing this year. October arrivals totalled almost 151,000 tonnes, an increase of 63 per cent in twelve months. In the first ten months of 2019 beef imports were 1.28 million tonnes, an increase of 55 per cent on the same period last year.

Australia does not have any pork plants approved for export to China and authorities have been waiting over two years to have 16 additional meat processing plants (including pork facilities) accredited by Chinese authorities.

However, we do have 35 beef plants with the required certification, and China’s importance as a destination for processed Australian beef has increased significantly in recent years. With the protein shortfall in China set to continue for some time yet, Australia’s contribution to this market should continue to flourish.

Call your local Grain Brokers Australia representative on 1300 946 544 to discuss your grain marketing needs.

Barley anti-dumping investigation remains a sleeping giant

Posted by | Grain Brokers Australia News, Weekly Commentary | No Comments

The news late last week that the Ministry of Commerce (MOFCOM) of the People’s Republic of China had decided to extend the anti-dumping investigation into Australian barley imports, while disappointing, came as no surprise to most market pundits.

Citing the complexity of the case, MOFCOM announced that the probe would continue for an additional six months and will be completed by May 19, 2020.

The extension comes despite full cooperation by the Australian government, its agencies, industry bodies and exporters with the ministry’s investigation over the last twelve months. By all reports the detailed information sought by Beijing in the course of the investigation has been provided in accordance with their guidelines and timelines.

The ministry launched the probe in November last year, accusing Australia of dumping barley into the Chinese market at prices it considered below fair value.

World Trade Organization (WTO) rules state that anti-dumping probes should be completed within one year, though the investigating country does have the option of an additional six months under special circumstances. It seems that ‘complexity’ qualifies as there appears to have been no attempt by the WTO to intervene.

And our’s is not the only agricultural trade stoush involving China at the moment. Early this year Beijing halted purchases of Canadian canola alleging inspectors found pests in several shipments. This has led to a slump in Canadian canola exports and has left growers battling lower prices and holding silos full of unsold seed.

And the US-China trade war continues. The on-again, off-again negotiations have been excellent fodder for the world press. However, its impact on world trade and the global economy is growing rapidly.

According to the United States negotiators, the two countries held further constructive discussions (whatever that means) over the weekend. Completely different rhetoric is being reported in China, with officials there saying the two sides are not even on the same page. Plenty of work to do, it seems, before a deal is inked.

In recent times, Australia has been China’s largest supplier of barley with the grain going into both the brewing and stockfeed markets. In the 2017/18 marketing year (October 2017 to September 2018) China imported almost 6.5 million metric tonne (MMT) of Australian barley. This was valued at more than AU$2.2 billion and accounted for around 75 per cent of China’s barley imports in that year.

Though still significant, that dropped substantially in the 2018/19 season, to a tad under 2.4MMT. To put that in perspective, Japan, Thailand and Vietnam were the next biggest importers of Australian barley at 653,000, 205,000 and 112,000 metric tonne (MT) respectively.

What does this mean for exports of Australian barley over the 2019/20 marketing year? If past actions are a fair indicator of future intentions, it certainly doesn’t mean that there will be no barley trades to China.

While a significant proportion of last season’s export business to China would have already been on the books when the anti-dumping investigation was announced, there was 730,000mt shipped in the second half of the season. Most of this business was probably concluded after the investigation commenced.

However, any new crop sales are more likely to be malting barley as opposed to feed barley. Feed grain demand is falling as the African Swine Flu epidemic continues to decimate the pig population in China.

On the other hand, Chinese brewers prefer Australian malting barley over French on the basis of quality, and malting barley prices in Canada make that origin uncompetitive at the moment. In fact, market rumours are suggesting that as much as 500,000MT of new crop Australian business may have already been concluded.

The expectation is that barley exports to China will be down again this year. Those exporters that are willing to accept China as a trade counterparty are likely to trickle barley onto the Chinese mainland but will minimise risk by doing so one, or maybe two, cargos at a time.

Outside of China, Saudi Arabia, in particular the port of Dammam in the Arabian Gulf, increases in significance as a destination for Australia’s exportable surplus in the first half of 2020. Australian exporters would certainly be hoping to do more than the one, 66,000MT, cargo shipped to the Gulf state in the 2018/19 season.

The Saudi Arabian Grain Organisation (SAGO) announced a tender late last week for 1.02MMT of animal feed barley for February and March arrival. The results were released on Monday with offers received from Australia, the European Union, the United States, Argentina and the Black Sea region.

In the end, SAGO booked 17 individual consignments of 60,000MT, with 13 (780,000MT) destined for Red Sea ports and 4 (240,000MT) to be delivered to Arabian Gulf ports. The average price of US$216.62 was an increase of US$6.67 (approximately AU$10) on the previous tender for an identical quantity on September 30.

Looking at the breakdown of offers, and the companies involved, it would be safe to assume that a significant portion of the Arabian Gulf business will be executed out of Australian ports and, surprisingly, some of the Red Sea shipments may also be Australian origin. Great news for domestic barley growers in a week when China disappointed.

With Australia’s freight advantage over the Black Sea and Europe, domestic exporters will also be looking to other traditional Asian consumers such as Japan, Thailand and Indonesia to step up to the plate and increase their imports of Australian barley over the next ten months.

Call your local Grain Brokers Australia representative on 1300 946 544 to discuss your grain marketing needs.

Global grain markets looking for direction after benign WASDE report…

Posted by | Grain Brokers Australia News, USDA WASDE Report, Weekly Commentary | No Comments

The United States Department of Agriculture (USDA) released their November World Agricultural Supply and Demand Estimates (WASDE) to the market last Friday (Saturday morning down under) and there was nothing to get the trade, or futures markets, too excited.

Chicago Board of Trade (CBOT) December wheat futures closed the week at 510¼ cents per bushel (c/bu), down 2¼ c/bu on the day and down 5¾ c/bu for the week. Wheat futures have been trending downward since a 3-month high of 532¼ c/bu was set on October 18. That equates to a fall of almost AU$12 over the last three weeks.

The December corn futures contract closed last Friday’s trade at 377¼ c/bu, up 2 c/bu on the day but down 12 c/bu for the week. The soybean contract for November closed at 919½ c/bu, down 5½ c/bu on the day and down 4¾ c/bu for the week. Like wheat, both corn and soybean futures have been trending lower in recent weeks and have lost the equivalent of just under AU$12 and just over AU$11 respectively since the highs of mid-October.

The WASDE wheat production numbers were basically a juggling act, the result being a small global increase of around 0.3 million metric tonne (MMT). Australian production was decreased by 0.8MMT to 17.2MMt, similar to last year’s final number. However, this is still around 1.5MMT above many domestic trade estimates, and a further reduction is expected in the next report, due for release on December 10.

Argentine wheat production was decreased by 0.5MMT to 20MMT. Like Australia, this is around 1.5MMT above the most recent estimates emanating from the South American republic. Last season’s production was 19.5MMT. Reaping has commenced in many parts of the country, and the Buenos Aires Grain Exchange called the wheat harvest 7 per cent done compared to 11 per cent at the same time last year.

The United States (US) was the other major wheat producer which saw production fall compared to last month. The USDA pegged 2019/20 production at 52.3MMT, a decrease of 1.1MMT, but still, 1MMT higher than last season.

Planting of the next US winter wheat crop is well underway with 94 per cent expected to be planted by early this week. This compares to 89 per cent last week, 85 per cent last year and 92 per cent on average. Crop ratings are expected to be unchanged week-on-week at 57 per cent good to excellent, versus 51 per cent last year.

On the positive side of the equation, Ukraine, Russia and the European Union (EU) all saw increases to their final wheat numbers for the 2019/20 season compared to the October report. Ukraine production was increased by 0.3MMT to 29MMT. This represents a significant year-on-year increase of 4MMT, or 16 per cent.

The USDA increased Russian production by 1.5MMT to 74MMT. Here again, the USDA appears to be conservative with their revised estimate as local Russian forecasts are around 1-2MMT higher. That said, it is still around 2.3MMT higher than 2018/19 production.

The most significant increase to global wheat numbers in Friday’s WASDE report came in the EU. Production was posted at 153MMT, an increase of 1MMT compared to October and an increase of 16MMT compared to last season. However, the USDA number is 3MMT lower than the most recent European Commission wheat forecast of 156MMT.

In France, the European Union’s biggest wheat producer, planting of the winter wheat crop is delayed by wet weather. The French state grains board, FranceAgrimer, estimates that 67 per cent of the soft wheat crop has been planted, up 13 per cent on the previous week, but still well behind the long term average of 82 per cent.

With global wheat demand remaining static, the washup of all of the production changes was an increase in world ending stocks to a record 288.3MMT, 142.6MMT (49 per cent) of which is held outside of China.

On the barley front, the WASDE report was slightly bullish. The USDA cut Australian production by 0.2MMT to 8.4MMT. While this may be achievable, it appears to be on the high side based on the hard finish experienced in almost all the major barley production regions of the country.

Elsewhere, Argentine production was decreased by 0.1MMT to 4.7MMT (5.1MMT last year), the EU was raised by 0.2MMT to 61.8MMT (55.9MMT last year), and Ukraine was increased by 0.3MMT to 9.5MMT (7.6MMT last year).

The USDA increased global barley demand by 0.8MMT, predominantly in Russia, Ukraine and EU and world ending stocks were decreased by 0.8MMT, mostly in Russia and Saudi Arabia. Australian barley exports were reduced by 0.2MMT to 4.3MMT, and China’s barley imports were cut by 0.2MMT to 6.3MMt (5.5MMT last year).

There were several decreases to global corn supply, but most had already been factored into trade calculations, hence the subdued futures market reaction. US production was down by 3MMT after the yield forecast was decreased to 167 bushels per acre (10.5 metric tonne per hectare). Mexican, Ukraine and EU production were cut by 2MMT, 0.5MMT and 0.2MMT respectively, and Russian was increased by 0.5MMT.

US corn demand was down by 1.2MMT, but world demand was increased by 0.8MMT compared to the last WASDE report. World ending stocks are forecast to decrease by 6.6MMT, predominantly in Brazil, China, EU and the US.

The soybean numbers were quite benign, with global production down by 2.4MMT, mainly in India and Canada, and global demand down by 2.4MMT, primarily in India, China and the United States.

The grain market needs news, and the WASDE report provided nothing that wasn’t already known and factored into global thinking. From a wheat and barley perspective, 2019/20 production is basically known, even though the USDA numbers still need a little tweaking in several key jurisdictions.

A resolution, or otherwise, to trade disputes involving China is a key driver in the near term. The big one, of course, is the US standoff, with Trump seemingly dousing the most recent positive news with his usual Twitter diplomacy.

Call your local Grain Brokers Australia representative on 1300 946 544 to discuss your grain marketing needs.

How to complete your Canola Sustainability Declaration and Commodity Vendor Declaration.

Posted by | Grain Brokers Australia News | No Comments

If you have a contract or are intending to sell your Canola as ‘sustainable’ with a member of Sustainable Grain Australia, you will need to complete a Sustainability Declaration.

The below flyers provide more information to assist Growers in completing their Canola Sustainability Declaration and Commodity Vendor Declaration.

FAQ’s > Completing your ISCC Sustainability Self Declaration

 Fact Sheet > myCVD

Russian Production Down but Quality Up…

Posted by | Grain Brokers Australia News | No Comments

July 16, 2019
Russian production down but quality up…
Hotter and dryer than normal weather patterns over the European portion (west of the Ural mountain range) of the Russian Federation since late May appears to have had a drastic impact on the size of this year’s wheat crop and projected exports for the 2019/20 marketing year.
Production estimates have been lowered as a result, but they are still higher than last year and, if they come to fruition, will be the second highest on record for the world’s biggest exporter.
Early last week two of Moscow’s leading agricultural consultancies, SovEcon and IKAR downgraded their production and export estimates and the United States Department of Agriculture (USDA) followed suit by doing the same when they released the latest World Agricultural Supply and Demand Estimates (WASDE) later in the week.
However, the lack of consensus amongst the agencies demonstrates how difficult it is for the global trade to get an accurate picture of production and potential exports this season. SovEcon had previously been the most optimistic regarding the size of this year’s crop, but they made the biggest cut due to the recent drought-like conditions.
SovEcon’s previous production estimate of 82.2 million metric tonne (MMT) was slashed by 5.6MMT, to 76.6MMT. IKAR, on the other hand, was not as pessimistic about the effects of the recent weather, cutting their production estimate from 79.3MMT to 78.5MMT. However, that number was revised down by another 1MMT early this week to 77.5MMT, and IKAR suggested that further cuts may come as more harvest data becomes available.
SovEcon also took a knife to their export numbers, cutting expectations by 4.6MMT, to 33MMT. That is 3MMT lower than 2018/19 wheat exports, despite their production forecast being around 5MMT higher than last season.
The latest WASDE report was quite bullish for wheat with production cut by 9.3MMT across the major exporters including Ukraine, European Union, Canada and Australia (even though domestic conditions have improved over the last month). However, the biggest surprise to the market was the 3.8MMT taken off Russian production.
The USDA is forecasting 2019/20 production at 74.2MMT, down from 78MMT last month, but still higher than the 71.7MMT produced last season. The total area to be harvested is forecast at 26.3 million hectares, representing an average yield of 2.82 metric tonne per hectare.
In line with the drastic production cut, the USDA lowered their 2019/20 wheat export estimate by 2.5MMT to 34.5MMT. This is a year-on-year fall of 1.5MMT, with the USDA obviously expecting supplies to tighten this season.
The recent hot and dry weather hasn’t been all bad for the Russian farmer, with protein levels boosted as a result of the hard finish. Harvesting commenced in the southern wheat belt about three weeks ago, and protein levels in approximately 80 per cent of the deliveries made to date have been higher than 13 per cent. That is four times greater than the long term average.
Higher protein wheat is highly sort after by global millers as it is linked to gluten, the component that makes bread dough strong and stretchy. The challenge for the Russian farmer is extracting a better price for their high-quality product. With an abundance of 12.5 per cent protein wheat available to the market at this early stage of harvest, the trade is very reluctant to pay a premium.
That is reflected in the current price spread between milling wheat and feed wheat, which has more than halved since harvest commenced, and the high protein trend became evident. In late May, the premium being paid for 12.5 per cent protein wheat was more than US$12 per metric tonne. That is now down to under $US5.00 per metric tonne, or even as low as parity in some regions.
Some growers are reportedly seeing protein levels as high as 16 per cent but are only being offered 12.5 per cent protein prices. This is encouraging them to hold onto their highest quality wheat in the hope that overall Russian quality falls as harvest moves into the central and northern farming regions before finishing in Siberia in September.
Egypt is the world’s biggest importer of wheat, and Russia is traditionally their primary supplier. Egypt’s state grain buyer, the General Authority for Supply Commodities (GASC) needs to purchase around 900,000 metric tonne per month. It was back in the market last week after booking just one cargo (60,000 metric tonne) of Romanian wheat the week before.
GASC booked the top four offers on the tender lineup, for a total 240,000 metric tonne, with Russia overlooked yet again. The successful exporters were Romania with three cargoes and Ukraine with the fourth. They paid US$198 Free on Board (FOB), a slight increase on the previous week’s purchase, but under the price paid at the same time last year.
No doubt Russia will feature in the GASC tenders soon, given the size of their wheat crop and the exportable surplus that needs to start moving. That said, the Egyptians would appear to be sending a subtle message to Russian exporters to sharpen their pencil if they want a piece of the action.
The Russian export lineup is reported to be around half of what it was this time last year. Nevertheless, it is too early in the new crop marketing season for the Russian shippers to resort to discounting quality, particularly with production, and exportable surpluses, dropping in most of the major export origins, except for the United States.
Call your local Grain Brokers Australia representative on 1300 946 544 to discuss you

Check you're getting the best value from your grain marketing. Test Our Grain Prices