Markets Archives | Grain Brokers Australia

Weekly Strategy Update 13/02/17

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Wheat –  With CBOT wheat futures up 18 cents for the week, (or A$7 per tonne) we would have expected to see cash prices up week on week. However, the buyers pulled basis back 15 cents with grower selling targets being triggered. This was most evident on Friday with futures up 11 cents yet the cash price only pushing up about $1 across the board. Good news for those with Grain95! We would now be less aggressive in cash sales for wheat (with the exception of ANW1) with Thursday nights USDA report quite bullish and plenty of carry in the wheat futures market meaning traders will want to keep remaining long. If needing to sell for cash flow or feeling undersold, we believe Grain95 is the better move than selling cash at this stage.

Feed barley –  Is starting to look a lot tighter now with a heatwave hitting the eastern states severely impacting sorghum. Also a very heavy shipping program of barley out of Australia into Saudi Arabia and China is quite bullish. Similar to wheat, traders will want to remain long barley and to do that will need to ramp up buying of feed barley for this to happen. Currency will have a big influence on markets in the short term. We can’t see massive downside in barley so perhaps holding is a strategy to consider now.

Malt Barley –  The marketing window for malt barley is closing by the week. Have price targets in place as this is the best way to achieve your targets. Chinese buying interest should return following Chinese New Year’s celebrations but at what level is hard to gauge. Premiums should be $20 above feed for most malt 1 varieties.

17/18 Canola –  With rain forecasted across much of the wheat-belt this week, growers will look to getting some cover. Canola is the only grain to consider at the moment as it is at a decile 5-6 compared to other commodities still at about a decile 1-2. Planting expected to be up considerably due to pricing and early moisture so we suggest to get some cash sales cover at current levels.

Weekly Strategy Update 04/01/17

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  • Wheat – Given the time of year, it is suggested that you hold onto what you have until mid January when traders are back from holidays and have an appetite for buying. The shipping stem is growing day by day which shows there is a possible upside soon to come.
  • Barley – As said previously, we anticipate buyers coming back online soon to hopefully give barley a boost. Saudi will be importing 10mmt and China 2-3mmt of feed in 2017.
  • Canola – Still a strong sell at current prices. At the current price, plus the added oil premiums, it gives you good cashflow and can ease the pain of lower grains prices currently.
  • Oats – Stuck in a rut at present. With no buyers in the market at present other than CBH, we suggest holding until others come back into the market to create some competition.
  • Lupins – Similarly to oats, there is only one buyer in the market at present. We suggest holding until more competition becomes evident.
  • Firm Bids – It is strongly suggested that firm bids are put in place with your broker (bids you’re happy to sell at) so that any spikes in the market that comes up, you don’t miss out.

Weekly Strategy Update 06/12/16

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Wheat – If you require cash-flow within the next 4-6 weeks, we suggest looking to sell lower grade what this week rather than wait until it is too late, as there is increasing harvest pressure coming from the east coast as well as locally. If you aren’t looking to sell right now, look to sit until the second quarter of 2017. If you’re not happy with today’s prices, look into using the Grain95 product.

Barley – Not unlike wheat, we suggest off loading your malt barley soon if you need cash-flow within the next month or two. If there isn’t a need to sell right away, look to sit on your barley until at least Feb 2017.

Canola – This is still the best value at present. For any low oil canola, speak to your broker about flat oil contracts to find the best value. We also suggest looking at selling some 17/18 canola.

Oats – As said in last weeks strategy we suggest holding onto oats until more buyers come into the market to create some healthy competition and drive prices up.

Lupins – Not unlike last week, there is still very little competition out there for lupins at present. There is little movement in the delivered market for any lupins stored on-farm, so speak to your broker about what price can be generated.

Weekly Strategy Update 09/11/16

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Wheat – Recommend growers establish minimum tonnes they need to sell as required for
cash flow accompanying sales of other grains. Understanding quality is a concern, where
possible make sales or fill contracts using APW. ASW and AGP1 under-priced at current
discounts and suggest holding these over better grades. Hard wheat is extremely rare, if you
have hard wheat you have the upper hand in negotiations.
Barley – We feel feed barley can still be priced sharper than current values, at $190/t we are
the cheapest option for feed barley out there, be prepared to hold for up to six months and
target $200/t, protect downside at $185/190. Current malt premiums are strong considering
the size of the crop and quality of receivals to date. Suggest a sell at current premiums.
Canola – Supply and demand continues to be tight but current values present exceptional
value at harvest for cash. High oil values could possibly erode grower values at some point
as end user markets are generally capped at 45% max oil. Suggest make sale off the header.
Oats – Values have rallied $15-20 in the last 6 weeks and look to have flattened out. There is
a couple of buyers chasing right now so suggest selling off the header once quality is known
and contracts are filled accordingly.

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.

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%

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%.

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).

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