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Trying to forget the politics for a moment…  

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Trying to forget the politics for a moment…

A lack of adequate snow cover to protect the winter crop against cold weather is raising some concerns in parts of the northern hemisphere. The snow cover acts as an insulation layer for the hibernating wheat and barley crops. If this is not present the exposed crop becomes susceptible to damage, and even death, from freezing winter temperatures.

The areas of adequate snow cover are confined to eastern Europe and the Balkans. This leaves the crop in the central and western regions susceptible to the sub-zero temperatures that are forecast for most of Europe over the next few weeks. Rainfall will alleviate the immediate issue in isolated regions, but an exposed crop remains very susceptible to a cold snap.

No such issues exist in Russia or their Former Soviet Union (FSU) neighbours where the snow cover is reported to be excellent and the winter crop in good shape. The snow cover is so thick it has actually been playing havoc with the movement of wheat and barley to the Black Sea ports for export in recent weeks.

Across the Atlantic, it has been bitterly cold in the northern parts of the US. The market has been finding support on worries that recent snowfalls and the forecast snowstorms may not be extensive enough to protect the winter crop adequately. Freezing temperatures are forecast for much of the Plains and Midwest through to the end of January. The snowstorms are expected to be less severe in the Southern Plains, but so too are the temperatures, reducing the potential weather and production risk in those counties.

US wheat futures closed out last week in positive territory on the back of firmer Black Sea export values. There appears to be a renewed feeling that the market and price will ensure Russian domestic requirements are met by restricting exports enough to negate the need for government intervention. Available shipping data suggests that there has been a sharp drop in Black Sea wheat loadings to open the New Year despite their dominance of recent Egyptian tenders.

Rumours also abound of fresh US export wheat business being concluded along with reports of optional origin sales being switched to US execution. US hard red winter wheat is now around US$3-5 cheaper than both Russian and EU origin wheat. However, all of this remains anecdotal as long as the government shut down continues and the key United States Department of Agriculture (USDA) market data is not being collated.

The window for the US and EU to gain wheat export traction before new crop grain is available gets smaller with every unsuccessful Egyptian tender, not that they are the only option. The market is also expecting vastly improved supplies in 2019/20 as global cereal production rebounds from drought reduced production in many jurisdictions this season.

European Union wheat production, for example, is forecast to be 147 million metric tonnes (MMT), an increase of 16% on this season’s production of 127 MMT. With a return to more normal seasonal conditions, both Australian and Russian production could easily be up at least 6MMT. That will bring production in the major exporting countries back to around 400MMT, up from 364MMT this season.

Weakness in corn futures values in the middle of last week bought out some buyers with South Korean importers booking around 260,000 metric tonnes (MT) in snap tenders. The biggest purchase of 135,000MT was made by the country’s largest stockfeed manufacturer, Nonghyup Feed Inc (NOFI).

The export interest, and the ongoing weather concerns in South America, pushed corn futures higher into last week’s close. US corn exported from the Gulf of Mexico is now cheaper than Ukraine origin corn delivered into many Mediterranean destinations. Pacific North West (PNW) export prices are also competitive trading on a par with Argentinian values into the Korean Peninsula.

Total precipitation in the Brazilian state of Mato Grosso this summer crop season is running around 35 per cent below last year. The state produces almost 40 per cent of Brazil’s safrinha corn crop. The first corn crop only makes up about a third of Brazil’s total corn production with the second crop (safrinha) making up the balance. This crop is planted immediately after the soybean crop is harvested and is the major contributor to their export program. With the soybean harvest ramping up in Brazil at the moment the safrinha plantings have also just commenced, with harvest expected in May.

Market talk suggests China is bidding for Ukraine corn at evens to PNW export values. Given the freight spread is around US$18 in favour of the US, significant sales to China are indeed possible if a resolution can be found to the ongoing China-US trade war.

Speaking of China, African swine fever is still a significant concern with 916,000 pigs culled after around 100 outbreaks of the disease had been recorded in 24 provinces since August last year. While that seems a high number, it is small relative to the total pig population of around 430 million head. China slaughtered almost 700 million pigs in 2017.

With US corn prices now competitive internationally, downside from current price levels appears limited. US corn is currently the cheapest in the world and will most likely remain so until the new crop South American harvest comes on stream in the second quarter of the year. Here again, the shutdown means we have no idea if the US is gaining traction in global markets.

The political issues of recent weeks have been a massive distraction in global grain markets. The dearth of crucial information and statistics has created a market that is merely treading water, with no direction and no rudder. As a result, the trade focus has now turned to the weather extremes being experienced across the world and the possible global supply ramifications. But that is only one side of the critical supply and demand equation.

Peter McMeekin is a consultant to Grain Brokers Australia. Call 1300 946 544 to discuss your grain marketing needs.

A new year starts with the same old stories …  

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A new year starts with the same old stories …

The New Year celebrations are now behind us and 2018 has been happily farewelled by many growers across the globe, particularly by a vast majority of eastern Australia’s winter crop farmers. Nonetheless, many of the same old issues continue to generate volatility on both global futures and domestic grain markets right across the globe.

World wheat values remain supported as rumours of supply tightness, and possible export restrictions, in Russia linger. Fresh news is limited as most of the Black Sea region only return to work from holidays this week. Russia has been dominating global wheat trade so far this marketing year but US hard red winter wheat is now priced to buy demand, trading last week at a US$10 discount to Russian export values. That said, the trade is waiting on a sustained improvement in US export sales before slipping into their buying shoes.

The market did rally late last week on the news that Algeria had rejected a cargo of Argentine wheat on the grounds that it was below contractual quality standards. Argentina exported around 900,000 metric tonnes of wheat to Algeria last year.  The north African country is Argentina’s second-biggest wheat client. Argentine authorities are confident that the quality issue is an isolated case.

The trade stand-off between China and the United States (US) appears no closer to a resolution despite mutterings from the White House, and tweets from The Don himself, suggesting all is on track. There are also unconfirmed rumours of more purchases of US soybeans by the Chinese government owned Sinograin. One day the soybean market is up on speculation of a resolution and sales. The next day the market falls as profit takers jump in to take risk off the table.

A US trade delegation is due in Beijing this week. Some reports say it is to continue the discussions (meaning progress has been slow) and others say it is to finalise an agreement (maybe the Don’s “going well” tweets are accurate). Nevertheless, one fly in the ointment could well be President Xi Jinping’s recently enunciated position on the reunification of Taiwan. Me thinks this stalemate may well continue for some time yet.

And now we have another game in play in the US. In simple terms, Trump wants to build a wall between the US and Mexico, but the Democrats don’t agree with his border control policy. The impasse has led to the shutdown of non-essential government services across the country. More than 800,000 federal government workers have been without pay since the 22nd December.

One such non-essential agency is the United States Department of Agriculture (USDA). The lapse in funding means that key USDA reports, due for release this week, will not be published. Reports such as the World Agricultural Supply and Demand Estimates (WASDE) along with US production and US stock reports will be delayed until at least one week after funding has been restored. With the Democrats now in control of the House of Representatives it could be a long wait!

The WASDE report is a monthly publication that includes production and trade forecasts for the US and world wheat, rice, coarse grains (corn, barley, sorghum, and oats), oilseeds (soybeans, rapeseed, palm), and cotton. For many traders and consumers across the globe, this report is an essential component of their market analysis and strategy development.

The January WASDE report is particularly important as it will likely contain the final production numbers for the US corn and soybeans crops as well as updating the South American summer crop production estimates. There are growing trade expectations of a lower final US corn yield compared to the December WASDE estimate.

The December weather concerns across many regions of Brazil (extremely dry) and Argentina (exceptionally wet) have continued into the new year putting downward pressure on both soybean and corn production forecasts in both countries. The dry is also having a detrimental impact on summer crop production in neighbouring Mercosur trade pact member countries, Uruguay and Paraguay.

Another victim of the partial US government shutdown has been the trade aid payments to US farmers. The payments are designed to help (and appease) farmers affected by the US trade war with China. A second round of payments was authorised just prior to Christmas but they have not been paid. This comes at a time when US farmers are securing finance for their next summer crop program and it may reduce the amount of money banks are prepared to lend farmers.

Harvest here in Australia is now winding down with pockets in the Western Districts of Victoria, small areas of the lower south-east and lower Eyre Peninsula regions in South Australia and some late Albany and Kwinana crops still to be harvested. Favourable weather will see most of this knocked over in the next week or so.

Receivals in Western Australia have now exceeded 16 million metric tonnes (MMT). Wheat makes up around 9.3MMT of this total, barley around 4.7MMT and canola just over 1.4MMT. In South Australia total bulk handler receivals are approaching 4MMT and are expected to surpass that number by the time final harvest deliveries have been received.

Major bulk handler receivals in the eastern states total around 2MMT and probably constitute around 35% of the total crop. The balance is either sitting in private stores, on-farm or has already been received directly into consumer storage facilities across Queensland, New South Wales and Victoria.

Experience says that no two years are ever the same in agriculture. New global supply and demand challenges will emerge in 2019 as old ones are resolved. But for now, political interference in the jurisdictions of Presidents XI, Trump and Putin continue to dominate grain market news wires.

As legendary American folk rock duo Simon and Garfunkel wrote and sang many years ago: It’s the same old story!

Peter McMeekin is a consultant to Grain Brokers Australia. Call 1300 946 544 to discuss your grain mark

Grain Brokers grain in hand

Grower Events

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Grower Events – March 2018

Senior Grain Brokers from our team along with and expert guest speakers will be touring WA from 19 – 23 March and providing Growers with information regarding:

  • Season Overview 2017/18
  • Marketing
  • International Grain Markets
  • Weather Risk Management
  • Lime
  • Safe Farming

These events are a great opportunity for Growers to ask questions and network with our team and other growers.
Refreshments and food will be provided and entry is free.

 REGISTER

If you would like to attend any of the events below please email or phone our friendly team:
bids@grainbrokers.com.au  or call PH (08) 9367 2866

TOWNEVENT LOCATIONDATEDAYTIME
YerecoinYerecoin Hall19 MarchMonday 2:30pm - 5:30pm
YealeringYealering Bowling Club20 MarchTuesday 9:45am - 12:15pm
DumbleyungGraham Shearing Shed20 MarchTuesday4:45pm - 7:30pm
BroomehillBroomehill Golf Club21 MarchWednesday9:45am - 12:15pm
South StirlingSouth Stirling Hall21 MarchWednesday4:45pm - 7:30pm
RavensthorpeLandmark (Shed)22 MarchThursday9:45am - 12:15pm
ScaddanScaddan Golf Course22 MarchThursday5pm - 7:30pm
Moorine RockMoorine Rock Tennis Club23 MarchFriday11am - 1:30pm

Download the Grower Events WA

Win 2 nights at Tribe Hotel, Perth

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Grain Brokers Australia are giving away two nights’ accommodation for two people at the new brand of hotel, TRIBE in West Perth.

Tribe Perth is characterised by contemporary, innovative and boutique design, along with its prominent position next to Kings Park just minutes from the city’s restaurants, bars and tourist attractions.

The hotel comes with free broadband, smart TVs, a digital reading collection, and free streaming movies on demand. The hotel will also include large common areas that reflect homely living rooms and a café and bar, TRIBE Foods. All rooms come with complimentary unlimited WiFi, Nespresso pod coffee machines, T2 Tea and bottled water.

TO ENTER

For those not receiving our Daily Pricing Summary, to enter simply visit us at either Mingenew, Dowerin or Newdegate Field Days and sign up for your free month trial.

If you’re a current customer or on a free trial of our Daily Pricing Summary you will automatically go in the draw to win – no need to do anything.

Click here for the Terms and Conditions.

Tim Byass, Grain Brokers Australia

Trump remains popular among US farmers

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Last week at the Australian Grains Industry Conference (AGIC) WA Grains Business Development Manager, Tim Byass met with Sara Wyant, veteran US agricultural journalist and editor of Agri-Pulse.

Ms Wyant said Trump remains popular among US farmers and that agriculture was enjoying near-unprecedented access to the president with strong influence in terms of key issues such as trade policy.

“The map of where his voters sit has been critical, his position on trade policy has made agricultural people nervous, but you see with the North American Free Trade Agreement (NAFTA), he nearly threw it out but the opinions of the farmers, those that elected him, were considered.”

Listen to the ABC radio interviews below by Clint Jasper on Trump talking the type of talk farmers want to hear and US trade restrictions.

Tim Byass, Grain Brokers Australia

Tim Byass, WA Grains Business Development Manager comments on Trump policies

Image of hand using phone in grain field | Grain Brokers

Weekly Strategy Update 13/02/17

Posted by | Grain Brokers Australia News, Misc, Weekly Strategy Market Update | No Comments

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.

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