Markets are really struggling to find any reason to rally. Nth hemisphere crop conditions keep getting better, early season harvest results are strong and talk of a late season frost remains just that. Markets for quality grain are being supported by concerns over crops in eastern Australia and the threat of a late season frost impacting late nth hemisphere spring crops. Argentine bean crop forecasts should keep the oilseed market on edge over the next few months.
Wheat still holds a sizeable advantage over corn (+165USc/bu CBOT Dec 09 futures), indicating that a fair chunk of carryover wheat stocks are of poor quality. Also, many of the producers of higher quality wheat will have smaller crops and the quality end of the market is not prepared to relax until a large Australian crop is made and until northern hemisphere spring wheat escapes a late frost threat.
Speaking of which, we are hearing reports by the day that crops across parts of western Queensland are being fed off. Unseasonally hot and windy conditions over the past week have crop watchers giving the crop another fortnight before serious production damage is done. A poor QLD and nth NSW crop has the potential to knock at least 2mmt off current crop forecasts.
While prices in most port zones have traded a premium above east coast northern zones this week, Newcastle APW is currently a $10—12/t premium over these southern and western zones with Brisbane APW/H2 another $5—8/t above Newcastle.
Worries about Australian supplies kicked off offshore interest in new crop with trade reports of Asian consumers buying both December and March APW shipments. Customers are also looking at min 11.5% protein wheat ex Western Australia and South Australia.
Outside of Aussie crop concerns, the only real action is in oilseed markets. China continues to buy up beans, old crop stocks remain tight and there is talk that disease may limit US yields. But reports are that, despite ongoing political turbulence and uncertainty regarding export taxes, Argentine will produce a massive crop of over 50mmt as drought prone areas are forecast for a drenching as the impact of the El Nino moderates.
Argentina’s soybean output peaked at 47.5 million tons in the 2006-2007 season before dropping to 46.2 million the following year, the exchange said. The 2008-2009 harvest, which was gathered between February and June, was cut by the drought to 32 million tons.
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