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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Sunday, August 30, 2009
Sunday, August 23, 2009
Now look who’s calling for more information
The email I received from CBH late Friday afternoon was a breathtaking exercise in hypocrisy. For those that missed it, CBH released a special ‘Down the Line’ e-newsletter late last week where they URGENTLY called on growers to submit their crop estimates.
It read ‘With a potentially big harvest less than six weeks away, we still have only 50% of crop estimates submitted. This is a serious concern for our operations staff. If we were to plan harvest services from the information we have received to date, we would be opening only 80 of the State’s 197 receival sites.’
They will get no argument from me that this type of information is required to promote efficiency, but it is a curious comment from a company who doesn’t think there is a need to disseminate information to other industry participants to aid their planning.
Prior to completing the survey, growers should be thinking about who will gain access to it? Is it just CBH operations? And if CBH were fair dinkum about promoting competition (which would benefit their grower members), they should publicly release this information to the market so that everyone else can get on with their planning.
Remember Grain Pool (formerly Agracorp and part of the CBH Group) was the biggest cash buyers at harvest time last year, so why would you (the farmer) potentially want to create an information advantage for one of more than 20 organisations looking to buy grain from you this year? Does the muted response to the survey by growers finally recognize that this information could be used against them?
Some perceive that I am launching a crusade to improve industry information for my own benefit. A CBH Director has publicly made this claim. But apart from the claim being totally baseless (it is not like I will be able to inside trade with this info), why would a CBH Director accuse me of this? Think about it - is it he that accuses, trying to veil the vested interest of the company he represents?
What vested interest can ProFarmer possibly derive, from asking for the public release of high-level information to the marketplace? All I want is better information so I can give qualified, independent advice to my grower subscribers - I hate guessing. Unless growers derive benefit from my advice I don’t have a business, no-one is forced to become a ProFarmer member. I am not asking for an advantage over any other market participant competing against me.
If you are interested in receiving this information and more on a regular basis, please call us toll free on 1300 302 143 to organise your subscription. Click HERE to subscribe online or Click HERE for a 4-week FREE Trial
It read ‘With a potentially big harvest less than six weeks away, we still have only 50% of crop estimates submitted. This is a serious concern for our operations staff. If we were to plan harvest services from the information we have received to date, we would be opening only 80 of the State’s 197 receival sites.’
They will get no argument from me that this type of information is required to promote efficiency, but it is a curious comment from a company who doesn’t think there is a need to disseminate information to other industry participants to aid their planning.
Prior to completing the survey, growers should be thinking about who will gain access to it? Is it just CBH operations? And if CBH were fair dinkum about promoting competition (which would benefit their grower members), they should publicly release this information to the market so that everyone else can get on with their planning.
Remember Grain Pool (formerly Agracorp and part of the CBH Group) was the biggest cash buyers at harvest time last year, so why would you (the farmer) potentially want to create an information advantage for one of more than 20 organisations looking to buy grain from you this year? Does the muted response to the survey by growers finally recognize that this information could be used against them?
Some perceive that I am launching a crusade to improve industry information for my own benefit. A CBH Director has publicly made this claim. But apart from the claim being totally baseless (it is not like I will be able to inside trade with this info), why would a CBH Director accuse me of this? Think about it - is it he that accuses, trying to veil the vested interest of the company he represents?
What vested interest can ProFarmer possibly derive, from asking for the public release of high-level information to the marketplace? All I want is better information so I can give qualified, independent advice to my grower subscribers - I hate guessing. Unless growers derive benefit from my advice I don’t have a business, no-one is forced to become a ProFarmer member. I am not asking for an advantage over any other market participant competing against me.
If you are interested in receiving this information and more on a regular basis, please call us toll free on 1300 302 143 to organise your subscription. Click HERE to subscribe online or Click HERE for a 4-week FREE Trial
Sunday, August 16, 2009
Frost and friction in oilseed market
Considering that last week’s USDA reports were pretty negative, the markets held up reasonably well. Corn and wheat look to be searching for a bottom but could have some further downside if we escape the next month or so without a significant frost event. Speaking of frosts there is a frost forecast to hit Canadian canola growing areas this week (around the 20th). ProFarmer Canada is a bit dubious but thinks that there is some major frost risk later in the month.
The oilseed markets has been acting strangely, dropping through the floor after failing to break through a key resistance level this week. This is despite further evidence of excellent sales of both old and new crop out of the US. Over 1mmt of new crop sales and another 260,000t of old crop sales have been executed while a further 760,000t of new-crop beans are added to export bookings.
Large sales to China are welcome but need to be treated with some caution as there is a potential trade tiff brewing between the US and China. Some are now wondering if China is aggressively front-loading purchases ahead of potential trade retaliation that could include slowed US bean buys.
In local news a crop tour of the WA northern cropping zone last week revealed that canola crops were faring by far the worst, particularly for those sown on sand plain country. Patchy emergence and some browning off is being attributed to wet planting weather, shallow root establishment and some hot dry days. Time will tell whether recent rain will help these crops recover in time to post average yields, but none of the farmers we were talking to were expecting better than 1t/ha.
There are also worries about crops in the northern cropping zone on the east coast. Without a decent rain before the end of August these crops have the potential to fall-over quickly and this coupled with a northern hemisphere frost may prove the right tonic for a fundamentally driven grain market rally.
If you are interested in receiving this information and more on a regular basis, please call us toll free on 1300 302 143 to organise your subscription. Click HERE to subscribe online or Click HERE for a 4-week FREE Trial
The oilseed markets has been acting strangely, dropping through the floor after failing to break through a key resistance level this week. This is despite further evidence of excellent sales of both old and new crop out of the US. Over 1mmt of new crop sales and another 260,000t of old crop sales have been executed while a further 760,000t of new-crop beans are added to export bookings.
Large sales to China are welcome but need to be treated with some caution as there is a potential trade tiff brewing between the US and China. Some are now wondering if China is aggressively front-loading purchases ahead of potential trade retaliation that could include slowed US bean buys.
In local news a crop tour of the WA northern cropping zone last week revealed that canola crops were faring by far the worst, particularly for those sown on sand plain country. Patchy emergence and some browning off is being attributed to wet planting weather, shallow root establishment and some hot dry days. Time will tell whether recent rain will help these crops recover in time to post average yields, but none of the farmers we were talking to were expecting better than 1t/ha.
There are also worries about crops in the northern cropping zone on the east coast. Without a decent rain before the end of August these crops have the potential to fall-over quickly and this coupled with a northern hemisphere frost may prove the right tonic for a fundamentally driven grain market rally.
If you are interested in receiving this information and more on a regular basis, please call us toll free on 1300 302 143 to organise your subscription. Click HERE to subscribe online or Click HERE for a 4-week FREE Trial
Tuesday, August 11, 2009
ACCC on the job
If the bulk handlers thought the Australian Competition & Consumer Commission (ACCC) had its hands full with other matters - which would allow them to set their own ambiguous rules for competitor access to their port terminals - then they were wrong. The rejection by the ACCC of their initial draft access Undertakings has left them in no doubt that the watchdog has their eye on them.
While the ACCC agreed with many of the principles expressed by the bulk handlers they were concerned by the lack of clarity and formality of them. The best example is that less then three months out from harvest and none of the bulk handlers had published indicative prices to access their services. This means that the major competitors are essentially flying blind trying to purchase grain with no idea what it may cost them to export.
Moreover, exporting arrangements and management of capacity issues (which proved a significant problem over the 2008/09 harvest) are far from the clear and the ACCC has asked the bulk handlers to go back to the drawing board to improve transparency in dealing with these issues. ACCC’s response to the CBH draft undertaking is 227 pages long – many times longer than the access Undertakings originally proposed.
On issues such as ‘ring fencing’ information the ACCC have taken a ‘wait and see’ approach, deciding not to threaten the industry with a deluge of regulation while it is in transition. But at the same time they have issued a stern warning that they would act if there was evidence that proposed ‘ring fencing’ measures were not working.
The main beef the ACCC has is with the ambiguity surrounding the publish-negotiate-arbitrate component of the proposed Undertakings. The ACCC has heard exporter concerns of the former ‘take it or leave it’ approach adopted and want a more formal and inclusive approach to setting prices for access arrangements and dealing with disputes.
Unlike Cargill Australia Pty Ltd, Elders Toepfer Grain Pty Ltd, Emerald Group Pty Ltd and Noble Resources Australia Pty Ltd which had their wheat export license accreditations extended to September 2012, the bulk handlers have some serious work to do before their export license accreditation can be considered. Wheat Export Australia (WEA) cannot issue an export license to any bulk handler unless the ACCC accepts its access undertaking. It is also likely that the bulk handlers have to apply for their licenses on an annual basis so that ACCC can monitor their compliance with their access undertakings.
If you are interested in receiving this information and more on a regular basis, please call us toll free on 1300 302 143 to organise your subscription. Click HERE to subscribe online or Click HERE for a 4-week FREE Trial
While the ACCC agreed with many of the principles expressed by the bulk handlers they were concerned by the lack of clarity and formality of them. The best example is that less then three months out from harvest and none of the bulk handlers had published indicative prices to access their services. This means that the major competitors are essentially flying blind trying to purchase grain with no idea what it may cost them to export.
Moreover, exporting arrangements and management of capacity issues (which proved a significant problem over the 2008/09 harvest) are far from the clear and the ACCC has asked the bulk handlers to go back to the drawing board to improve transparency in dealing with these issues. ACCC’s response to the CBH draft undertaking is 227 pages long – many times longer than the access Undertakings originally proposed.
On issues such as ‘ring fencing’ information the ACCC have taken a ‘wait and see’ approach, deciding not to threaten the industry with a deluge of regulation while it is in transition. But at the same time they have issued a stern warning that they would act if there was evidence that proposed ‘ring fencing’ measures were not working.
The main beef the ACCC has is with the ambiguity surrounding the publish-negotiate-arbitrate component of the proposed Undertakings. The ACCC has heard exporter concerns of the former ‘take it or leave it’ approach adopted and want a more formal and inclusive approach to setting prices for access arrangements and dealing with disputes.
Unlike Cargill Australia Pty Ltd, Elders Toepfer Grain Pty Ltd, Emerald Group Pty Ltd and Noble Resources Australia Pty Ltd which had their wheat export license accreditations extended to September 2012, the bulk handlers have some serious work to do before their export license accreditation can be considered. Wheat Export Australia (WEA) cannot issue an export license to any bulk handler unless the ACCC accepts its access undertaking. It is also likely that the bulk handlers have to apply for their licenses on an annual basis so that ACCC can monitor their compliance with their access undertakings.
If you are interested in receiving this information and more on a regular basis, please call us toll free on 1300 302 143 to organise your subscription. Click HERE to subscribe online or Click HERE for a 4-week FREE Trial
Monday, August 3, 2009
A bad to time to rethink price expectations
It has been a busy but successful week at ProFarmer. I finished my last presentation in a stretch of five at the Australian Grain Conference and spent most of the week in Melbourne discussing trade issues with nearly 500 delegates at the conference. While I was away my horse Silver Omen won at Belmont which was a bonus.
I have been telling my inner-self to hold the line that grain prices would rise towards our harvest, but lately, week by week I have been questioning our price expectations; right in the middle of the nth hemisphere harvest is never a good time to be rethinking price forecasts, as supplies often look overwhelming and price forecasters get jittery.
Northern hemisphere summer crops continue to look impressive resulting in the International Grains Council (IGC) raising its all grain 2009/10 end stocks by 18mmt or 1% in its latest report released last week. A big corn crop would take out some upside potential and open up some downside, but although yields appear to be moving, the trade wants the USDA to confirm the unexpectedly large plantings of its 30 June report.
But we might not have to. Despite posturing about making soybean sales, China last week stepped back into the oilseed market big-time. Traders reacted strongly to US weekly and daily export sales data reported last Friday morning where export sales were nearly double the top end of expectations.
The USDA confirmed market rumours of large new crop soybean purchases by announcing sales of 1.8mmt on 30 July - the third largest daily sale on record. Clearly, China continues to have a large appetite for imported beans and used the recent price retracement as an opportunity to extend bookings. Internal Chinese prices are still US$30/t above imported beans. This all gives hope that the Chinese economy has regained its footing quickly.
But while China’s enormous appetite for beans provides overall support, beans and cereal prices could start diverging which is something to keep our eye on. We suspect another rain and prices back towards A$300/t could prompt some local hedge selling.
If you are interested in receiving this information and more on a regular basis, please call us toll free on 1300 302 143 to organise your subscription. Click HERE to subscribe online or Click HERE for a 4-week FREE Trial
I have been telling my inner-self to hold the line that grain prices would rise towards our harvest, but lately, week by week I have been questioning our price expectations; right in the middle of the nth hemisphere harvest is never a good time to be rethinking price forecasts, as supplies often look overwhelming and price forecasters get jittery.
Northern hemisphere summer crops continue to look impressive resulting in the International Grains Council (IGC) raising its all grain 2009/10 end stocks by 18mmt or 1% in its latest report released last week. A big corn crop would take out some upside potential and open up some downside, but although yields appear to be moving, the trade wants the USDA to confirm the unexpectedly large plantings of its 30 June report.
But we might not have to. Despite posturing about making soybean sales, China last week stepped back into the oilseed market big-time. Traders reacted strongly to US weekly and daily export sales data reported last Friday morning where export sales were nearly double the top end of expectations.
The USDA confirmed market rumours of large new crop soybean purchases by announcing sales of 1.8mmt on 30 July - the third largest daily sale on record. Clearly, China continues to have a large appetite for imported beans and used the recent price retracement as an opportunity to extend bookings. Internal Chinese prices are still US$30/t above imported beans. This all gives hope that the Chinese economy has regained its footing quickly.
But while China’s enormous appetite for beans provides overall support, beans and cereal prices could start diverging which is something to keep our eye on. We suspect another rain and prices back towards A$300/t could prompt some local hedge selling.
If you are interested in receiving this information and more on a regular basis, please call us toll free on 1300 302 143 to organise your subscription. Click HERE to subscribe online or Click HERE for a 4-week FREE Trial
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