Tuesday, December 6, 2011

Harvest 2011 – Around the Paddocks


After experiencing ideal harvesting conditions over the last couple of weeks, rain fell over much of southern Kwinana zone and Northern Albany zone. Wide spread coverage of 25mm while falls up to 105 mm in eastern cropping regions occurred. Again raising quality concerns with the crop, and delaying receivals for the week. APW2 continues to be in a tight trading range during harvest, with prices in the Kwinana zone trading between $238 -$248 since mid October. While feed barley continues to trade in a similar tight pattern (low $220’s) since the start of November. Malting varieties continue the familiar pattern of falling away heavily once harvest has commenced. With the current spread to F1 now at $14 after being $50 at the start of November and out to $100 in July.

Receivals have ramped up in anticipating of beating the rain that fell across the region. CBH have estimated that over the week 3mmt has been received into the system, for a total of 8.2mmt this harvest. So far Geraldton has received 2.5mmt (+600kt fro last week), with wheat quality improving and now lupins freely flowing. Kwinana 3.5mmt (+1.5mmt), barley and canola receivals slowing down whilst more milling grade wheat is coming off. Albany 1.1mmt (+618kt) and Esperance 1mmt (+340kt) with wheat quality improving.

Grain prices have eased as international values decline and trade shorts become comfortable with current ownership levels and available stocks of milling wheat. The H2 premium to APW has eased $9 since Friday. DR3 discount to DR1 has been holding steady at  -$45 through late October and early November, with the discount of late widening out to -$62. But on Tuesday the trade sharply lowered their prices with the spread out to $102, as Graincorp sharply lowered their DR3 prices by $40 overnight.

Feed markets are showing signs of weakening in southern QLD with delivered Brisbane still bid $215 for SFW1, $198 Downs and Glencore paying $188 into Texas. Over the border Liverpool Plains region feed markets are weaker on available supply of feed quality. Further south SFW delivered into metro regions has held up as consumers take coverage.

Harvest has made good across the Eastern Australia, with the past weeks rain events have produced down graded quality in all regions to varying degrees. The region south of Moree and East onto the Liverpool Plains is more generally affected and high volumes of feed quality are expected from this region. Test weight quality is holding above 70kg/hl, making it suitable for domestic consumptive markets. While in southern regions AH9 has been reported the dominant grade being received. The Victorian Mallee will be having cut out soon; while south of the divide will be just onto canola. High protein wheat is being widely reported in SA, with yields all up.

Oilseed values continue to succumb to price pressure, with track bids weaker reflecting export parity. Although we have passed the peak of grower selling pressure, prices still are drifting lower (-$83 since October). Delivered crushing plant bids have reduced the premium to $1 - $3 over the track prices into port/ capital city destinations.
Global oilseed demand will be relaying heavily on outcome of the EU/US debit crisis, and if the huge Sth American bean crop has a good harvest in April/May next year.

Old crop sorghum continues to compete with feed wheat and is losing the battle with values on par with wheat, needing to fall to find increased market share. ABARE forecasts no change in area planted to sorghum, with increases in QLD covering for a small decline in NSW. Production is set to increase on increased yields with a crop of 2.4 mmt estimated versus a 2.1mmt crop last year. Exports are estimated to double to 668kt, while domestic feeding is increased 300kt, which maybe difficult to achieve given availability of feed wheat in the sorghum production regions and available low cost feeding options in the southern states.

Chickpea bids continue to weaken, in light of good Indian Rabi planting pace into good conditions. The rain across NSW and downgrading of crop quality has not spurred the market, potentially only provided another cheaper source of lower grade product. Brisbane track is bid at $430, and has now declined $100/t since it made a modest recovery in start of November.

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