If it weren’t for the extreme wet over the summer, most regions of Australia would be in a ‘mini winter drought’. For the three months from April to June, southern NSW, Victoria, SA and WA all recorded below average rainfall (decile 2 -3), while isolated pockets in these regions were very much below average (decile 1).
If the eastern states receive below average rainfall until harvest it won’t be a complete disaster considering subsoil moisture, but it won’t be a second bumper harvest in a row as earlier predicted. Especially since the BOM have predicted that July through to September is favouring a drier than normal season. The chances of receiving above median rainfall are between 30 and 40% over WA, southern parts of SA and Victoria. While temperatures are tipped to exceed maximum temps for the critical August – September period. East coast regions have got a 70% chance, while WA is 80%!
AOF have revised their estimate for new crop canola by 6% to 2.58mmt, and if this materialises it will be the biggest crop in 15 years. From their June update they have increased area planted to canola in NSW by 5% (395kt) and whilst intended area is unchanged at 800k ha in WA, predicted yields have increased to 1.2t/ha (960kt). Although the rise in yield is justified given things have improved from previous dire conditions, AOF have only decreased their total area in WA this year by 5%. Research that Profarmer has undertaken is that some regions have cut back in the range of 10 - 20%, especially in the upper grade southern.
From the price peak on the 27th May ($675 FIS), prices have been in a steady decline through June hitting a short term low ($605) on the 1st July. Prices have since stabilised and have traded in a $20 range since and are now at $620 for Western Australia. While new crop prices along the east coast continued to come under pressure. It has been over a month since east coast canola was $600/t with the contract continuing to trade around the $570 range for July.
Basis (WA cash v Winnipeg Nov ’11 futures) has declined in a similar pattern after reaching a high of A$91 at the end of May, basis has now reached A$45 (the lowest price since 20th April). With conditions slowly improving will basis decline further dragging prices with it?, just in January -March basis was trading in a range of -$10 and +$10.