Tuesday, January 3, 2012

Big crop always get bigger

The WA harvest continues to exceed expectations with 13.5mmt being received into the CBH system, representing 98% of total receivals. CBH has estimated that Geraldton has hit a new harvest record at 3.45 mmt (99% complete), while receivals in the Kwinana zone have surpassed previous estimates at 6.27 mmt (4% above prior estimates). Recent wet weather in the two southern port zones has continued to frustrate growers, with Albany 2.24 mmt (89% complete) and Esperance 1.42 mmt (95% complete) dragging out the harvest. The 03/04 harvest still holds the CBH record for highest grain intake for WA at 14.7mmt.

APW prices are above $240 for the first time since 5th Nov, with AWB paying $241 ($2 higher then the next best price from CBH).  However the large WA wheat crop is continuing to weigh in on basis with it averaging +$5 over the past week, compared to average of +$13 in December. Looking back to last weeks drought ravaged crop, basis averaged +$66/t. Kal Grains continue to offer $200 for lupins in the Kwinana zone with AWB and CBH $20 behind, not willing to match their price over the last month.

The rallying US corn market (due to dryness in southern Brazil and Argentina) has helped drag sorghum prices higher. A weather market is developing in Sth America and as long as the forecast stays dry additional gains in the markets will be made. But with all weather markets, future forecast and subsequent price movements can fluctuate widely. And after the market rallied 80c in two weeks, the downturn could be equally as dramatic.

Even in the face of a bumper crop coming on line later this month, new crop sorghum values have surged to their highest level since 2nd December. With Pentag and Viterra both paying the best money at $196 Brisbane. While for CQ ports Viterra is paying the same money, and is $3 better then the next best price. Grower selling was reported between Christmas and New Year although volume was light. Selling is anticipated to increase as it hits the physiological $200 port. Yield prospects on the Downs look excellent with high potential especially if rain falls within the next week. Growers are sitting on sizeable wheat stocks and finding room for the sorghum harvest will be difficult. This may result in some harvest pressure during the March timeframe although the market may already be discounting this possibility.

The harvest along the east coast is generally over, with the odd weather damaged paddock still to go. Yields were generally good, with quality suffering after the rain. Most wheat receivals after the rain event were largely AH9 and SFW. The market will need to shift large amounts of this off spec grain into export channels in 2012, representing good buying opportunities for feed users. Offers will need to be prices competitively, and will need a strong shift in the dollar or rallying international futures to drag prices higher from the recent depressed trading range.

Container and domestic markets continue to provide pricing opportunities from time to time, with APH, H2 and APW grades still in demand. Market depth is not deep, with activity for January shipments. Activity is expected to pick up this week and more trade to come back into the market.

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