Weather markets are hard to predict and although they appear simmering for a while it takes only a slight action for the markets to explode. Internationally this has now happened twice in the space of one month. First rally was on the back of Russian dryness and subsequent short covering, whilst this rally was emerging US Midwest dryness, and each time domestic prices have reacted accordingly. This has been welcome news especially with growers who were too busy in the paddocks in offloading old crop stocks in May. Delivered markets are now at the highest prices since last August, whilst southern delivered markets approaching twelve-month highs. New crop wheat has surged $27 over the week, and have now exceeded the last peak by $8.
Barley and sorghum has also surged between $18 - $22 over the week, on the back of international production concerns. Sorghum and feed barley is currently sitting at the highest prices since last October. The malt/feed spread continues to trade around +$27. Although malt barley has surged $42 since the contract hit $213 for two months, it is still a risky proposition in selling malt so far early in the growing season. Delivered F1 for the up coming harvest are at a slight premium to current old crop prices.
East Coast new crop canola continues to mirror Winnipeg ICE exchange, and although the market has surged $16 over the past week, it is still $11 shy of the of the contract peak reached on 26 April. The GM spread continues to fluctuate, current discount is $33, but it was only -$16 last week. With acreage surging across the country (NSW DPI alone are forecasting a 73% increase to 668,500 ha) growers have already engaged the forward market back in April/May at similar values. Agronomic conditions are mixed in regions, and with BoM long range forecast not offering much confidence, this raises the risk of hedging more of the crop (albeit at current excellent returns). Last year when forward prices sunk more then $100 from May until December, however may be still stuck in the back of growers mind.
Canadian growers have planted another record crop, and South American growers on the back of last years drought ravaged output will look to increase soybean acreage sharply. Combined with increased domestic selling as harvest approaches, these are the factors that could weigh on market mentality in the second half of the year. Short term, the sky rocketing US soybean crop continues to add uncertainty into the global oilseed market. With all weather related rallies it is difficult to predict, so this will be the one to watch if canola is to strengthen.
Chickpea prices have ignored outside market gains in cereals and oilseeds, with the chickpea market still catching its breath from the sharp rally experienced during May. Internationally market news is thin on the ground, the Indian monsoon that usually you can set your watch to, continues to disappoint and delayed. Rainfall continues to be unevenly distributed in recently planted pulse production regions in interior growing regions.
Domestic exports continue to run at a brisk pace, as highlighted by last weeks BHC stocks with NSW stocks declining by 931kt from April to May. Looking at the current Graincorp shipping stem for NSW, exports will continue to surge. Although 365kt (June) and 384kt (July) is on the shipping stem for Port Kembla, looking at previous export months the most that was shipped out was 205kt in May. Either ship failing survey, vessel delayed, domestic accumulation delay, terminal problems, quality issues the list goes on, so shipping volume will continue to roll from one month to the next or shipping slots being cancelled and/or moved elsewhere around the country. Recently Graincorp opened up the 2012/13 shipping stem (Oct '12 to Sept '13) so traders can acquire slots for exports. Out of the 13.3mmt available some 9.1mmt was booked. Port Kembla for example, there is only 150kt available for shipment during Oct – Dec. But from now until August 2013, it is booked solid!