wheat _snapshot_feb_16.pdf · 2016-02-26 · • us soybean ending stocks for 2015/16 are projected...
TRANSCRIPT
Wheat
Global
Macro economic policies continue uncertainty, volatility
Macro themes continue to hang over global markets, with uncertainty over economic outlook. Central banks in Europe and Japan have taken unprecedented steps to boost economic activity and create stability by setting cash target rates in the negative. However, the consequence is heightened volatility across stocks, bonds, currencies and commodities, with the money flow being ‘risk off, safe haven’ in nature.
Abundant global supply continues to weigh on pricing, but the focus has turned to the unseasonably dry and warm conditions experienced in US hard red winter (HRW) areas. This could have the effect of bringing the crop out of dormancy too early, increasing the susceptibility to potential frost damage.
Also, funds remain short for CBOT and KCBOT, increasing the likelihood of a short covering rally in the near future.
DoMestic
Prices down in subdued market
Wheat cash markets have remained relatively quiet since the end of January, with most trade activity centred around swapping or buying the correct grades/tonnage on shipping commitments.
Despite this, over the past month flat prices have eased in most port zones. East Coast APW1 values are down $12 in Geelong, $25 in Newcastle, and in South Australia down $18 in Port Lincoln and $7
* Prices are indicative and subject to change
26 FEBRUARY 2016
MARKET SNAPSHOT
* Prices are indicative and subject to change.
* Prices are indicative and subject to change
Market last trade
7 Day Move
CBOT Wheat ($USc/bu)
445.25 17
CBOT Corn ($USc/bu)
355.5 10
CBOT Beans ($USc/bu)
859 20.75
Winnipeg Canola ($CAN/Mt)
447.4 16.8
Matif Canola (€/Mt)
348.5 7.5
AU$ / US$ 0.7235 0.0084
AU$ / EUR 0.656 0.0114
the trading Week
AT A GLANCE 15/16 adM POrt PriCeS
aPW1 F1 Non GM canola
sorghum
Brisbane 252 225 228
Newcastle 260 220 490 229
Pt Kembla 258 222 490
Geelong 261 232 488
Pt Adelaide 247 195 488
Kwinana (Port Inc) 270 223 515
in Port Adelaide. In the west, Kwinana is down approximately $14/mt. Protein spreads over APW1 have narrowed.
Despite the flat price movement, however, basis levels over CBOT wheat have held up across most port zones, with PAD up 18c and NTL virtually unchanged. Over the past month CBOT WH6 futures have traded from above 480c/bu down to 455c/bu.
For latest prices, contracting grainand administration, call aDM Direct
1300 123 aDM(1300 123 236)
Grower pricing activity has remained subdued given the lower flat price levels, while the domestic consumer remains a just-in-time buyer.
Relative to other origins, Aussie wheat values remain at the upper end of pricing into South East Asia. The story regarding the potential import of Aussie wheat into India continues to develop, albeit on conjecture and rumour.
MARKET SNAPSHOT
BarLeY
PAGE 2
Poor chinese demand, increased argentinian exports impact local growers
The Australian feed barley market has continued to drift lower over the last month as lack of demand from China for feed relaxes global supply and demand.
Changes to Argentinian export taxes and the devaluing of their currency has also placed further
pressure on the feed barley complex, as the volume out of that country increases.
Current Chinese buying ideas remain $US8-10 below current Australian levels. Plentiful supplies of US sorghum to China has also reduced the appetite for feed barley as the Chinese Government pushes to further reduce feed imports due to growing domestic corn stocks.
Chinese New Year celebrations have slowed nearby malt enquiry. Year-on-year demand is set to be lower as domestic beer consumption reduces. Large carryover stocks have also slowed China’s demand with a move to hand-to-mouth buying prior to European new crop tonnes coming on stream.
European malt values have come under pressure over the
last couple of months as lower demand reduces the pressure on global malt supplies.
So far in 2016, grower selling has remained slow as producers hold on to higher prices. Currency fluctuations have provided some opportunity to offload some tonnes, although it appears there is still volume in growers’ hands.
Changes to Argentinian export taxes and the
devaluing of their currency has also
placed further pressure on the feed barley
complex, as the volume out of that country
increases.
Most players in the grain industry have heard the old adage that “corn is corn and beans are beans, but wheat is not always wheat.”
Milling wheat for flour is not as simple a linear equation for millers as the process of grinding corn or crushing beans. Flour quality and yield are variable outcomes, relative to crop class, variety and growing region.
The biggest class differences in the US are Spring Red versus Hard Red versus Soft Red versus White. Of relevance to Australian producers, from the perspective of millers and bakers, is the difference between red wheat and white wheat.
White wheat is the principal variety grown in Australia, whereas red wheat accounts for most of the US crop. According to the USDA, in the 2015/16 season, white wheat accounted
for approximately 10% of all wheat production in the US.
According to the Whole Grains Council, the introduction of white wheat into the US was to help reverse a trend of declining US wheat exports. Asian noodle miller demand was said to be waning and switching from red to white varieties in the 1980s and 90s.
Historically, white wheat yields have been lower than red wheat, particularly in the Pacific North West (PNW) region, but this is offset at the farm gate with white wheat attracting a premium. This premium, however, has
STRAIGHT TALK
FRO
M THE U.S.A.
STRAIGHT TALK
FRO
M THE U.S.A.
MARKET SNAPSHOTPAGE 3
When wheat is not wheat
declined over the past couple of seasons.
The process of milling white wheat produces a “whole” flour including bran, germ and endosperm – key elements in making whole grain bread. White wheat typically has a higher extraction rate than red wheat, meaning each bushel of white wheat yields more flour than the red varieties.
The chart below compares US red wheat – HRW2 (Hard Red Wheat No.2) and Australian White Wheat - APW1 (Australian Premium Wheat No.1).
White wheat is the principal variety grown in Australia,
whereas red wheat accounts for most of the US crop.
HRW2 APW1Protein (min %) 11.5 10.5DMB % 13 12.9Moisture (max %) 13.5 12.5Foreign Material (max %) 0.7 0.6Total Defective (max %) 5 5
Note: In the US, Futures delivery is based off 11.0 protein and Gulf values are traded based 12.0 protein
by Brad McConnachy
MARKET SNAPSHOT
CanOLa
PAGE 4
Japanese and Mexican buying, while the domestic crush pace is running 12% ahead of this time last year.
In Europe, forecast temperatures over the next few weeks should remain moderate, minimising the risk for winterkill. Generally speaking, the European rapeseed crop is in a good shape, with only some areas of Poland experiencing crop loss.
Lower EU crush from the previous crop is due to continuing poor margins and little biodiesel business. Expectations for new crop crush come in around 23.5 to 23.7 mln mt for 2016/17.
The market needs an oil story for support and the current one doing the rounds is Crude Palm Oil (CPO). Rumours abound that Russia and France may impose additional taxes on palm oil, making it less competitive against other edible oils such as soy. Oil World reports that Indonesia exported 26.5 mln mt of palm oil in the calendar year 2015, up significantly from the 23mln mt exported in the previous year.
growers in managing their EU sustainability programs.
Agriculture and Agri-Food Canada (AAFC) released their ‘outlook for principal crops’ report last week. Oilseed area planted is predicted to increase year-on-year, while grains should remain relatively consistent. For 2016/17, seeded area for canola is forecast to increase to 8.4 million hectares (up 4%) on more attractive returns than other field crops. Production, however, is forecast to decline slightly to 16.8mln mt.
Canadian exports to date for 2015/16 season are up 17% on last year due to strong Chinese,
February WasDe report key points
• US soybean ending stocks for 2015/16 are projected at 450mln bu, up 10 million from last month due to a lower crush
• The 2015/16 season-average soybean price range projection is unchanged at $8.05 to $9.55/bu
• Global oilseed production for 2015/16 is projected at 527.4mln mt
• Global oilseed stocks are projected at 91.2mln mt, up 0.3 million
• Higher soybean stocks in Argentina, the US and Turkey more than offset lower rapeseed stocks in the EU and Canada
The chart below illustrates the lower European crush year-on-year and the typical seasonal ‘tapering’ start.
3,000
2,500
2,000
1,500
1,000
500
0
July AugSept Oct Nov Dec Jan Feb Marc
hApril May June
Sunflower 2013/14Sunflower 2014/15Sunflower 2015/16
Rapeseed 2013/14Rapeseed 2014/15Rapeseed 2015/16
Soy 2013/14Soy 2014/15Soy 2015/16
1000
t
EU Oil crush estimate
Source: Oil World/Fediol
local rapeseed crop revised down
The Australian Bureau of Agricultural and Resource Economics (ABARE) recently measured the Australian canola crop at 2.9mln mt, or 8% lower than previously forecast. Of that, between 1.6 and 1.8mln mt is heading to Europe, with most already gone.
China has been noticeably absent from the Australian canola market this year, sourcing their requirement from Canada at roughly US$45 to $50/mt cheaper than Australian seed. This clearly highlights the benefit to Australian
MARKET SNAPSHOT
SOrghUM
PAGE 5
www.admgrain.com.au
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25th Percentile
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For latest prices, contracting grainand administration, call aDM Direct
1300 123 aDM(1300 123 236)
solid finish, feed supplies pressure sorghum market
The local sorghum market has come under pressure in recent weeks, with the wet January enabling the crop to mature under favourable conditions.
Harvest is well underway in southern Queensland and with the consistent in-crop rainfall, early yields are being reported at the higher end of the range. This rain has also allowed the CQ crop to be planted, albeit on significantly less hectares than last year.
Despite lower values, export demand for Australian sorghum is significantly down, with less than one-fifth of sales agreed to the middle of February when compared to the same time last year.
The effect of Chinese demand on the relative values of Australian
sorghum when compared to US corn can be seen in the chart (right).
Significant Chinese demand first appeared mid 2012 and basis levels rallied strongly. These lofty levels were maintained right through to mid-2015 until tightening import restrictions by the Chinese government slowed demand.
On the domestic front, sorghum remains reasonably priced into end-user homes, although there seems to be plenty of competing feed barley and wheat in the northern area.
Offshore markets have drifted into a post-Christmas lull, seemingly waiting to assess their next move once northern hemisphere crops emerge from their winter dormancy. Option volatility in corn is 4% lower than this time last year, highlighting the lack of activity.
AUD BNE track values for the past eight seasons
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