Confidence restored after consistent rainfall
- By: "Prime" Ag News
- Cattle News
- Jul 14, 2020
- 207 views
By Matt Wallis - AWB
Friday saw the release of the July USDA World Agricultural Supply and Demand Estimates reporting in line with the market’s expectations following on from the June stocks and acreage report. Overall, the global wheat outlook consisted of lower supply, reduced consumption, a decrease in trade and reduced stocks. Global wheat supply was reduced by 2.85mmt led by reductions in the EU of 1.5mmt and at 139.5mmt, would be the smallest EU wheat crop since 2012/13. Russian wheat production was also reduced to 76.50mmt however offset by a reduction in global ending stocks of 1.25mmt on the back of reduced trade expectations. Of note, ending stocks in China were reported at 51.5% of total world wheat stocks. Australian production remained unchanged at 26mmt aligning closely with domestic trade estimates and given the seasons outlook, perhaps likely to show upside in the coming months.
Given the global S&D is sitting comfortable with no major issues presenting today, I suspect we will need to see some sort of cut to production to create a more supportive market. Currently the CBOT Dec 20 contract is trading up 43USc/bu for July at 530USc/bu or $280 AUD/t. Although we have seen a rally in global futures, the favourable domestic conditions have seen our basis pull back to between $10-$14 over across all east coast port zones.
Its been a while since domestic barley markets has been given a mention and to put it politely the market still remains dull. We’ve moved through the Chinese tariff saga to a price level where we are competitive to sell to the middle east from December onwards. For our current crop we remain a high-priced island as the grower isn’t letting go the last of the carryout into the inverse, so small tonnes have been trading in a very illiquid market.
The season is setting up nicely across much of the country. WA is set to receive a good rain this week to lift the crop rating, so no production issues thus far. The question for next season is to sell enough into Saudi, we’ll have to remain cheap enough to price through the front half of the year 2021. If we don’t have the volume, there isn’t much hope for sustained upside in prices with what we can see today. It will be up to the grower to carry it if we cannot price the exports we need to move the crop.
As we now enter the middle of July with the lions share of the east cropping belt receiving not just timely but consistent widespread precipitation, it appears that confidence has been restored following on from consecutive droughts. Grower selling has increased with current new crop Port Kembla wheat pricing ranging from $295-310 track over the previous fortnight presenting great opportunity for growers to start chipping away and ensuring harvest cashflow is in order. New Crop barley remains dormant while canola markets have been relatively active at site prices around $550/t.