By Matt Wallis - AWB
Over the last six months we have seen global agricultural commodity markets navigate through the COVID-19 pandemic with a very strong bullish undertone. Since August 2020, March CBOT wheat futures have picked up 185USc/bu, corn up 110USc/Bu and soybeans 550 USc/bu. Global demand for agricultural commodities has remained strong with further emphasis placed on food security during the pandemic. La Nina weather patterns have resulted in prolonged dryness throughout the northern hemisphere growing regions coupled with an increase in Chinese feed consumption as they rebuild their domestic pig herd which was earlier decimated by swine flu. The fund buying has also been significantly stronger with traders encouraging the sustained rally across the major commodities.
As with all good things they must eventually come to an end at some point with grain markets no exception to the rule. Starting off the Australia Day week US markets closed heavily in the red. Much needed rain was recorded throughout South America with the extended forecasts optimistic there’s more to come.
This weather event triggered short selling and profit taking amongst fund managers with a technically bearish pattern appearing late last week. This saw soybeans close limit down by the end of the day’s trade, dragging wheat and corn with it closing 26USc/bu and 20c/bu lower. A lower AUD has managed to briefly buffer domestic values from the full move seen in offshore markets in the immediate term. With the grower now well sold domestically, the challenge now lay with the trade holding the length in the market, and supply chain with emphasis on moving as much product from upcountry to port via road and rail before June where leading into the norther hemisphere grain harvest, markets are heavily inverted to the tune of AUD$50/mt.
Shipping stems are heavily booked with wheat, barley and canola to be exported from all major ports with rail and road avenues to port requiring careful planning to ensure efficient loading of all vessels. We have seen major bulk receival sites such as GrainFlow start to accumulate grain from within the system and off farm directly onto trains to further increase the efficiencies of the supply chain and reduce the burden and reliance on road transport travelling to ports.
In what has been a long time coming it is fantastic to see the GrainFlow sites finally execute in volume what they were designed for - the efficient movement of grain from upcountry to port terminals. While global markets have reminded everyone on just how quickly it can all change, domestically we find ourselves still very well priced at levels which after the harvest we have all had, provide some exceptional gross margins across all commodities. Wheat is priced over $300 delivered both Port Kembla and Melbourne terminals while barley trades at $260 delivered into these same terminals. Those looking to deliver grain off farm, throughout Port Kembla Zone $250 or better into the GrainFlow network for both tonnes off farm and already in the system has been achievable of late.