Farm Tender

Old crop delivered markets have surged

By Matt Wallis - AWB

Another wild week down with what is shaping as many more to come as the COVID-19 pandemic continues to command headlines across the globe. Heightened levels of volatility are becoming the new norm across all equity, commodity and currency markets as the degree of uncertainty climbs.

Global oil markets are now at levels last seen following on from September 11 as they approached US$20/bbl, Wall Street at its low was down just shy of 40% while the price of gold has launched to over US$1,600/ounce.

On the global grains front since the COVID-19 began, we have seen the CBOT December 20 contract trade a range of 65USc/bu or $40 AUD/mt while Matiff November 20 rapeseed contract is up $30 Euro/mt or $54 AUD/mt. The trading ranges of these commodities is almost unheard of for this time of year as the northern hemisphere crop is relatively inactive due to its winter dormancy.

As we enter April, the heightened volatility in agricultural markets is expected to be sustained as this crop comes out of dormancy. With increased speculation on dryness emerging from the Black Sea, the smallest US winter wheat crop planted in history and governments actively exploring measures to shore up their own supply through both export restrictions and increased imports, the stage has been set for an unstable marketplace in which locally we are already experiencing drought like pricing for the new crop without the drought like conditions. The big question mark hangs over the barley import tariffs into China with an update expected in May. At present we are roughly $10 away from pricing this market.

Domestically old crop delivered markets have surged to the 2019 highs on the back of strong buying from flour millers and the feed market. Wheat is trading into the Griffith zone at $410 and Young zone is well bid at $418 for April/June delivery while H2 wheat into Narrandera is trading $3 over delivered Griffith homes. The inverse to new crop is now pushing $100 in Port Kembla and Newcastle zones which represents just how tight the domestic stocks are as a result of a busy export program where over 75% of the domestic exportable wheat surplus is expected to be committed by end of April. At this stage the importation of foreign wheat hasn’t been affected and is expected to continue to flow into ast coast ports. Old crop canola is bid at $705 delivered Newcastle and $670 delivered into Footscray while new crop is strongly bid at $653 Port Kembla track. BAR1 into Jindalee Feedlot is bid at $340 for April and May delivery.

The large proportion of the NSW cropping belt has now experienced exceptional precipitation with more widespread rain occurring of two to five inches across Southern New South Wales giving croppers the best start to the season experienced in a very long time. With the prospects around a crop in the north now looking exciting, maybe today new crop wheat values of $340 Port Kembla track are beginning to look attractive. After all, the lack of a northern crop is what has been the key driver these past 24 months.

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