Global grain mar­ket up­date

The Western Star - - RURAL WEEKLY - Peter McMeekin Grain Bro­kers Aus­tralia

WE HAVE all heard of bull mar­kets and bear mar­kets.

Now we have ‘tweet’ mar­kets af­ter a post on Twit­ter by ‘The Don’ sent United States fu­tures mar­kets sharply higher last Thurs­day and Fri­day (US time). The rally was based on the hope of progress in the trade ne­go­ti­a­tions with China.

Pres­i­dent Don­ald Trump said he had spo­ken with his Chi­nese coun­ter­part, Pres­i­dent Xi Jin­ping, and stated the trade dis­cus­sions were “mov­ing along nicely” and that meet­ings were be­ing sched­uled dur­ing the G-20 sum­mit due to take place in Ar­gentina later this month.

Soy­beans have been the com­mod­ity most af­fected by ‘Don’s Party’ since it be­gan ear­lier this year. As news of a pos­si­ble res­o­lu­tion to the trade im­passe sur­faced on Thurs­day, the bean sell­ers dis­ap­peared and short cov­er­ing sent the fu­tures mar­ket more than 3 per cent higher. It hit a two-week high on Fri­day be­fore late sell­ing pushed the bourse lower into the close, but still up for the ses­sion and sub­stan­tially up for the week.

Wheat had its own story with mount­ing con­cern over US win­ter wheat acres, ei­ther be­cause it’s sim­ply too wet to plant or be­cause the rain-de­layed bean har­vest is push­ing the wheat seed­ing pro­gram past fi­nal plant dates for crop in­sur­ance.

The wheat har­vest in Ar­gentina is pro­gress­ing quite slowly with around 4.5 per cent of the to­tal area har­vested as of Novem­ber 1. While yield re­ports are im­prov­ing, the av­er­age yield is cur­rently run­ning at 1.6 met­ric tonne per hectare (mt/ha). The Buenos Aires Grain Ex­change (BAGE) pared its wheat pro­duc­tion es­ti­mate last week by 0.3 mil­lion met­ric tonne to 19.4MMT. This com­pares to 18.5MMT last year.

The pro­duc­tion down­grade was re­port­edly due to frost and hail dam­age. There were more frosts last week that could fur­ther dam­age crops in the later ma­tur­ing prov­inces in the south of the coun­try. Ad­di­tional re­duc­tions to pro­duc­tion num­bers are dis­tinctly pos­si­ble as a re­sult.

Ar­gen­tinian wheat prices are re­ported to be quite firm in the nearby with ex­ports fo­cused on Brazil. Once sig­nif­i­cant new crop ton­nage is avail­able for ex­port, prices are ex­pected to bet­ter re­flect ex­port par­ity val­ues, which are about US$30 lower. Ex­ports are cur­rently fore­cast at 14.5MMT for the 2018/19 sea­son. Brazil will take ap­prox­i­mately 6MMT, leav­ing about 8.5MMT that needs to find a home in­ter­na­tion­ally.

Mean­while, the Rus­sians are at it again, say­ing it may tem­po­rar­ily sus­pend wheat load­ing at five fa­cil­i­ties in Ros­tov, and could do the same for the Krasnodar re­gion, sup­pos­edly due to qual­ity prob­lems. How­ever, the gov­ern­ment is clearly con­cerned about do­mes­tic sup­ply and prices, so it is more likely in­tended to slow the pace of ex­ports with­out of­fi­cially im­pos­ing re­stric­tions.

There are signs that price is start­ing to swing ex­ports away from Rus­sia, with sales in­creas­ingly ne­go­ti­ated as ‘op­tional ori­gin’. In the event Rus­sian sup­plies tighten, this gives the ex­porter the op­tion of sourc­ing their grain from other ori­gins such as the EU, US or Ar­gentina. This was sup­ported by US ex­port sales, which are show­ing signs of im­prov­ing on the back of a lower US dol­lar.

In nor­mal years Aus­tralia would also be on that list, but in­elas­tic de­mand should ac­count for the ma­jor­ity of our mea­gre ex­portable wheat sur­plus dur­ing the next 12 months. The same goes for bar­ley, and canola ex­ports will be neg­li­gi­ble af­ter do­mes­tic de­mand is taken into ac­count.

The fi­nal Aus­tralian ex­port num­bers are in for the 2017/18 mar­ket­ing sea­son (Oc­to­ber to Septem­ber). Wheat ex­ports in Septem­ber were 865 thou­sand met­ric tonne (KMT), bring­ing the to­tal for the 12-month pe­riod to 13.8MMT. The wheat em­pha­sis was on qual­ity, with Iraq be­ing the big­gest des­ti­na­tion in Septem­ber, ac­count­ing for al­most 310KMT, while In­done­sia took only one pana­max cargo for the month. Septem­ber bar­ley ex­ports were al­most 90KMT, bring­ing the mar­ket­ing year to­tal to just above 6.1MMT.


GLOBAL GRAIN: Wet weather is caus­ing grow­ing con­cerns for US wheat plant­ings.

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