Increasing pressure on local markets as AUD slides to new lows

Market Update & Commentary

As Predicted in the last few updates.

Current AUD $070.3… was down as low as $070.1 This morning.

We are of the opinion that AUD needs to be around $0.68 to help balance any future tariffs and boost exports..this is highly likely given the shortfall in consumer spending to date.

Christmas spending is at an all-time low, this includes new car sales and farm machinery sales, new homes and leisure spending.

However the AUD could stabilise bouncing between $0.73 & $0.70.

Cereal grains are set to see a slight decline in to traditional delivery zones over this week and perhaps the following week.

However, delivered grain into non traditional delivery zones will see growers gain a premium of up to $10-$12/mt.

In all reality two things could happen over the next 4-8 weeks into January/February, either Barley comes up to meet Wheat or Wheat comes down to meet Barley however if the AUD slides even further we could have a more competitive set of circumstances.

If the AUD drops to around $0.68 exports could become more active/attractive putting supply pressure on local markets.

The bumper crop in WA could be heading the South East Asia with less cost and allows exporters to maintain trade relationships.

There will still be plenty of grain available for Australian consumption “But” at what price.

Already millers are complaining of poor quality WA wheat and of course the “price”.

Some argue that at short supply periods growers get too greedy..”really” well my response is ” if that’s the case, in over supply or high yielding years does the price of food and feed come down?

It’s about security of supply..we will never not have enough grain in a consolidated market, there always has, and always will be enough grain to go around in Australia.

It’s when large merchants insist on exporting it either to maintain relationships or pre-contracted commitments.

Rather than allowing imports the Australian government should “cap” exports or offer subsidies if it wants to maintain/ honour preexisting trade agreements.

In closing, my opinion has always been the issue of “storage” for both growers and buyers.

Increased storage enables buyers to take advantage of harvest prices and or lower prices in high yielding years.

And for growers it gives them the control and flexibility to market their product according to market conditions and their own commercial commitments.

More and more growers, merchants and buyers are moving away from storing grain with “large” corporations and moving to on-Farm or private storage houses which provide a far better service.

I’m told daily of the torture, inflexibility.

logistical nightmares and high costs of dealing with large storage facilities.

These large groups are the most inefficient, time-wasting, expensive, inflexible way of storing grain in Australia ..(the list goes on..).

They are continually under pressure to get grain it to their facilities to keep human capital and meet fixed costs, they “MUST” buy or attract grain from growers to keep shareholders happy and survive..moreover the inherited/ developed “culture” is old-school public service mentality..doomed to fail from the start.

Until Government and industry can work together to create an operational strategy that value-adds services and integration with all industry players.

Organisational culture is one of the most difficult changes and one of the most devastating manifestations of long standing businesses.

It takes 1 year for every 10 years a company has existed to change “culture” and not many companies manage to endure what it takes to make it happen successfully.. It’s much less painful on shareholders to give the problem to someone else by selling it or fragmenting it into more manageable pieces.

Market Activity Lull

This time of the year; it starts with harvest pressure and bid reductions across the board for cereal grains and sometimes pulses.

However this year for pluses at least its no so; pulses have skyrocketed because of increased demand, the lower AUD and increased speculation (beware of pulses, back-2-backs are always a sure bet in a rising market, unless you’re long then it might be an idea to cash it in?…) So normally we see a significant reduction in delivered bids Jan-Jun, site bids, on-farm bids and off-the-header bids as was the case this year for cereal grain.

Then comes the “LULL” this is a result of calling on contracts created on a delivered basis between January and June.

In my experience contracts are called on early “IF” January/February prices are higher than the pre-contracted price, alternatively if prices are lower than the pre-contracted prices; purchasing behaviour is motivated toward snapping up lower prices while they are there and deferring pre-contracted deliveries.

For example: “The Spread” between wheat and barley and the elasticity between pre-contracts for the same term.

WHEAT

Delivered contract prices for ASW Wheat ranged from (Melbourne Only)

September 2018 ASW $440 + $3 Carry per month starting February delivered Melbourne

And by October 2018 ASW was $425 then in November was $418, early December $415

BARLEY

Delivered contract prices for F1 Barley ranged from (Melbourne Only)

September 2018 F1 $435 + $3 Carry per month starting February delivered Melbourne

And by October 2018 F1 was $412 then in **November** was $405 and December $390

Please remember that market “bids” are just that; “bids” this is the market expectation/indicative purchase price on any given day; in other words “what a willing buyer is prepared to pay”.

It does not mean that “sales” are being made at those levels and is reflective of the above; regarding pre-contracted sales prices.

Of course there are many variables that will affect market pricing on any given day i.e. weather, supply, currency and futures just to name a few.

Note:

_As always, please!

keep as informed as you can; spend some time researching, ask questions [AND] Always make decisions based on your own personal and business circumstances._

Merry Christmas..

Dr Mario Bonfante – GrainPro Australia**

For more information on market strategy feel free to call GrainPro Account Reps.**

Mario: General Market Strategy PH: 0412 315 548

Cameron: Pulses and Export Market PH: 0488 400 660

Nick: Cereals Market PH: 0457 238 932

Angela: Planting Seed & Fertiliser PH: 0407 462 385

Jemma: Hay & Feed Market PH: 1800 816 887

Below is a list of price fluctuation estimates for today 24 December 2018: **

Price estimates are based on averages & dependent on X-Farm Location or Delivery Method, Prices indicated below show the fluctuations ▲▼ from the previous update.**

Grain Price Fluctuations as at 24 December 2018

WHEAT SFW: DEL: VIC▲Fr: $438 – SA▲$363- Bris▲Fr: $428RIV▲Fr: $450, Nth NSW/Nctl▲**Fr: $425,

CHICKPEAS: DCT: Bris/Melb/Adl▲Fr: $945+

LENTILS: DCT: VIC/SA▲ Fr: $645 Jumbo ▲ $720+

CANOLA: DEL: VIC/SA/NSW▼ Fr: $595

SORGHUM: DEL: Bris/Nth NSW▲Fr: $355

BARLEY F1: XF: VIC▲Fr: $372 – NSW▲$425 – SA▲Fr: $340

OATS M1: XF: VIC▲Fr:$470+ – RIV▲Fr: $480+

CORN: XF: NSW▲Fr: $490 VIC▲Fr: $475

LUPINS Round: DEL: VIC▲Fr:$545 – SA▲ Fr: $490

LUPINS Albus: DCT: VIC▲Fr:$1090 – SA▲ Fr: $1060

FIELD PEAS: XF: VIC▲ Fr: $600+ – SA▲ Fr: $600+

FABA BEANS: DCT: VIC/SA▲ Fr: $945

HAY: XF: SA/VIC/NSW▼ Fr: $230

CANOLA MEAL: FOT: VIC▼ Fr: $423

COTTONSEED: FOT: Sth NSW Fr:▲ $532

ALMOND HULLS: XF: VIC▲ Fr: $152

SEE LIVE PRICES: www.grainpro.com.au

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