A view from the Chair & Your Co-op in action

AGG Co-op has been working feverishly this year to ensure we are performing for you and able to offer some unique programs and deals now and in the future and we thought it timely to let you know what’s coming up as you prepare for a busy seeding period.

Managed Programs performing
All our managed programs are performing according to their mandates and enjoying the post-harvest price rallies. Current progress & EPRs can be followed on our website
click here

AGG Clear
This program is clearly popular with growers and has been well supported again this season, with volumes traded exceeding 70% more tonnes, year-on-year. This program can be accessed all year round so you can decide when & what you sell and at your price, with secure settlement and fast payment.

AGG Engage
This program was introduced as a pilot late last year to work on behalf of collaborating growers who want to participate in aggregating and offering larger grain parcels with the aim of securing better prices. We intend to further develop this program with the co-operation of growers who are willing provide access to their grain stocks – in the warehousing system or on-farm – and expect a better grain marketing service.

On-farm storage
We received great feedback from you in the survey distributed in February 2018. We have managed to secure an attractive deal for AGG Co-op Members based on the responses, in terms of the indicative demand for on-farm silos and associated ex-farm grain marketing potential.

Details of this offer will be circulated soon and access will be restricted to Co-op Members, and we think that will be incentive to join to further improve our collective bargaining & marketing influence.

Ex-farm grain marketing
These programs are always in development and with the emerging new supply chains may provide real alternatives for domestic and international participation. We have been working with potential demand customers and have been able to secure some test volumes with a view to expand these programs to complement the activities mentioned above.

Coopers
The ultimate connection for the Co-op is to supply from farm direct to the end-user. We are currently delivering against a commercial contract with Coopers to supply Compass, Spartacus & Scope malt barley ex-farm providing efficiencies to both parties in this supply chain. Our objective is to increase ex-farm supply of specific malt barley varieties for Coopers with both pre- & post-harvest contracting.

Managed Programs 2018-19
The Co-op will review the Managed Program offering for the new season and may look to introduce new programs to meet specific grower needs.

AGG Co-op Membership
Maintaining membership with the AGG Co-op currently requires a minimum delivery of 150 tonnes of grain to our programs during the previous three seasons. The Board understands that grain marketing options offered have been restricted recently but now believes the portfolio will be more attractive.

The Board also understands that you may have exhausted any grain supply from the 17/18 season, so will be offering special terms to those Members ‘at risk’ of lapsing, to maintain their membership for a further three years by either:

  1. Paying your original membership fee by 30 June 2018, or
  2. Committing to deliver 150 tonnes of grain to any one of our programs in 2018/19

It’s easy to become a Member of AGG Co-op by visiting our website (click here) and completing a Membership application.

Activities & feedback
Our aim at AGG Co-op is to achieve the best result for our members and program participants.  You can contact any of our Board who you should see at industry events in the country during the year. Co-op success is a direct result of member and grower support so keep an eye out for our announcements, offers & services. We believe we have an important function within the market place and look forward to any feedback to keep us focused on your needs.

Your attention and participation is appreciated.

Thanks and regards,

Richard Konzag
Board Chair
Phone:  0417 830 416
Email: richard.konzag@gmail.com

Bruce McDonald
Chief Executive
Phone:  0418 350 738
Email: b.mcdonald@aggcoop.com.au

Market Update 22 March 2018

That ‘breather’ we mentioned in February was indeed the calm before the storm. The market surged again in early March and has been bouncing about ever since!

US wheat futures rallied strongly to start the month driven by the prevailing dryness in Argentina and the US Plains. Aggressive short covering by the hedge funds saw the Chicago wheat futures contract rally by more than 20% off the lows of December. The move higher was even more extreme for the Kansas Hard wheat contract, which witnessed a rally of nearly 30%. This price action is a perfect example of just how much influence the hedge funds can have over the market, especially when holding a large short position that they want to exit in a hurry.

More recently, better than expected rains for the US Plains and the fact that US wheat has priced itself out of many of its export homes, has seen futures markets fall away. While US wheat exports continue at a modest pace, the speed of Russian wheat exports has been impressive. Russia exported 3 million tonnes of wheat in February, and with four months of the export calendar still remaining, they have already surpassed their previous best export year.

An upbeat assessment of the US economy by the new US Federal Reserve Chair, and the potential for as many as four US rate hikes in 2018, has seen the Australian dollar fall from its January highs to a 3 month low of US$0.77. Despite subdued US wage and inflation growth casting doubts over the need for such as aggressive approach to raising US rates, the US FED is widely expected to raise rates by 25 points this week to 1.75%.

 

Wheat prices in South Australia rallied by $20/t during February and early March. A combination of futures strength and a softer Aussie dollar allowed APW1 prices in Port Adelaide and Port Lincoln to reach $260/t. Consistent demand for hard wheat in a number of zones has seen the price spread for H2 extend beyond $20/t.

Consistent Chinese demand and strength in global feed barley values has kept the spread between wheat and feed barley at historically tight levels, as illustrated in the chart below.

Locally, the Port Adelaide zone has witnessed the strongest demand for feed barley, while prices in Port Giles and Port Lincoln have started to come under pressure in recent weeks.

AGG managed programs are being executed within their published and transparent mandates and are performing well relative to the Dec/Jan harvest average prices.

 

Market Update 30 January 2018

Strong gains in futures markets have been a key feature over the past week. The Chicago wheat contract has strengthened by more than 8% from the lows of mid-January, reaching a 2 ½ month high and closing above the technically important 100 day moving average. Ongoing dryness in Argentina, poor crop conditions across the US Southern Plains, and the weakness of the US dollar have spurred the hedge funds to cover some of their short futures positions. The latest crop conditions report for the US state of Kansas has seen the percentage of the wheat crop rated good or excellent fall to just 14%, with almost half of the state’s crop rated in poor condition.

Last week the Australian dollar broke above US$0.81 for the first time since September 2017 after comments from the US Treasury Secretary stating that a weaker US dollar could be good for the US economy. Adding further support to the Aussie dollar has been the strength in commodity prices. Crude oil prices have hit their highest level since 2014, while coal and iron ore values remain strong. Looking at the week ahead, the Aussie dollar has the ability to strengthen further if our 4thquarter inflation data comes in better than expected.

MU180130Fig1

Figure 1: 2017-18 APW1 – Profarmer Best Bid – $/tonne

Despite the rally in futures markets, the strength in the Australian dollar has kept local values largely unchanged over the past week. APW1 bids in the Port Adelaide zone remain in the low $240/mt range, while buyers of F1 barley in the Port Adelaide and Port Lincoln zones remain active at $230/mt.

MU180130Fig2

Figure 2: 2017-18 F1 Barley – Profarmer Best Bid – $/tonne

AGG have developed a number of programs for growers that spread price risk across the season. You can check the AGG Co-op website for current EPRs and progress reports, as well as access to information about all AGG managed programs.

All EPRs are quoted $/mt GST exclusive at Port and net of management fees and storage charges. Advance payments are made in line with the nominated EPRs from 1 November 2016.

 

Market Update 25 January 2018

After initially plunging following the USDA’s modest cut to US wheat acres for 2018, wheat futures have stabilised over the past week. While it is difficult to describe the futures market as bullish, there are currently a few factors at play that offer support at current levels.

The hedge funds continue to hold a large short position in Chicago wheat, the US southern plains remain exposed to dryness and winterkill, and despite the abundant Black Sea supply, Russian export value continue to inch higher. We have also seen the forecast for Argentina turn dry for the next few weeks, forcing some analysts to rethink their corn and soybean production numbers.

The past week has also seen the Australian dollar break US$0.80 for the first time in over 4 months. This move has been driven by weakness in the US dollar, the strength of crude oil and iron ore, and the latest round of Chinese economic data. The Chinese economy grew at 6.8% in the 4th quarter of 2017, taking their annual growth rate to 6.9%. The uncertainty caused by the US government shutdown has also been supportive of our dollar, after the US Congress had initially failed to reach agreement on a funding deal that would keep government agencies open.

MU180125Fig1

Figure 1: 2017-18 APW1 – Profarmer Best Bid – $/tonne

Despite the 7% jump in the value of the Aussie dollar over the past 6 weeks, and the fact that Australian wheat isn’t overly competitive into many export markets, the strength the local basis has been a quite supportive to cash prices. APW1 bids in the Port Adelaide zone remain at $240/mt, while a healthy premium for hard wheat exists in most port zones. Buyers of F1 barley in the Port Adelaide and Port Lincoln zones remain active at $230/mt, although the price spread for F2 and F3 has come under pressure in recent weeks.

MU180125Fig2

Figure 2: 2017-18 F1 Barley – Profarmer Best Bid – $/tonne

 

AGG have developed a number of programs for growers that spread price risk across the season. You can check the AGG Co-op website www.aggcoop.com.au for current EPRs and progress reports, as well as access to information about all AGG managed programs.

All EPRs are quoted $/mt GST exclusive at Port and net of management fees and storage charges. Advance payments are made in line with the nominated EPRs from 1 November 2016.

You can also view our new video market update – head over to our Facebook page to view my mug in action!

AGG Facebook

Market Update 18 January 2018

US wheat futures plummeted on Friday night, triggered by the USDA’s latest US wheat planting forecasts. Heading into the report the trade was expecting to see US winter wheat acres cut by as much as 5% for the coming season, but were surprised by the USDA’s modest 1% reduction, and futures were sold off heavily as a result.

The USDA’s January report also contained a 1.8 million mt increase in global wheat production, thanks to a 2 million mt increase in Russian production which now sits at a record 85 million. This figure is up 17% from last year, and has resulted in the USDA increasing their forecast for Russian wheat exports to a massive 35 million mt.

A 3 ½ month high in the value of the Australian dollar has seen our currency continue to be one of the best performers against the US dollar in 2018. Over the past 6 weeks, our currency has rallied by more than 6%, as it looks to break above US$0.80 for the first time since September 2017. While a great deal of the strength in our currency comes on the back of US dollar weakness, favourable Australian retail sales data, 3 year highs in crude oil, and strength in the EURO are all offering support to our dollar. Looking at the week ahead, the Aussie dollar is likely to remain well supported by the latest round of Chinese economic data as well as Australian employment figured from December.

MU180118Fig1

Figure 1: 2017-18 APW1 – Profarmer Best Bid – $/tonne

Despite the negative tone in both currency and futures markets, cash prices in South Australia have held relatively steady over the past week. APW1 bids in the Port Adelaide remain above $240/mt, while F1 barley has traded above $230/mt in the Port Adelaide and Port Lincoln zones.

MU180118Fig2

Figure 2: 2017-18 F1 Barley – Profarmer Best Bid – $/tonne

AGG have developed a number of programs for growers that spread price risk across the season. You can check the AGG Co-op website for current EPRs and progress reports, as well as access to information about all AGG managed programs.

All EPRs are quoted $/mt GST exclusive at Port and net of management fees and storage charges. Advance payments are made in line with the nominated EPRs from 1 November 2016.