Freezing temperatures across the US Southern Plains have generated winter kill concerns for the US wheat crop in recent weeks, helping futures markets to rebound off their early December lows. While we will have to wait until the crop comes out of dormancy before we get a true picture of any damage, many regions continue to lack significant snow cover.

Other stories making the headlines to start 2018 include changes to US wheat acres, and the size of the short position held by the hedge funds, and a warmer Argentinean weather forecast. The USDA is likely to cut US wheat planting for 2018 in their January report, while the size of the short position held by the hedge funds continues to sit near record levels.

While the threat of winter kill in the US has offered some support to wheat futures markets, the 3.5 cent jump in the value of the Australian dollar has put pressure on local values. Our currency has bounced off its 6 month lows to trade above US$0.7850 last week, aided by strength in crude oil and iron ore, as well as weakness in the US dollar. Uncertainty over the effect of US tax reform on economic growth, and disappointing US jobs data have also been topics of discussion.

Figure 1: AUD/USD

Since the beginning of December, cash prices for wheat in most SA port zones have eased by around $10/mt. APW1 bids in Port Adelaide, Port Giles and Port Lincoln zones now sit near $240/mt, with a $15 to $20 spread for H2 in most zones. Feed barley values have been a little more resilient over the past month. F1 in Port Adelaide continues to trade in the mid $220/mt range, while a premium for F1 in Port Lincoln has been established.

Figure 2: SA Cash Prices – 2017/18

Both AGG Protect Wheat and AGG Protect Barley are currently 20% sold, and sitting near the top end of mandate. Early wheat sales have focused on capturing any premium for hard wheat in a number of zones, while feed barley sales have been made in the Port Lincoln and Port Adelaide zones. We will continue to monitor deliveries into the program, and look for market opportunities as they arise.

The charts below shows the sales progress against the mandate for AGG Protect programs.

Figure 3: AGG Protect Wheat – Sales Mandate

Figure 4: AGG Protect Barley – Sales Mandate

Estimated Programs Returns (EPRs) have recently been updated and are available below. You can also check the AGG Co-op website (www.aggcoop.com.au) for information about the progress of AGG Protect, as well as all the other AGG managed programs. All EPRs are quoted $/mt GST exclusive at Port and net of management fees and storage charges.

AGG Protect remains open for further deliveries / transfers until 31 January 2018.

As is normally the case during the Christmas break, trade in US futures markets has been characterised by a period of low volume and volatility. While the nearby Chicago contract has rebounded modestly from its early December lows, the 3 cent jump in the value of the Australian dollar has put some pressure on local values. Our currency has bounced off its 6 month lows to sit above US$0.78 this week, with uncertainly over the effect of US tax reform on US economic growth a topic of discussion.

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

SA cash values have eased in recent weeks, largely driven by AUD strength and harvest selling pressure. Over the past month, APW1 values in South Australia have declined by roughly $10/mt, while feed barley prices have slipped by $5/mt. A healthy premium for hard wheat exists in most port zones.

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

Despite the negative tone of the market, there are a number of potentially bullish stories that are starting to get some airtime. The USDA is likely to cut US wheat planting for 2018 in their January report, the size of the short position held by the hedge funds continues to sit near record levels, freezing temperatures have hit the US Southern Plains, and forecast in Argentina looks hot and dry. All of these factors have the ability to increase volatility in the market and trigger a move higher.

With the 17/18 harvest now drawing to a close, more than 1.3 million mt of barley and 3.2 million mt of wheat has been delivered in South Australia. From a quality perspective, feed barley accounts for 80% of barley deliveries, while the percentage of hard wheat deliveries has declined to around 30% of the crop.

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.

AGG have developed a number of programs for growers that spread price risk across the season. More information on these programs is available from our Programs page.

US futures markets continue to feel the heat  from growing global production estimates (or is it a Christmas flurry blowing from the north pole cooling the markets?). Last week the USDA added a further 3 million ton to their estimate of global wheat production, which now sits at 755 million. The weight of global supply and the structure of the market has kept pressure on US wheat futures, which continue to trade near their contract lows. The size of the record Russian wheat crop, and the pace of their export program has been a dominant factor, as has Stats Canada’s latest production figures. In their December update, Stats Canada increased their wheat production forecast by 3 million mt to 30 million mt. If realised, this would be the third largest Canadian wheat crop on record.

Despite the negative view of the market, there are a number of potentially bullish stories that are starting to get some airtime. The USDA is likely to cut US wheat planting for 2018 in the January report, the size of the short position held by the hedge funds continues to grow to record levels, and dryness across the Southern US Plains have some in the trade worried.

Over the past few months, weakness in the Australian dollar has been a key supporter of Australian grain prices. Stronger US GDP and employment figures have driven gains in the US dollar, resulting in a 7% fall in the value of our currency to US$0.75. Looking ahead at 2018, the pace with which the US Federal Reserve increase US interest rates, and the whether or not the Trump Administration are able to pass their corporate tax cuts will have a large say in the direction of Australian dollar.

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

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

1.3 million mt of barley, and 2.8 million mt of wheat have so far been harvested in South Australia. Despite the frustration of weather delays, more than 70% of the states crop has now been harvested. From a quality perspective, feed barley accounts for 80% of barley deliveries, while the percentage of hard wheat deliveries has declined to around 30% of the crop.

You can check the Program pages 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.

The Co-op Communicator updates growers on AGG Co-op activities, news and grain marketing products.
Download this edition as a PDF:

AGG Co-op Newsletter harvest 2014

The Co-op Communicator updates growers on AGG Co-op activities, news and grain marketing products.
Download this edition as a PDF:

AGG Co-op Newsletter harvest 2013