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.

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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.

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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.