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.
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.
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.