Market Update 3 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.

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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.

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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.

Market Update 20 December 2017

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.

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

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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.

Strong performance for AGG Co-op

The Australian Grain Growers’ Co-operative (AGG Co-op) has reported significant profit growth year-on-year at its AGM held last week at the Yorke Peninsula Field Days.

Newly elected chairman Mallala grain grower Richard Konzag said the positive financial position was a result of ongoing support from South Australian and Victorian growers. Mr Konzag took the reins from long-serving director Andrew Polkinghorne, who retired as chair in July but continues as a director.

Mr Konzag said the board also confirmed the re-election at the AGM of Jim Heaslip and Bruce McDonald following the expiry of their terms, as well as the election of new board member Jordan Wilksch, who joined the Co-op in July.

“We’re thrilled with the Co-op’s strong underlying financial performance in 2017,” Mr Konzag said.

“Our full-year profits increased by nearly $300,000 year-on-year.

“We continue to be pleased with the support from growers in SA and Victoria and our results are testament to that support. More than 250,000 tonnes of grain was marketed through the Co-op during the 2016-17 harvest and we’re confident that support will continue into the 2017-18 harvest, despite the challenging season.”

Mr Konzag said the team were pleased to welcome newest board member Jordan Wilksch, and described him as a “passionate grower who understands the changing landscape of farming for the next generation”.

Jordan is married with four children and farms with his family as Wilksch Agriculture at Yeelanna on the lower Eyre Peninsula. He has previously served as chair of the Lower Eyre Agricultural Development Association and as a committee member of the Eyre Peninsula Agricultural Research Foundation. He is currently a member of the Cummins & District Enterprise Committee.

At the AGM, Managing Director Bruce McDonald provided an update on the company’s plans for the next 12 months, which include expanding value offerings for members and potentially a new broking service.

“We are continuing to explore opportunities and we want to continue to build on the consolidation work we’ve done during the past two years,” he said.

“We’re really pleased with the commercial arrangements we have in place with Plum Grove and Clear Grain Exchange.”

Mr McDonald reminded growers that access to AGG managed programs and payments in 2017/18 season was through contracting and direct delivery or transfer.

“Growers need a contract by 30 November 2017 to access the AGG Harvest program which tracks the average of cash prices from 1 December 2017 to 31 January 2018,” he said.

“If growers choose AGG Three or AGG Protect programs they can transfer directly and receive the default distributions payment or they can contract to access alternative payment options such as advance or deferred.

“We are also looking to introduce a new broking service where we can aggregate tonnage from co-operating and authorised growers to offer to the market larger grain parcels, improving accumulation efficiencies and adding value.”

More information on AGG programs can be found at www.aggcoop.com.au and information on the new broking program should be available in November 2017.

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