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.