Sam Davidson, Agfarm Account Manager Victoria
This week we saw a drier than average April and a delayed seasonal break lead to a sharp increase of production risk priced into 2018/19 wheat and canola bids. We also saw reduced seller liquidity on old crop, particularly in delivered buyer markets punching front month prices higher.
Wheat market structure remains bullish over the short to mid-term as buyers look to cover both prompt and forward positions. End users will be banking on wet weather to wash away risk priced into the market and traders will be working on their supply and demand forecasts to gauge market direction from here out. 2018/19 – 2017/18 spread has moved anywhere from +$20/MT at the start of April to +$5/MT this week, indicating just how tight supplies are relative to the coming season’s forecast.
Canola markets have certainly benefitted from the delayed seasonal break with new crop bids rallying anywhere from $15-20/MT throughout Victorian port zones. Growers have been active on canola forward sales particularly throughout the central region and western districts. Canola sowing has been somewhat staggered throughout the state with direct drill growers holding off for recent rain whereas disc-seed operators have been happy to sow dry and wait for the inevitable break to arrive.
Barley markets ended the week higher, however delivered buyer markets continue to trade below track bids, indicating a preference for traders to carry system stock and buy in relatively cheaper delivered tonnes from the grower. While this might be the play throughout autumn, winter could see the delivered and track bid spread move from -$7/MT to + $12/MT to reflect the full cost of execution.
Shipping stem data released this week failed to show an increase in Victorian exports for canola, wheat or barley. The export demand window traditionally remains open out until July, so additional June/July demand could see increased competition between FOB and domestic markets moving forwards.
Prices as at 4th May 2018