Sam Davidson, Agfarm Account Manager VIC
Victorian grain and oilseed markets had another volatile week in response to continued adverse growing conditions throughout the state. The first month of spring has seen frost, warm weather, high winds and below average rainfall throughout the Victorian cropping belt. We have seen an increase of wheat and canola crops cut for hay as well as an increase in forward contract washouts. All reaffirming just how damaging this season has been for Victorian winter crops.
Production estimates are starting to gather consistency with Victorian wheat production now pegged between 2.8MMT-2.3MMT, barley between 1.6MMT-1.3MMT and canola between 0.6MMT-0.4MMT. It is worth noting the majority of trade estimates now sit well below the Australian Bureau of Agricultural and Resource Economics (ABARES) September forecasts published last week.
Wheat markets responded to the aforementioned cuts in forecast production by “legging” higher as buyers look to elicit cover from growers still holding unsold stock. We anticipate this trend to continue until new season stock comes online throughout the harvest months of OCT/NOV/DEC. However, due to the level of production risk facing growers this season, selling liquidity is understandably low. Thin trading volumes and wide bid/offer spreads are making it difficult to define both old crop and new crop markets this week. In some instances, we have seen offers for old crop wheat trade at anywhere from $10-18/MT over the public bid. In others, buyers have remained reluctant to rise. Market structure this week has been bid dominated, but only by a whisker.
2017/18 season wheat markets showed the largest gains this week with ASW1 and SFW1 delivered Melbourne/Geelong zone for SEP/OCT gaining $21/MT week on week, as did SFW1 delivered to the Western Districts for the same period. JAN/MAR delivery also managed a $20/MT gain week on week, with buyers potentially looking to replace washouts or simply covering new season positions.
Canola markets also responded to cuts in production by moving track bids up $8/MT for 2017/18 stock and anywhere from $9-13/MT for 2018/19 season stock. Trading volume for both spot and forward markets remain very thin with small volume of 2017/18 season stock trading anywhere from $588-590/MT Melbourne/Geelong track. The majority of grower selling targets on old crop appear to be set at $600/MT Melbourne, Geelong and Portland track. Both buyers and sellers appear to be unsure on price discovery with production risk still too heavy for many sellers to engage on the forward market. Spot market prices are also arguably too low considering the current state of fundamentals which is seeing a gentle easing in seller engagement.
Prices as at 20th September