The Ashes are over, the Poms are heading home, the traders are back at their desks, and the headers are pulling up. The first grain article of the New Year is a good time to look at what happened with prices and harvest over the break.
The public holidays might have slowed down the traders, but it couldn’t slow down harvest, especially of the enormous WA crop. Figure 1 shows CBH receivals dwarfing those of Viterra and Graincorp.
Harvest reports were available for CBH and Viterra for the period between Christmas and New Year, but we have left that out on the chart, hence the missing week 11. Compared to last year, CBH has received 20% more grain, equating to just over 4 mmt. SA is up 64%, or 20.8%, while Victoria is also up 19%. NSW Graincorp receivals were down 28%, or 1.92 mmt.
After falling in early December, CME Soft Red Wheat (SRW) futures have remained relatively steady. Figure 2 shows a little further easing in the price in our terms, but this has been largely due to a strengthening Australian dollar.
ASX wheat futures and local wheat prices have remained remarkably steady over the harvest period. The ASX premium to SRW has strengthened to over $30 thanks to easing international values. Despite having a relatively strong supply, east coast growers are reluctant to follow prices under $300/t, which is shaping as a key support level.
Canola growers have been less reluctant to follow international values lower. Figure 3 shows local canola prices have declined by around $100/t since late November. Declining international values are largely to blame, but grower selling has pushed the local spread lower. With canola still at historically strong levels, and cereals not so much, canola traders have been able to drag basis lower.
This suggests that when canola selling pulls up, we could see some improvement in canola prices. There is $15–25/t to be gained in basis if levels move back to those seen in November relative to Matif futures.
What does it mean?
Contrary to absolute price levels, canola is now poorer selling, and wheat and barley better. There are strategies to be able to use futures or swaps to sell cereals and access upside for the prudent grower.
Key Points
- Harvest is well underway, with Queensland largely finished and NSW ramping up.
- Harvest is running slower than last year but can quickly catch up with fine weather.
- Prices are following international markets, with a major disruption required to see a decoupling.
Click on figure to expand
Click on figure to expand
Click on figure to expand
Data sources: Graincorp, CBH, Viterra, ASX, CME, Bloomberg, Mecardo
