It’s all Supply and Demand

Posted in June 2016 - in

One of our recent newsletters was titled “Selling into a Flooded Market”, well since then we have seen some small grade specific spikes locally. These spikes have been your opportunity to complete your final sales. We have been reading and hearing about how much grain is left unsold in the CBH Network. Rumours have it that there is still over 2 MMT unsold. This equates to approximately 15% of last year’s crop unsold.

Priority needs to be placed on having a plan for unsold grain, needing to have income deferred until July is not a sound plan. The trade know this and there should be pressure on local prices come July 1st. Develop a plan now, don’t just hope that prices will come back to levels closer to that which we saw in January.

The USDA recently updated their Supply and Demand numbers. Some of the major changes include;

What does this mean? Once again we have a very interesting market with volatility expected to continue. Wheat ending stocks have increased year on year which is a bearish factor for international prices. Locally, reports are that the start to the season is nearly perfect and we could potentially see a bin buster. This will add further pressure to local values.

A positive for local wheat prices could well be the value of the $AUD. The $AUD has been moving around quite a lot of late. We did see it as high as $0.78 only a month ago. Since that high, the RBA has announced one 25 basis point rate cut which saw the $AUD come off nearly one cent directly after the decision. Since that announcement, we have seen it come back to harvest levels of between $0.71 and $0.74. The US Federal Reserve is holding on increasing interest rates. This helps keep the $AUD higher. If they raise interest rates there then we could see the $USD firm against the $AUD.

In commodity markets the shining light has been the oilseed market. The interruption to the South American harvest due to weather and quality issues has seen the Chinese switch back to importing US Soybeans. Soybeans already have a tight balance sheet and this shows no signs of changing just yet so it adds further support to Soybean prices which in turn help our local canola and lupin prices.

This strength in Soybean prices has helped over commodities such as Corn and Wheat a little. The US farmer is always looking to plant a higher profit driven crop so they compare values regularly between Soybeans and Corn. At the moment they are leaning towards Soybeans over Corn and the potential of double cropping Soybeans as well. This fight for acres is exactly what we need in our current situation where we have a large world supply of Wheat and Corn. It is helping put a floor in the Corn price which conversely helps to keep Wheat prices supported. Below is a chart

 

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Ten Tigers is a business that specialises in grain marketing and consulting. We use Ten Tigers to help us achieve the best price for our grain, to find out what is happening in the world’s grain market to date and to help with marketing strategies. The best thing is, all this can be achieved by just a few text messages per day and / or a quick phone call while I stay busy growing as much grain as I can. I find them a great deal of benefit to our grain farming business.
Ten Tigers has helped our grain operation grow through a well-balanced marketing program of all our grain types in the current season and beyond. Ten Tigers has given me a greater understanding of our grain business through a fully transparent summary at the completion of each marketing season. Ten Tigers has given our business confidence to expand grain production by allocating achievable pricing target levels on all our grain types. Our business can better allocate time towards the production side knowing that Ten Tigers is managing our marketing in a professional, unemotional manner.
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In the ten years we have been working with Chris and his team there has been a huge transformation in grain marketing in our business. Ten Tigers has made these steps a comfortable journey instead of the hill climb they appear to be when we receive correspondence from all different grain identities and our legal obligations we need to meet. Ten Tigers has assisted us to achieve higher daily prices regularly with good communication and sound advice. Ten Tigers has been an important member of our business allowing us to concentrate on growing our grain with the knowledge that Ten Tigers is there to worry about the marketing, optimisation and filling of contracts. The very detailed information that is supplied to us makes record keeping and entering g details into our accounting program very simple and quick.
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