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Back from Japan!
After a couple of years of planning we have been to Japan and we have now returned. The trip was a success and we all had a great time. We saw 3 games of footy, some wheat farming, breweries, indoor farming, sake distillery, cotton spinning mill, had dinner with Geishas, saw sumo wrestling , dinner with George Gregan, rode the bullet train, saw Mt Fuji and visited a flour mill to name a few things. It was really great to spend some time away with valued clients and we enjoyed it immensely on a personal level and we are sure it was good for business also.
You may not know it but you are currently earning points towards our next tour in 2021 if you are doing business with us. It looks very likely we will be touring South America next. More information to follow on the points system.
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The trade war continues to keep a bit of a lid on prices, but it seems to me that there is more potential for upside – if a deal is actually struck between China and the US then I think we will see a big lift in prices but if not, it will be more of the same and the market will need other fundamental reasons to shift.
US stocks will increase significantly in the next few months putting downward pressure on prices and the USDA has also increased India’s ending stocks by 1 million bales.
The US Crop is looking pretty good from a quality and yield perspective at this stage. The Pakistan crop has suffered and as a result import demand from Pakistan has picked up. The Indian crop is doing very well and who knows about the Chinese crop, but I have heard that it might be down a bit.
The China cotton reserve and how the Chinese government deals with it, is in my opinion the number 1 fundamental factor to keep an eye on over the next 6 months. That is of course easier said than done as its very difficult to get reliable information out of China. I’m not sure how high Aussie basis can go but I’m pretty sure what’s left of our miserable crop for 2020 delivery will be in high demand if they decide to start buying more cotton to replenish reserve stocks.
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COTTON ICE FUTURES
US 64.20c/lb (May 2020)
Range last 30 days
61.07 - 66.10
Current AUD/Bale price
2019 - $555
2020 - $575
2021 - $550
2022 - $520
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AUSTRALIAN DOLLAR
AUD - Current 67.30
Range last 7 days
67.12 - 68.05
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With buyers likely to be competing heavily for bales in 2020 it may be worth considering putting some in the Raw Cotton Australia system.
For more information on this option please see www.rawcotton.com.au
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Will the rally continue?
The Chickpea market has had a very impressive rally in the last few months as the sub-continent buyers realise that Australia was telling the truth about a much smaller crop. Looking back at prices the new crop market has rallied as much as $160/mt and Old Crop around +$100/mt. The general good quality of the new season chickpeas has improved global demand of Aussie peas as they search for good quality supply to cover any short fall before the Northern hemisphere production starts hitting the market in March 2020. Many of the traders in the market are suggesting that unlike the last few seasons, supply will be tight against demand. Bangladesh is expected to have 100k to 150k of demand (for new crop peas) with maybe 50K to 70k demand from other countries. Pakistan & UAE will need 50K to 70k of Old Crop peas. If this seasons supply is around 200k plus old crop at 50k to 70k then things will be tight for the coming marketing season. There is some expectation that chickpea prices may rally into early December for shipments in January to February 2020. It is good to see the market moving in the right direction for once and the potential for continued support.
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New Crop 19/20 Delivered Downs Oct/Nov $810/mt. Graincorp Sites, Mt Mac $725, Capella $720, Emerald $720, Moura $730. Del-Port Mackay and Gladstone Oct-19 to Jan-2020 $780
Old Crop Oct/Nov Fixed $700 Del-Wee Waa & Trangie, Del-Goondiwindi , Del-Narrabri $710, Del-Downs $725/mt. Chickpea M $665 Del Downs.
We are starting to see Chickpeas being harvested in Southern Qld and they are getting some surprising results. Yields are low (around ½ to the Ha) as expected but to tell you the truth I didn’t think these crops could be harvested with most areas having no beneficial “in crop” rain it is amazing what you can do with a bit of subsoil moisture. The other nice thing is that the quality in those dry regions seems to be ok as well. Some of the packers are complaining about the dirt in loads already so make sure you are going to a packer or storage with grading options.
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Wheat consumers waiting for new crop pricing
The wheat market domestically has been caught in a pretty tight trading range for the last month or so with CQ crops adding to imported supply. Most of the feedlots are not covering too far out with still some worried that any substancial rain will affect feedlot margins adversly. One of the recent big movers in the feed market is Barley. We have seen this market being sold with a $10 to $15 premium to wheat only a few weeks ago to now, upto a $40 discount to wheat in the new crop market. The question is will this big change in value put pressure on the domestic wheat market as well. At this stage values have been holding up but the real demand is from the feedlot sector and if too many switch their ration into barley we may feel some pressure on price as the new crop imports start rolling in.
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Current Crop: Ex-F Oct/Nov, Emerald SFW $375, Moree SFW $425, Goondiwindi SFW $423, Narromine SFW $400/mt
Delivered Downs SFW Oct/Nov $425/mt, Del Condamine $425, Del Hanwood SFW $382, Del Melbourne ASW1 $377.
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Cottonseed price is killing demand
Have we seen the highs of the year for cottonseed? Cottonseed production has dropped around 2/3 from it’s biggest seasons and is also expected to drop a future 55% from this season to the next. The extreme drought feed consumption has only increased domestic use over the last few years. So how does the market “ration demand” taking into account the shortfall of supply? PRICE. This is usually the best way to reduce demand for a popular commodity. The only risk is that price may ration too much demand if it goes too high. At the moment the market is close to record highs for cottonseed in Australia with all regions well over $600/mt and some (in the North) above $700/mt. These prices make it hard to work in any feedlot or drought feeding ration. So there is some talk that these current prices may ration too much demand and leave those with long positions with an expensive headache.
If I was growing cottonseed next season, I would be starting to consider pricing seed for ginning as by the time we get to ginning time it may be hard to find a buyer who wants to keep it in their ration at these prices.
Prices Ex-Gin 18/19: MIA $635/mt, Macquarie Valley $660, Gwydir/Namoi Valley $785, Downs +$725.
Prices Ex-Gin 19/20: Downs $655, Gwydir $630, Macquarie $600, MIA $570.
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World Cup: Japan to beat South Africa
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Brisbane: 119.72
Melbourne: 119.82
Sydney: 119.99
Newcastle: 119.84
Fuel Prices have come up about 2 cents since our last report.
Allow about 4c to 6c for delivery depending on your proximity to the port.
To make sure you are ready to go when you want to order, please fill in the attached credit application. CREDIT APPLICATION.
Forward pricing options
If you are interested in locking in a forward price for delivery at a later date, please get in touch with us. We have been working hard to be able to bring a user-friendly hedging option to the market.
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The first person to correctly identify where Ian Grellman is in the photo to the right (by return email) will receive a free carton of beer from Newstead Brewing Company after their next business transaction with Rain Ag.
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In the last edition Ian was the at the Face of Mary Rocks near Springsure. Unfortunately, there were not guesses this time round. Better luck with this edition!
Learn more about Newstead Brewing Company by clicking on the can!
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CONTACT US:
Northern Region | Tim Whan | Grower Representative | 0448 444 015
National | Ian Grellman | Trade Commodities Specialist | 0448 333 959
Southern Region | Peter Horton | Grower Representative | 0448 777 358
Southern Region | Amy Billsborough | Grower Representative | 0406 872 323
Administration | Natasha Coffey | 0447 545 714 | natasha@rainag.com.au
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