The Rain Gauge | Newsletter

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Newsletter | Wednesday 08 April 2020

CASH FLOW AT HARVEST
Cash flow is likely to be a major concern for many this season BUT growers don’t want to be forced to sell into a buyers market at harvest time.

Here are a few options we have that may be able to help

1. Forward contract – you can sell now on a forward contract

2. Pre-harvest floor price option – to protect today's price. Click here for more information

3. Instant Cash Advance against grains/pulses delivered into system or approved farm storage at harvest. We can facilitate a cash advance without the need for forms or an arduous credit approval process

4. Pools – we can provide individual or grouped strategies at harvest allowing you to free up some cash while still maintaining market participation at harvest

All of our options are handled professionally through our 3^rd party partners and with our customers best interests in mind. Please get in touch with us, we are happy to run Zoom meetings for individuals or groups if requested.

CREDIT INSURANCE
Growers are rightly concerned about who they sell to in the current market environment. Rain Ag can offer credit insurance at a very attractive rate against all business deals done through Rain Ag. There are some conditions that apply so give us a call if you are interested in discussing further.

Basis has come off about AUD$30-$40 per bale since our last report based on the demand shift and uncertainty around the Coronavirus. This saw the Aussie cotton market go under $500 per bale. Futures has held ground at around US50c/lb and a bit better for the past 2 weeks and the AUD hasn’t been too erratic given current circumstances trading between 60 and 62 cents.

I have been talking to some of our China contacts and trying to get a feel for what they are thinking. The Chinese are 90% back at work and are cautiously positive about their own plight in regards to COVID-19. Some provinces are still operating under strict rules while others are back to life as normal with social guidelines in place but no enforceable restrictions.

The big issue for the Chinese is that demand for their exports has come to a halt with many orders being placed on hold or cancelled. The State reserve stopped buying last week as well so import demand has obviously slowed as well.

On the positive side our contacts believe that the government will start buying again which will help support the market through this period. Currently the reserve has around 9 million bales on hand but they would like to increase this by 4 or 5 million bales.

Low cotton prices during Northern Hemisphere planting should mean less acres go in which will also help the situation. In China 85% of the cotton is grown by the army in the Xinjiang region in the North West. This area is likely to be fully planted as there are government subsidies here. The other 15% grown in mainland China may well be largely left out and substituted with other crops.

A lot will depend on international demand based on the severity and fallout due to the virus over the coming months, but our friends in China say cotton will rebound strongly perhaps by September if not March 2021. They say prices will likely stay around current levels for quite a while now with downside potential to about US46c/lb.

COTTON ICE FUTURES
US 53.16c/lb (July 2020)

Range last 30 days
48.15 - 63.46

Current AUD/Bale price
2020 - $510
2021 - $540
2022 - $525

AUSTRALIAN DOLLAR
AUD - Current 61.40

Range last 7 days
59.92 - 62.04

Ian recently wrote an article about COVID-19 and the cotton market for the Australian Cotton Grower publication which you can read here. The article explains why this may be a good time to commit your balance of crop to Raw cotton Australia.

Don’t forget you have the option to store cotton if you don’t want to be pressured into selling. The Raw Cotton Australia Warehouse system may well be the best place for your cotton until the corona virus panic weakens and things get back to normal. Simply let your ginner know the bales are committed to Raw Cotton Australia.

Remember when you deliver cotton into our warehouse system:

Your cotton is insured
Your cotton is secure
Your cotton remains in our warehouse until you have been paid in full.

For more information on this option please see www.rawcotton.com.au

CHICKPEAS - should I sell at these levels?

Food markets have continued to stay firm in the face of the COVID-19 crisis as the food hoarding follows through to supply. Most nearby markets are very strong and as a result we have seen sentiment for deferred supply follow the upward move. I get a feeling that this renewed demand as a result of the COVID-19 crisis may not be here for the full season as hoarders realise they don’t need to go shopping for a while and shop shelves stay full for a little longer than usual after the panic dies down. We have no hard evidence of this but the COVID-19 crisis may still have a little silver lining for commodity prices with some in the trade thinking that countries like India may look at reducing a few import tariffs on some food products while potentially restrict exports as governments focus on food security. Chickpeas being one of the cheapest protein sources may become a highly sort after commodity as many consumers look for cheaper options.

Should I sell? It is not an easy decision selling chickpeas before you plant! So what factors should I consider before making this decision.

Make sure you are also considering your risk profile regarding counter-parties to sell to. The type of contract may also be important (area contract or fixed tonnes). Delivery site is important as you may need help with quality if specs don’t meet. Don’t forget delivery period as many traders are looking for Oct to first half Dec. Some growers may not be able to meet this window. I am sure your decision is as clear as mud!

Current Crop 19/20 Delivered Downs April-20 $820/mt Narrabri $750 Gunnedah/Wee Waa $730.

Old Crop April-20 Fixed Del-Wee Waa & Del-Goondiwindi, Del-Narrabri $720, Del-Downs $755/mt. Chickpea M $POA Del Downs.

New Crop 20/21 Delivered Down Oct/Nov-20 $710/mt, Wee Waa $675/mt, Narrabri $670/mt, Goondiwindi $675/mt.

WHEAT - still holding, but for how long?

The wheat market has shown some strong signs of demand in the nearby market as the COVID-19 crisis continues and hoarders call on more supply. The futures market and cash market have all shown signs of demand with Delivered Downs cash prices as high as $500/mt and the May-20 Futures price out striping the Dec-20 contract on price. In a normal futures market the front months are usually lowers (in normal backwardation) than some of the deferred markets, but the May-20 Contract rallied above December-20 for a week or so (in Contago) as short covering started to push futures higher. The futures market has now returned back to normal backwardation restoring carry to the market.

Current Crop: Delivered Downs SFW April-20 $495/mt, Condamine $495, Hanwood SFW $410, Melbourne ASW1 $405. Ex-Farm April-20, Moree SFW $455, Goondiwindi SFW $460, Narromine SFW $430/mt

NEW CROP!!! Delivered Prices: Bris $390 H2 plus, Downs SFW Jan+ $350, Narrabri Oct-Nov $315 Ex-Farm Jan+ Central West $310, Moree & Narrabri $310, Walgett $305, APW Multi Grades Sites Oct-Nov Burren $300, Walgett $300, Hillston $302, Narrabri & Moree $310.

FABA BEANS - market still strong

Some growers have started early planting of Faba's in the last week or so, as most will have a lot of acres to get across before the winter crop is planted. Both Old crop and new crop markets have continued to rally on a lower $AU and renewed spot demand for Faba-beans. This market has been a little hard to pick over the years as once demand is covered prices can fall out of bed in a hurry. But it is hard to walk away from prices close to $500/mt delivered packer for new crop. RainAg has been taking orders at $500/mt delivered Goondiwindi, Wee Waa & Trangie as traders work orders overnight to meet your targets.

COTTONSEED - lower $AUD starting to help cottonseed

The cottonseed market has been quiet for the last month or so as sellers have been waiting for demand to kick in. There is very little supply left for old crop and the gins will be starting a bit later this year so buyers need to be careful of their cottonseed usage. We may see cottonseed move a little higher as buyers start to get into the market.

New Crop 20/21 cottonseed is a little slow now, as buyers hold off from taking a position due to COVID-19 concerns and the markets unstable trading pattern. It is a little hard knowing what will happen with cottonseed demand for next year let alone this season as we head towards a new world after COVID-19.

Prices Ex-Gin 18/19: MIA $570/mt, Macquarie Valley $600, Gwydir/Namoi Valley $625, Downs +$660

Prices Ex-Gin 19/20: Downs $640, Gwydir $620, Macquarie $600, MIA $580.

The Pulse market has got more upside in the near term but the price will disappear as quick as it came so don’t be too greedy.

Fuel Prices have come off another 5 cents since our last report.

Allow about 3c to 6c for delivery depending on your proximity to the port.

We have had a fair bit of interest in fuel lately but we can’t do business unless you are approved for credit with our third party supplier. Once the form is returned approval can normally occur within 24-48 hrs. Click here to download the form CREDIT APPLICATION.

Once you have filled out email to admin@rainag.com.au and we will fast track the application for you.

FORWARD PRICING OPTIONS
Our forward pricing option has been limited at this stage due to finance constraints however we are endeavoring to significantly increase our capability. If you could let us know if you have interest in the concept that would be handy for us to better quantify demand.

SPOT US! - 2020

HORTO AROUND

The first person to correctly identify where Peter Horton is in the photo to the right (by return email) will receive a free carton of beer of their choice after their next business transaction with Rain Ag.

We are still working on the exciting new SPOT US! prize details, but while this is still moving along, winners will receive a free carton of beer of their choice (after your next business transaction of course!).

Thanks to everyone that submitted answers for Where's Whanny last Rain Gauge - he was indeed at Moonie Crossroads in QLD. First correct guess in this time round goes to Meg Moses - congratulations Meg!

We are still working on the exciting new SPOT US! prize details, but while this is still moving along, winners will receive a free carton of beer of their choice (after your next business transaction of course!).

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