The Rain Gauge | Newsletter

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Newsletter | Wednesday 17th July 2019

New Promotional Video for Raw Cotton Australia

We have just released a new promotional video for our warehouse business. The video is intended to showcase the industry as a whole, as well as attracting more buyers and sellers to the marketplace. Be the first to see it here!

Raw Cotton Australia - linking Australia's cottton with the world

2019 Cotton Trade Show

We will be attending the trade show in Griffith next week under our Raw Cotton Australia brand. We are at Site Number 9 and we hope to see you there.

Well the cotton market is certainly a bit crook at the moment as the trade dispute continues and the notion of a deal being struck seems as distant as ever. Confidence is low and this is really hitting home now with the ICE futures recently hitting its lowest point in 3 years. The latest WASDE report showed an increase in global ending stocks of 3 million bales with most of the increase in China and India.

With a bigger US crop potentially looming and ongoing lack of buying interest globally it seems likely the market will slide further yet. We need a bullish development to change the market sentiment. Obviously the one we have been waiting for is a trade deal between the US and China and if this does occur I think it will change things dramatically.

I’m not sure how low the market can go in the meantime but it has dropped over 30 US cents/lb in the last 12 months or so from its high of around 95 cents. The amazing thing is despite all of this we have historically good cotton prices in Australia thanks to a low AUD and a decent basis. We just need rain!

COTTON ICE FUTURES
US 63.06c/lb (Dec 2019)

Range last 30 days
62.60 - 68.35

Current AUD/Bale price
2019 - $530
2020 - $550
2021 - $535
2022 - $515

AUSTRALIAN DOLLAR
AUD - Current 70.13

Range last 7 days
69.11-70.41

It is promising to see we currently have a buyer who is happy to pay a premium for base grade or better in the warehouse to facilitate risk free back to back trades.

Most growers in the warehouse have decided to hang in there with prices softening. We did sell some more high grade recently at $575 to a new buyer however prices have taken a slide since then.

Short staple remains to be difficult to sell. We have had some buyers asking for it however they are yet to show us a firm bid that will get too many growers excited.

For growers who have bales in the warehouse (of any quality) or those who are looking to put cotton in there over the next few weeks be aware that this market can still go lower.

A couple of options include:

Selling a known grade promptly to the highest bidder
Setting a floor in an Aperture Ag Pool (see below)
Some growers have decided to carry cotton through until April to cover their 2020 contracts in the event they cannot produce due to lack of water, or to take advantage of shorts.

Floor Pool Option

The idea of the floor pool is to minimise further downside while still being able to take advantage of upside in the futures market. We are making it easy for you to utilise the tools required for this by linking you with a professional third party through our alliance with Aperture Ag Pty Ltd.

Please click on this button to read further information about the floor pool option.

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

CHICKPEAS

At last someone is getting some good luck

The lack of demand seems to be the theme of the last 12 months. This coming season we will see a lack of supply as well with only a few crops. South of Rolleston, QLD - this could mean a smaller crop than last season for Chickpeas. North of Rolleston has possibly 90% of the Australian Chickpea crop and this 90% is looking pretty good. With most of the crops flowering and many crops podding up, maybe a small amount of rain at the right time could make this a big crop for Central Queensland. I have been travelling through the CQ area for the last few days visiting growers and looking at crops, now I can say I am feeling a little better about life knowing that some farmers in Australia are getting a little bit of luck!

Fig 1: Dryland Chickpeas podding up near Emerald with good moisture to finish

Fig 2: Harland Burnett in a dryland Chickpea crop flowering & podding up near Emerald

Fig 3: Dryland crop podding up east of Emerald

Fig 4: Irrigated Chickpea crop east of Emerald

The Indian Monsoon

The Indian monsoon is still around 2 weeks behind and has been very hit and miss so far with many areas in Red having below average rainfall. However, some of the biggest chickpea growing regions have had average rainfall so far.

Old Crop July/August Fixed $630 Del-Wee Waa & Trangie, Del-Goondiwindi $630, Del-Narrabri $630, Del-Downs $650/mt. 17/18 crop $30 to $40 lower. Chickpea #2 Del Dubbo $600/mt.

New Crop 19/20 Delivered Downs October $670/mt October/November $650.

WHEAT

World S&D holds market up, but will Trade War push it lower anyway?

We are seeing two forces in the world wheat market tight S&D’s pushing the market higher but the US/China trade war is holding the market from any real heights. The continuation of the trade war has kept a lid on any positive news for the market as both consumers and producers find hard to be optimistic. Uncertainty is always a killer for any commodity markets.

Current Crop: Ex-farm July+, Moree SFW $426, Goondiwindi SFW $424, Narromine SFW $415/mt

Delivered Downs SFW April+ $420/mt, Del Hanwood SFW $400, Del Melbourne ASW1 $380.

COTTONSEED

Slow and steady

The Cottonseed market is still steady with several gins running into the new financial year building on supply. This plentiful supply will keep a lid on the market for the near term but a lack of fibre in the feed market may kick cottonseed in the coming months. The price of hay may push cottonseed prices as stock feeders search for substitutes for fibre, as they wait new crop alternatives in October (new crop stubble & hay from central Queensland).

New Crop prices are starting to pop their heads up with interest from feedlots looking to secure longer term supply. The feedlot numbers remain at record highs as many feed lotters are reporting great margins even though input costs including grain and hay remain very high. This is good for cottonseed as these good margins will underpin the market.

Prices Ex-Gin 18/19: MIA $430/mt, Macquarie Valley $450, Gwydir/Namoi Valley $480, Downs +$500.

Prices Ex-Gin 19/20: Downs $460, Gwydir $430, Macquarie $400, MIA $380.

Cottonseed market has been a little lack-luster over the last couple of weeks, but we are starting to see interest in end users taking coverage from September on-wards to new crop. With grim prospects for next seasons crop, expect to see cottonseed firm over the next few months.

Brisbane: 118.7
Melbourne: 118.38
Sydney: 118.52
Newcastle: 118.68

Fuel Prices have remained steady 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.

GROWLER ON THE PROWL

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.

In the last edition Tim was at the Cuttabri Wine Shanty out in the Pilliga. Congratulations to Daniel Kahl who was the first responder! Your carton of Newstead is on it's way.

Learn more about Newstead Brewing Company by clicking on the can!

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