Nidera Australia, Peter McMeekin

It seems that the dramatic fall in domestic wheat prices over the past couple of weeks has put Australian wheat in play from an export viewpoint. However, export values in competing origins have reacted to the downside, meaning there is still some work to do to sell out the substantial exportable surplus expected following the upcoming harvest.

Sales of new crop wheat have been reported into Thailand, Philippines and Vietnam over the past week and the trade is seeing further export enquiry for both the old and new crop shipments. Over 200,000 metric tonnes of business is reported to have been concluded with APW values pegged at US$213 CNF Thailand and ASW at US$203 CNF Philippines for February 2017 shipment. If Australia is to export 20 million metric tonnes (MMT) of wheat over the next twelve months it needs to sell around 400,000 metric tonne per week into export pathways. Last week’s sales are certainly a good sign, but they are a tiny step in a big program if we are to approach next year’s harvest with a similar or reduced carry out.

Unfortunately the same cannot be said for feed barley at this point in time. Australian values are around US$170 FOB for Jan shipment and Saudi Arabia values are sitting at around US$175 CNF for the same period. Freight from Western Australia to Saudi Arabia would be around US$15, so that puts domestic feed barley US$10 out of the money from an export viewpoint. China is still an unknown and it would seem more likely that we will see malt business out of Australia with the EU and Canadian quality issues, before we catch significant feed barley bids.

The Australian dollar may be finally playing the game, falling around 123 points following Janet Yellen’s highly anticipated speech at Jackson Hole last Friday. That in itself makes Australian wheat about AU$5 more competitive into the export market. The US Federal Reserve Chair left the option open to raise US interest rates as early as next month, as long as next week’s US employment data is robust. Any firming of US rates will be negative for the Australian dollar as the interest rate differential between the two currencies narrows and the carry trade becomes less attractive.

The rain keeps coming!

Queensland, NSW and WA were the big beneficiaries from last week’s rainfall. Whilst there are isolated stories of waterlogging and calls for Noah to build an ark, on the whole the crop will benefit and there is increased certainty around this year’s winter crop production. I expect that the next USDA report will publish a significant increase to their current Australian wheat production number of 26.5MMT. The largest domestic wheat crop 29.6MMT was recorded in 2011/12 and at this point in time it is hard to see this year’s crop being under 30MMT.

On the other hand the chickpea crop through parts of NSW and Queensland is suffering. Chickpeas don’t like wet feet so the waterlogging issues combined with high disease pressure will likely see a downward revision in Pulse Australia’s next production estimate.

Source: Nidera Australia Weekly Market report: Peter McMeekin is Nidera Australia’s Origination Manager.