Archives: Market Reports

Crop forecast déjà vu turns markets volatile as Crop forecasts weigh in.

Weekly Market Report 18th of June 2018.

Tim Murray, Wheat Trader COFCO International Australia, Melbourne Office.

It’s been “government report week” as USDA and ABARES released updates for their relevant papers on crop production. The results have sparked up markets as the July CBOT wheat contract traded a 52cent/bu weekly range (AUD 27) and ended closing lower at 499.50 US cent/bu.

Despite repeated claims, no one believes the numbers the USDA produce, and the response to the World Agricultural Supply and Demand Estimates (WASDE) may suggest otherwise as the bullish numbers initially sent CBOT Wheat and Corn higher by the equivalent of $11 and AUD 5 respectively. It was their production estimate of the world’s largest wheat exporter that provided the story, with the WASDE report revising Russia’s new crop wheat production lower. The 2018/19 crop was reduced by 3.5 million metric tonnes (MMT) to 68.5mmt noting “drier-than-normal conditions this spring in winter wheat areas and excessive wetness in spring wheat regions lowering plantings”.

But why did the market believe it? Only twelve months earlier in their June 2017 report, USDA cited the Russian crop at 69mmt, then forced by record export pace to revise higher for subsequent reports to reach 85mmt where they stand today. Maybe we are a little harsh on the USDA, but given the 145US cent/bu down move from July to September 2017, this suggests they weren’t the only one to get Russia wrong, and it’s highly unlikely we will see another 85mmt crop as the conditions have not been near as kind as 2017. Regardless, when it comes to Russian Wheat there are only a few things that are clear; that is, that they are getting better every year at growing it, and no one knows how much better until at least after their harvest.

One thing, USDA didn’t bother touching on Australian wheat production; however, we only needed to wait a few hours to see ABARES early call on our national production with scores of 21.9mmt for wheat, barley of 9.2mmt, and canola at 3.1mmt. Given the planting window hasn’t even closed, I would think it’s fair to say that this is not really a forecast, but more an early guess and few in the trade will be holding ABARES to their number. If your bullish or a farmer, you could easily say these numbers are too high as much of the crop has been planted in sub-par conditions and the outlook is poor. Conversely, if you’re bearish or a consumer, you may have read the report and said: “plenty of water to go under the bridge, hopefully!”.  There is enough evidence for both the bulls and bears to support these arguments – the Bureau of Meteorology (BOM) joined in at the government report party with their Climate outlook and favoured below average rainfall and above average temperatures for most of our cropping belts, only giving WA a greater than 50% chance of average rainfall.

June 2018 Climate outlook below has less than 50% chance of median rainfall for most of Australia


June 2017 Climate outlook above had a similar forecast for Eastern states to 12 months later

However, just like the USDA reports of Russian production forecast, those more optimistic on Australia can say we’ve been here before. As shown above, the BOM June Climate outlook for 2017 is comparable to this year’s forecast for the East coast, worse for the West coast, yet last year, we still managed a 21mmt crop. In that time some areas did it very tough, others had a favourable run home, but more importantly, like the Russian farmers every year, Australia’s farmers get better at growing their crops. All the consumers along Australia’s seaboard, or in the food bowl of Asia that are now left anxiously watching on should be thankful for that.

Demanding Feed

COFCO Weekly Market Report 11th of June 2018 Thomas Kim – COFCO Grain Trader Northern Australian Region We are often well versed on how much grain Australia produces each season and with good reason. Namely, the interannual supply swings are the primary drivers of price. The demand side of the equation, particularly domestic feed demand […]

Read More ›

Three-Quarter Update: 2017-18 Export Update

COFCO International Australia Weekly Market Report 5th of June 2018 Dim Ariyasinghe – COFCO Exports have picked up in Q2 after a muted start to the year.  While barley showed early strength on a proportional basis, exports have since been pegged back to ensure wheat is not threatened as the export leader. Canola exports have […]

Read More ›

Chickpea Markets in the Balance

COFCO International Australia Weekly Market Report   22nd of May 2018 by Rob Brealey – Pulse Trader – Toowoomba Office   Despite all the Indian Government efforts, the local Indian farmers are still only receiving at local market yards between 70/75% of the Governments mandated Minimum Support Price (MSP). I am sure this would be a […]

Read More ›

Global Production Risks All Ahead

COFCO Weekly Market Report 15th of May 2018 Luke Mason – Wheat Trader – COFCO International Australia -Melbourne May, June and July are generally the critical months for northern hemisphere cereals and row crops.  The seasonal risks facing the global grains market this year, however, take on more importance than previous years due to a […]

Read More ›

Bring on the rain!!

COFCO International Australia Weekly Market Report 8th of May 2018 Matthew Pattison – Sorghum Trader – COFCO International Australia With any luck, as this hits the press, some much-needed rain has turned the season around in some districts and more is on the way for others.  After an alarmingly dry April, we’re all hoping for […]

Read More ›

Waiting for the break

Growers and traders are starting to turn blue across Australia as they hold their breath for that first winter break. No cropping region has so far experienced a widespread break, with topsoil moisture being below average for the majority of Australia’s cropping country (see BOM subsoil map below right). The situation is similar for lower […]

Read More ›

China ‘Trumps’ US Sorghum

After much speculation, China’s Ministry of Commerce (MOC) announced on the 17th of April that it would impose provisional anti-dumping measures on grain sorghum imported from the United States, effective immediately. These actions are the latest developments in the tit for tat trade war between the two nations. This is the calculation formula: Margin amount […]

Read More ›

Daily Bid Sheets Weekly Market Report