MMM a week old sorry

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Local cash pricing for wheat has rallied again within the last fortnight, with prices reaching $300/MT in both the Outer Harbour and Port Lincoln Zones. December CBOT wheat fu-tures also rallied about 35c/bu based on weather concerns in the US, Black Sea, Europe and notably Australia. A new high for Spring Wheat for the year has also appeared, though con-tinuing support appears to be limited.
Australia
The recent high can certainly be considered a strong selling point for many growers as it is the highest since July last year. Forward selling has been limited, however, due to the lack of rain on Aussie weather forecasts. For many growers, the condi-tions are more important than price right now. Growers rightly have concerns over new crop yields and are remaining more conservative on this year’s production estimates. Some grow-ers have been seeding into very dry fields with the hope of picking up some rain this week. Though the forecast looks more promising now than it did a week ago, the totals still aren’t remarkable. Total rainfall for Australia was the eighth-lowest on record for April according to the BOM (Bureau of Meteorology). Precipitation for Australia for the year to date has been included, with the wheat growing regions outlined on the map. Longer term forecasts also show a drier season in WA, and inland Victoria and NSW have a moderate chance of a dry start to winter. The root soil moisture maps are most re-vealing, showing how starved for water WA and NSW crops have become. Recent updates to the precipitation forecasts indicate that a change could be expected in June along the eastern coast. Up to approximately 70mm is indicated on the extended forecast. WA saw some rain over the weekend, bring-ing totals up to 25-50mm in some areas, and expected to receive more over the coming weeks.
The dry conditions here in Australia have amplified positive changes to prices. Wheat is effectively being priced to remain on-shore. Domestic demand has increased as stocks tighten up, particularly for feed use. ASW, AGP and SFW grades have been priced the same in almost all major SA port zones for what’s left of old crop stock in the system and continue to maintain a low spread to APW.
Russia
Russia reportedly harvested a record crop of 135MMT in 2017 and a large crop of 61MMT came from Ukraine. Whilst last season fared well for Russia, it may face difficulty repeat-ing the feat this coming year, with abnormally dry weather popping up in some production regions. Two Russian consul-tancies are expecting total grain production to drop between 6% and 11% this season. Specifically, SovEcon expects 126MMT for 2018 whilst IKAR sees it at 120MMT respective-ly. SovEcon has cut the Russian wheat harvest down from 78.2MMT to 77MMT. For comparison, the last WASDE report pegged Russia at a much lower 72MMT. This revision is a result of delays in their spring grain sowing due to cold weath-er in Siberia and Urals regions, now at 60% complete. The situation is better in Russia's south, where the sowing is run-ning ahead of last year's pace. However, in a wider scope, the pace of spring sowing in Russia is the slowest in five years; planting still lags as much as 25% behind last year and over 40% behind 2016. Keep in mind that spring wheat accounts for roughly half of Russia’s total wheat crop. Even though Russia’s ministries are more outwardly optimistic on their estimates, the revisions and weather cautions have been supportive for wheat prices.

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Ukraine's Agriculture Ministry has kept its forecast for grain produc-tion unchanged at 61MMT with grain yield expected slightly higher than last year at 4.4MT/ha. In spite of this, recent lack of rainfall here has also been supportive for the wheat market. In contrast to the substantial rainfall accumulation in March, Ukraine’s recorded rainfall since 1st April is only 10-40% of the long-term average. The current rain deficit is not seen to be a concern for winter crops, but if persistent into June, would affect their spring crops.
Black Sea wheat with 11.5-percent protein is being traded around $220-$227/MT (USD), including cost and freight, compared with a similar variety of Australian wheat estimated at $255-$260/MT (USD). Mills are usually willing to pay a premium of about $10-$15/MT (USD) for Australian wheat as it is typically seen as better quali-ty. As the quality of Black Sea wheat improves, and its prices re-main so much lower, Asian countries are going to be more inclined to switch sources and shift away from Australian wheat. India has decided to curb these cheaper wheat imports by increasing import tax.
India
With wheat harvesting nearing its finishing stages in India, the gov-ernment was considering the proposal to double import duty for wheat. India has now raised its wheat import tax from 20% to 30%. The government wants to ensure that farmers get remunerative prices by trying to stem imports of wheat from Ukraine, Russia and Australia. In 2017-18, India imported an estimated 1.17MMT of wheat compared with 5.90MMT for 2016-17. Prior to the import tax change, imports were expected to increase again this season back to 2.0MMT (up to 4.5MMT according to the IGC). The increase
in import duty will increase domestic buying, and thus their local prices. However, India’s lower-trending stocks-to-use ratio for wheat still tends to suggest that imports will not drop drastically.
North Dakota
While winter wheat crops in the US have been suffering from a lack of moisture for some time, dry conditions on the US North-ern Plains provided some recent support for the market. Decem-ber spring wheat futures shifted higher by about 24c/bu (and July up by 43c/bu) due to these drier than average conditions. The latest drought monitor shows about 25% of the crop is ad-versely affected, but conditions are significantly better than last year when 45% of North Dakota suffered from extreme or excep-tional drought. Neither condition currently is reported in this state. Recall, according to the USDA prospective plantings report for 2018, Spring Wheat was estimated up 15% in the US from 2017. North Dakota accounts for approximately 50% of each the US durum and the spring wheat crop this season. Current fore-casts show soil moisture improving thanks to rains moving through parts of the Northern Plains this week. Spring wheat planting progress improved by 33% in the span of 14 days, now reaching 91% complete . Since conditions are less severe this year, and plantings are now ahead of the 5-year average (of 89%), it is unlikely for this crop to have further strong positive impacts on wheat prices here in the short term.
Outlook
Black Sea and Australian weather will determine price direction for the wheat market after the US long weekend. Combined with Canada’s concerns after recent dry weather, half of the world’s exportable wheat surplus is currently at risk of a decline. This is before considering US stocks. Despite some volatility CBOT wheat futures have trended up. Unless more abrupt changes in weather emerge, futures prices remain supported above 560c/bu. Australian wheat production could drop further from its low of 21.2MMT last year (though currently at 24MMT), thereby sup-porting prices, but adding pressure to the bottom line for local growers. On the flip side, if weather turns ideal in Russia, a crop anywhere between 78-80MMT is feasible. If we see wetter fore-casts here, particularly in NSW, then basis will start to fall away along with bids above $295/MT for new crop wheat. Old crop pricing currently remains well supported to fulfil domestic de-mand.
New crop wheat is the focus for pricing, where CloudBreak main-tains its selling recommendation of 10-20% at current levels. This fortnight’s forecast rain may provide a production confi-dence boost for some to lock in the high decile prices whilst they remain. Seasonally, June and July could push wheat futures high-er, but local weather will be a stronger driver in the short term. If the east coast misses out on the rains, then we can expect to see further price premiums at sites dotted along the rail or close to the border. Loxton, Pinnaroo, Keith and Bordertown for example all exhibited premiums relative to the port zone price last week of at least $7/MT. CloudBreak will continue to notify members of the site prices if a premium is available, noting the relative differ-ence to the port zone price.

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Summary- This fortnight has seen barley prices remain firm and Australian basis continues to firm with no relief in sight for the al-ready tight domestic feed grain balance sheet. Feed wheat and barley delivered Darling Downs has reached a staggering $400/MT, which makes it viable for traders to ship feed grains from South Australia into Queensland for domestic purposes. China/US trade negations continue to make headlines and recently China has an-nounced that it has dropped its anti-dumping claims against US sorghum. China is willing to allow immediate duty-free passage of US sorghum without restraint. This saw the corn futures market rally on 18/5 and the 21/5, and greater certainty was gained over de-mand for US agricultural exports. This type of risk, tied up in trade disputes, will always create uncertainly, however, there is no way to avoid it with such intertwined global trade.
Basis- in 2017/18, Australian barley balance sheets tightened amid acute drought. An above-trend world barley yield is absolutely re-quired to prevent new multi-year low stocks. So far, this season has not been kind and average-to-above average yield may be hard to achieve. As long as we see locally dry weather on the outlook we can expect to see firm prices for barley, however, when/if this changes we are likely to see prices pull back. We are expecting a very significant increase in barley area both within South Australia and nationally, as strong price signals were present around seeding time. Based on rough cropping plans we are expecting between and 20-25% increase in SA barley plantings, mostly in favour of a switch from lentils.
Futures-The past fortnight has seen the corn futures market trend higher, but no where near as sharply as wheat. The major driver of corn appears to be other agricultural commodities rallying. Soy-beans have found support on recent co-operative talks between China and the US and of course wheat has been the big mover with dryness through Canada, Australia and potentially the Black Sea. Fundamentally, we don’t expect corn futures to break away from this pattern. US cropping progress has moved from well behind schedule to ahead of schedule in the last month and pre-seeding rain looks to have been abundant.
Currency- the AUD has traded within a very tight range of the past month. At this time the AUD is being supported by rising commodity prices and uncertainty between North Korea and the US. While it is also being supressed by an increase in US inflation and interest rate numbers. We expect, at least in the short term, for the market to continue to trade inn a very tight range.
Scenario- With most of the price components trading around sup-port and resistance levels we can create some hypothetical scenari-os. For instance, below we have an upper and lower ranges in which we think it is possible for new crop barley to trade. As we can see below, the price range forecast is very wide, with the main reason for this being due to the variability of basis. Rainfall through WA and parts of NSW could soften basis, however, with multiple rainfall models in disagreement basis is sitting in a no-mans land at this stage.
Variety- Newly accredited malt barley varieties are appearing very popular this year. Close to 40% of barley hectares sown this year by CloudBreak clients will be Spartacus with a further 16% being Compass. Usually it takes several years of consumption for end users to get their heads around the new malt varieties and reach peak price premiums over feed. Last year the spread for Com-pass / Sparticus got out to a +$12/T; this was when these grades made up only 48% of barley hectares. This year these varieties contribute 57% of barley area and coupled with an overall in-crease in barley plantings this is effectively a 31% increase in area for Compass and Sparticus combined. Currently new crop Comp/ Spart premiums are $10/T, now that these varieties are accredited for Malt we have been recommending intital sales to be on a floating basis as typically we could expect a premium of $15-20/T Malt1. That said with large increase in planted acres this season it may be prudent to have an ‘each way bet’ and have some locked in as well on any further sales. This way we can arbi-trage between these contracts depending on harvest grade spreads.
Outlook- As stated above, the Australian feed grain balance sheet is extremely tight. Unlike like 17/18 which had a large carry over from a record production in 16/17, consecutive tight years will leave domestic users demanding grains. At this stage, it appears that the east coast of Australia has imported feed wheat from the UK. With prices into Darling Downs touching $400 it is easy to see why. At high decile prices our recommendation remains at 15%-20%. This leaves plenty of ammo in the bank in case we get an-other rally in August when the corn futures typically peaks and basis remains strong

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lentils
Summary - Lentil markets finished the week firmer as buyers got impatient with limited grower selling thru the seeding period. Nipt prices del Adel peaked at $495 (up $20/T). These higher prices encouraged some selling post seeding coupled with growers looking to clear stock as the end of month draws near. As selling picked up Nipt prices once again retreated to now be trading at $485 Del Adel and $455 at Two wells.
Markets are waiting to see how much area is actually sown to the crop both locally and abroad. This year's Canadian seeding intentions have not been accepted by markets. Since 2006, the intentions were below the final seeded area every year except 2011, when farmers planted 5% less than planned.
Seeding of this year's crop started the week at 80% com-plete in Canada. Given current weather conditions, it should be at least 90% complete by the time Statistics Canada starts its seeded area survey. Last year that was conducted be-tween May 26 and June 12.
Demand Slumps - With India putting up the ‘Closed for Business’ sign with the introduction of significant duties and quotas, it is not surprising that demand has slumped.
Aust exports as per ABS stats are running at 239KMT for the period Nov to March, this is a massive decrease of 54% on lasts years exports for the same period. Canadian Exports are also seeing simi-lar reductions in exported volumes. For the Aug to Mar period Cana-da has exported 1.01MMT, this is down 50% on same time last year.
Canadian Stocks are huge – Canadian stocks have ballooned over the last couple of years. Total March stocks for lentils in-creased 34.8% from March 31, 2017, to 1.5 million tonnes, mainly driven by on-farm stock levels that rose 41.1% to 1.4 million tonnes. This continues the trend of rising stocks, lentil stocks in the 1617 season increased 104%.
Meanwhile, stocks of dry peas rose 12.7% to 1.9 million tonnes. These increases continue a pattern seen for the commodities in the last stock report taken on December 31, 2017.
These huge stock increases can be attributed to a large production
response to high lentil prices over the last four seasons (excluding 2017/18) and a large increases to import Indian import duties.
Canadian Seeding - Seeding of this year's crops is now 9% complete in Saskatchewan, compared to the recent 5-year average of 19% complete, according to the latest crop update from Saskatchewan's department of agriculture. Seeding progress was not broken down by crop, but judging from the level of progress in individual crop dis-tricts, it seems likely that 9% of the peas, lentils and chickpeas crops have been planted, while 11% of the intended mustard area is in the ground and 5% of this year's canary seed crop.
Strong and warm winds have dried fields throughout the province, and many producers will need rain in the coming weeks to help crops germinate and establish. Provincially, topsoil moisture condi-tions on cropland are rated as 3% surplus, 67% adequate, 25% short and 5% very short.
Canadian Planted Acres - Lentil markets were surprised by Statistics Canada seedings intentions report. Having expected farmers to say they would reduce area by around one million acres, the reported 355,000 acre reduction to 4.05 million was a surprise! This was a lot less than analysts had expected. Most analysts still anticipate acres to be dropped further in subsequent reports.
Looking at the relative market performance of lentils, it seems cer-tain that land in reds will drop, while land in all classes of green should increase. Moreover, the longer seeding is de-layed, the more likely farmers are to consider shorter season crops such as peas, lentils or polish canola; and those crops which can withstand a late harvest such as flaxseed or canary seed.
Globally - In the same theme as Canada, global pro-duction is actually forecast to increase despite a pull back in acres planted. With a normalisation of yields with an average season, production will be little changed. This will not help the burdensome stock situation that is plaguing lentil prices. It is forecast that global production (see table) will increase mar-ginally to 5.823MMT.
Lentil Outlook - Given diminished demand prospects for India, residual supplies of lentils in Canada would be expected to rise again unless growers end up planting much fewer lentils than intended.

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pulses contionues

If Canadian growers stick with their seeding intentions and yields are average, we will enter a buyer’s market. That means buyers will have more influence over price than growers. Even though seeded area will be down, there is a chance production could increase from 2.56 to 2.68 M tonnes. If realised, the available supply of lentils would jump from 2.89 to a record 3.54 M tonnes. Improved availability would be expected to result in lower average prices in the coming marketing year.
Canadian export demand could improve as green lentil buyers re-stock pipelines. Total lentil exports could climb from this season’s estimated 1.49 M tonnes to just over 2 M in 2018/19. Domestic use might also increase a little, though seed demand should drop, now that seeded area is trending lower. Canada could end the com-ing marketing year with an 890,000 tonne carry-over, or enough lentils to cover four months of normal demand. Taking advantage of times when prices rally to sell part of your production will not be a bad strategy. This will only change if the actual seeded area is much lower than the intentions, and yields or quality is poor.
Chick Peas - Canadian & US farmers plan to massively increase land in chickpeas this year. Australia is also expected to see a big increase in planted acres after looking at the cropping plans com-ing in. Prospective acreage increases in Canada and the United States are not currently having an impact on values because of early worries about prospects for a volatile weather market. Statis-tics Canada seeding intentions report said farmers intend to seed 346,200 acres, up from 209,000 last year and more than double the previous five year average of 171,700. A return to average yields would see output more than double from 109,100 to 250,000 metric tons (MT).
Markets are not overly concerned with Canada's increase in in pro-duction data. The country is a price taker, with the direction of world chickpea markets ruled by exportable surpluses in Mexico and India. This year has seen output recover from their recent lows, resulting in lower average prices. However, values remain at levels which would be expected to encourage expanded output in India during the coming Rabi planting season and possibly in Mexico next year.
The implication for growers is with such a large % increase in plant-ed acres globally there is a risk of further price declines in 2019.
Field Peas - India has since restricted yellow pea imports to 100,000 tonnes through the end of June. Markets had been con-cerned India would massively increase the import duty. This change was unexpected and completely freezes trade to that country. Giv-en the risk that the restrictions could be put back in place, markets
have written off India. It seems that Aust Kaspa peas are also caught in these restrictions.
In recent years, Canada exported between 1 to 2 M tonnes of peas to India, but when things look bleak for peas, new demand emerges. Since January, we have seen China buy feed peas, and our domestic market is expanding rapidly because of the new fractionation plants. Those plants mill peas to make protein, starch, and fibre fractions for the food industry. Farmers in Manitoba and Saskatchewan are clearly excited about the domestic market. While pea growers in Alberta say they will reduce area from 1.87 to 1.56 M acres, farmers in Saskatchewan say peas will be basically unchanged at 2.17 M acres, and Manitoba growers intend to increase area from 65,000 to 70,000 acres.
Within the next two years, Canada’s fractionation capacity will total at least 750,000 tonnes per year, making it the second or third most important market. But it is not there yet. If farmers stick with their intentions and yields are average, Canada will harvest 3.94 M tonnes of peas, down from last year’s record 4.11 M tonnes harvest. It looks like this summer’s carry-over will total 1.29 M tonnes, versus 301,000 last year. This would give Canada a record high available supply of 5.26 M tonnes. It would not be surprising to see this weigh on the global pea market. From time to time, peas could be a com-petitive ingredient for livestock feed manufacturers in China and elsewhere. Assuming exports could rebound to almost 3 M tonnes, and the domestic market expands to around 1 M, we will still end the coming crop year with over 1 M tonnes of peas on hand. Even so, it is important to remember that peas are in a transition period.
Outlook –Lentils- Little upside remains in the sort term for lentils and the potential for further Indian duties looms. Look to continue sales around $480 del Adel equivalent on large lentils and $485+ on nip-pers otherwise holding.
Peas- Pea prices picked back up the past fortnight to $320 Port Adelaide in Viterra. Demand seemed to be limited to the Viterra sys-tem though with delivered bids not matching the price increases. Pea prices should have limited down side purely on a feed perspec-tive with feed grains across Australia relatively tight. The key de-mand for PEAK grade comes from China and India. India with the 50% duty in place and a big pea crop themselves will certainly not be bidding up the market anytime soon and potentially, quite the opposite with rumours of restricting imports further. Key demand will come from China but as always, we are competing against Canadian exports where they have significant stocks. Look to keep sales tick-ing over targeting a $330 delivered or $320 Viterra.
Chickpeas- The global balance sheet can swing sharply as yield is never a certainty- but for now the Mexican harvest looks safe and the market will be flat whilst Mexico floods the market. Cur-rent projections have stocks to use at the highest since 2014 this year with planting intentions up for North America. Growers holding significant tonnes of chickpeas should consider taking some risk off the table before Mexican exports really kick off. and sell at current levels.

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canola
The past fortnight has continued to see canola prices locally push higher. After sitting at $520 for a week straight, price have begun to rally to now sit at a $535 Outer Harbour Basis. This can largely be attributed to an increase in the ****seed futures increasing 1.6% over the past fortnight. However, canola prices here have rallied 2.8% in the same time, which is the likely result of basis strengthening €8.54 to now sit at -€27.26, its highest level since late last year. This strength in basis has come largely due to the dry start for growers across Australia, and particularly into WA.
Europe - The past fortnight has been a positive period for Europe-an ****seed as it continues its trend higher. After adding 6.5% in the last month, values have benefitted from a weakening Euro, which has seen a 5.3% decline in the same period and continues to grind lower. However, it is also being driven higher by concerns surrounding crop condition across the continent. As the season continues to develop, the ****seed crop continues to be ham-pered by cold and dry weather. These weather patterns have been reflected in the latest EU crop monitor forecasts where ****seed yields were revised down from 3.27mt/ha to 3.17mt/ha. This yield is now 2.7% below the 5-year average with the drop off being a result by differing weather conditions in the EU’s two largest ****-seed producing nations. The French crop is continuing to be im-pacted by a lack precipitation as the country begins to move into drought. Germany on the other hand is feeling the effects of unu-sually cold periods hampering ****seed flowering, which has been evident in the latest production estimates out of the country, with downgrades of 3.3% year on year to 4.12mmt. The weather has also been reflect-ed in the latest production esti-mates out of the EU, down to 22.2mmt, from 22.5mmt last month, and looks to continue to decline with the latest yield esti-mates.
Looking towards Canada, seeding continues to progress with planting estimated to now be 75% complete. Canola futures out of the country have grinded higher over the past fortnight and have been dragged up on the coattails of soybeans. Unfortunately, stocks are still the second highest on record for this time of year at 9.1mmt, up 13.75% on this time last year. However, while parts of the country are receiving enough rainfall, topsoil conditions in parts of the praries continue to decline. Large areas of Manitoba, Alberta and Saskatchewan have received less than 40% average rainfall since April 1 and while rainfall is expected in some south-
ern regions in the next fortnight, precipitation is expected to re-main below-normal level. As a result, Canadian canola futures have now gained almost 10% for the year to date.
Soybeans - After spending the better part of the last month in a downward trend on the back of US/Chinese trade concerns, Soy-beans have relished the announcement that trade negotiators were able to work out a framework towards resolving the 6-week dispute. Soybeans marked the strongest gains on the back of these announcements, up 3% while soybean oil also found ground, up 1.5%. The uncertainty surrounding Chinese trade has been the largest unknown weighing on the soy market of late, and now that risk is somewhat off the table, the market will begin to realign. This realignment will begin with the window to soybean exports to China being re-opened, a positive given these exports have continued to decline through the dispute, down 80,000mt to 299,200mt from the week prior. The gains haven’t stopped there for U.S. growers as soybean value continues to surge higher, up 5.8% since the announcement was made as concern around the tensions contin-ue to alleviate.
These gains continue to bring relief to U.S. soybean growers who despite the concerns have continued to power ahead with their soybean plantings. With more than 20% of the crop planted within the past week, soybean planting now sits at 56% complete, up on this time last year where the planting sat at 50% complete and 12% above the 5-year average.
Locally, growers across SA have continued to endure varying condi-tions, with growers in some regions yet to receive an official open-ing rain. A similar start has been seen through Western Australia with many regions across the state receiving no more than 5mm for May. Those growers holding off for rainfall before planting can-ola have been warned to assess the risk of yield losses if sowing opportunities are delayed, where yields begin to rapidly decline if sown through May and into June, particularly in more marginal areas. The likely result of the dry start is growers reducing longer season crops such as canola and replacing the area with wheat or barley.
Current Recommendation - While the slow start has made many growers reluctant to forward sell any canola to this point, prices are beginning to garner attention. For those growers with confi-dence in their production and looking to get a sale on the books, it may be worth letting the current ****seed rally run its course. Strength in the Euro ****seed futures looks to be continuing as long as the value of the Euro continues to decline, as well as con-cerns surrounding weather conditions across Europe and Canada continue. The renewed confidence in the soybean market has con-tinued to add value also, and while the increase in soy values con-tinues, it looks as though ****seed will continue to find strength behind it. Once these trends look to flatten out, sales up to 10% are recommended, particularly for those growers with reasonable production certainty. Basis at its strongest levels in over 5 months is also worth considering. With recent rainfall through WA, basis may weaken as a result of renewed confidence in the WA produc-tion, therefore a sale is recommended to capture the current basis levels.
General

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reccomendations
1819 Wheat – Incremental sales, Total 10%-20% Sold
Current- Black Sea and Australian weather will determine price direction for the wheat market after the US long weekend. Com-bined with Canada’s concerns after recent dry weather, half of the world’s exportable wheat surplus is currently at risk of a decline. This is before considering US stocks. Despite some volatility CBOT wheat futures have trended up. Unless more abrupt changes in weather emerge, futures prices remain supported above 560c/bu. Australian wheat production could drop further from its low of 21.2MMT last year (though currently at 24MMT), thereby support-ing prices, but adding pressure to the bottom line for local growers. On the flip side, if weather turns ideal in Russia, a crop anywhere between 78-80MMT is feasible. If we see wetter forecasts here, particularly in NSW, then basis will start to fall away along with bids above $295/MT for new crop wheat. Old crop pricing currently remains well supported to fulfil domestic demand.
New crop wheat is the focus for pricing, where CloudBreak main-tains its selling recommendation of 10-20% at current levels. This fortnight’s forecast rain may provide a production confidence boost for some to lock in the high decile prices whilst they remain. Sea-sonally, June and July could push wheat futures higher, but local weather will be a stronger driver in the short term. If the east coast misses out on the rains, then we can expect to see further price premiums at sites dotted along the rail or close to the border. Lox-ton, Pinnaroo, Keith and Bordertown for example all exhibited pre-miums relative to the port zone price last week of at least $7/MT. CloudBreak will continue to notify members of the site prices if a premium is available, noting the relative difference to the port zone price.
Forward Put Option Strategy - For growers looking to lock in for-ward prices at these levels, but are uncertain about production an option strategy may be the way to go. The implied Basis attached to current forward physical prices is relatively weak trading around 30c/bu. It is looking as though the dry start to the Aussie 1819 season has not been fully factored into prices. There are strong forward price premiums embedded in US wheat futures, Dec18 is currently trading at a 40c/bu or $20/T premium to current spot prices. For those growers who wish to create a forward minimum price, take advantage of the forward premiums, not lock in basis (as currently weak) and have the ability to participate in rallies in the physical market then a Put option strategy is worth consider-ing for CloudBreak Advisory clients.
1718 Lentils— Increase Sales, Total 75% - 90% Sales (Nippers)
Increase sales, Total 40% - 50% Sales (Nuggets/Jumbos)
Current — Little upside remains in the short term for lentils and the potential for further Indian duties looms. Tight grower liquidity throughout May should provide some short term stability to the market providing there is no market shocks. Post Ramadan we may see some better demand which should be used to make fur-ther sales. Look to continue sales around $480+ del Adel equiva-lent on large lentils and $490+ on nippers otherwise holding.
1718 Canola - Total 100% Sold
1819 Canola - Targeted Sales, Total 5-10% Sold
Current—While the slow start has made many growers reluctant to forward sell any canola to this point, prices are beginning to garner attention. For those growers with confidence in their pro-duction and looking to get a sale on the books, it may be worth letting the current ****seed rally run its course. Strength in the Euro ****seed futures looks to be continuing as long as the val-ue of the Euro continues to decline, as well as concerns sur-rounding weather conditions across Europe and Canada contin-ue. The renewed confidence in the soybean market has contin-ued to add value also, and while the increase in soy values con-tinues, it looks as though ****seed will continue to find strength behind it. Once these trends look to flatten out, sales up to 10% are recommended, particularly for those growers with reasonable production certainty. Basis at its strongest levels in over 5 months is also worth considering. With recent rainfall through WA, basis may weaken as a result of renewed confidence in the WA production, therefore a sale is recommended to capture the current basis levels.
Previous—Canola is currently testing levels above $520/mt, val-ues not seen in more than 4 months. While sales have been pre-viously recommended around the $520/mt level, the current ****seed rally looks to be running out of steam. In order to capi-talize on this rally another 5% sale is recommended at this $520 level in order to get sales between 5% - 10%. Other bullish fac-tors to consider is the fact that EU ****seed production is likely down this month as well as the fact that while many South Aus-tralian growers have had a reasonable start with their rainfall, many growers are still after a larger soaking and with minimal rainfall on the forecast for the next fortnight, are now facing the reality of either dry sowing or reducing canola hectares. However, with Canadian stocks at their second largest for this time of year, another sale is recommended.
1718 Barley– Total sold 100%
1819 Barley– Increase 5% , Total sold 15-20%
Current—the Australian feed grain balance sheet is extremely tight. Unlike 17/18 which had a large carry over from a record produc-tion in 16/17, consecutive tight years will leave domestic users demanding grains. It is rumoured that east coast of Australia has imported feed wheat from the UK. With prices into Darling Downs touching $400 it is easy to see why. At high decile prices our rec-ommendation remains at 15%-20%. This leaves plenty of ammo in the bank in case we get another rally in August when the corn fu-tures typically peaks and when basis is also seasonally strong.
Previous— Many growers have taken on CloudBreak’s advice and have forward sold approximately 15%-20% of conservative pro-duction and strong decile prices. This recommendation still holds and if you have not reached this level it is advised you do so. Seeding so far has been better than expected and thus, growers should have slightly more confidence to forward sell. Barley pro-duction globally is expected to increase and at this stage no pro-ducing origins will fail.