When the weather is benign the market starts looking for reasons to move. Last night it was the slow pace of wheat shipments leaving US ports. Locally markets have been rather steady, with some short term opportunities cropping up on shipping squeezes.
Figure 1 shows a rather boring CBOT wheat chart. Recent swings in prices have been small on an historical scale. As the volume of supplies dampens any attempts at a real price rally.
CBOT finishes this week down 2¢ at 423¢/bu, having been as high as 429¢ and as low as 421¢. In our terms, CBOT remains stuck in its $225-235/t range, which while being unexciting on a hedging front, will deliver a price at least 10% higher than the 16-17 harvest.
ASX East Coast Wheat Futures are maintaining their premium to CBOT, possibly assisted by the Bureau of Meteorology’s latest 3 month outlook (Figure 2). ASX Jan-18 currently sits at $241/t which is obviously better than current values.
The new ASX contract is deliverable in Victoria, NSW and Queensland, which makes it more attractive to sellers. Even with the spot contract for May at $221/t, there would be an advantage at some Victoria sites in selling futures and going to delivery, rather than taking site bids which equate to prices $5-10 lower.
There has been intermittent interest in Canola, ASW and Feed Barley in recent weeks, with some growers managing $10-20 premium on published bids when buyers are trying to fill ships. If you’ve got wheat in store it’s worth looking at the shipping stem to see when boats are going and trying your luck with offers on Clear, or by talking to buyers or brokers.
The week ahead
Figure 2 is even making news in international grain wires, with some concern around the sowing of the coming winter crop. It hasn’t done much for prices, but if we do see a late autumn break, spot prices are likely to creep higher as growers use abundant grain in store as a drought hedge.
Our target for hedging new crop continues to be at the $250/t level for wheat, and $500 for Canola, both of which are a little way off. As usual growers are should be hoping that Figure 2 is wrong, and US and or Russian growers get some bad weather during their spring and summer, to take the edge off heavy world supplies.
Figure 1 shows that the strong prices failed to draw out more cattle this week, with East Coast cattle yardings increasing just 1,300 head. Cattle yardings were down 28% on the same week last year. In fact almost every week of autumn (except for Easter) 2016 saw yardings above 60,000 head. Over the last 8 weeks cattle yardings haven’t managed to crack 52,000 head.
Slaughter cattle prices haven’t managed to hit new 2017 highs yet. Heavy steers bounced back this week, gaining 27¢ on the east coast to sit just below the opening price of 2017, at 568¢/kg cwt. It’s s similar story for Cows, with prices sitting a few cents below the February high.
Figure 1 shows the lamb export volumes for 2017 sitting at 49% above the seasonal five year average levels for this quarter. Volumes increased again for March to 4,477 tonnes swt, just shy of the record high in June 2016. This is deviating from the usual March drop that occurs towards the seasonal trough.
To delve a little deeper into the question, in Figure 3 we have lined up the change in mutton and lamb export volumes from 2015 to 2017 for the season so far. Interestingly, we can see that where mutton volume has dropped off very closely aligns with increases in lamb consignments. Particularly in the months of January and March, there is a near exact shift in volumes from the one sheep meat to the other.
Our current sheep meat export prices may also be playing a part in the changing trade trends within China. Over the last season, the basis of the spread between mutton and lamb has narrowed significantly. In 2015, we had the price of mutton at around 50% of lamb but now we’re seeing the mutton price close in.
Figure 1. shows the rising trend over the last few weeks in East coast lamb throughput with a further 21,000 head added to yarding numbers this week to reach just short of 204,000 head. Since the recent dip in mid-March, lamb throughput has risen 35.4% in response to the firmer prices on offer at the saleyard.
In US$ terms, lamb prices have reached a seasonal peak at 513US¢/kg cwt, this is only the second week it has been above 500US¢ this year – Figure 3. Despite the record local prices for Aussie lamb being received by producers at the moment lamb prices in US terms have been a lot higher. During the 2010/11 season our lamb in US terms reached toward 675US¢/kg cwt so at current levels it is still 24% off its all-time highs.
The EMI closed down 43 cents in A$ terms at 1449¢ and also softer in US$ terms at 1101¢, down 50¢. In Fremantle, the later selling time and strong finish to the week resulted in an indicator less effected with a 29¢ decline in A$. terms for the week – Fig 1.
The reversal on Thursday saw the EMI gain 2 cents, however the WMI finished plus 19 cents for the day with reports of a strong finish to the market. Gains were across the Merino combing section, 18 MPG plus 16 and 21 plus 19 cents in Melbourne.
It seems that the falls on Wednesday encouraged exporters to book business and when they returned on Thursday to a reduced offering we saw the resultant rally. This caused the pass-in rate to fall compared to Wednesday, in Fremantle for example the first day a total of 29% was passed-in, however the next day this rate fell to 11.4%. Also impacting was the withdrawal of 20% in reaction to the price falls of the previous day.
Wool producers are not in any hurry to sell wool if the market retraces like this week, and conversely, they have been keen to sell wool as the market rallied.
In nautical terms, dead calm is the absence of wind or waves. It feels that way at the moment in the grain trade. The market has largely drifting with little in the way of wind or waves to give momentum in any direction. Will the USDA & IGC report provide some wind behind our sails?
Yesterday the International Grain Council (IGC) released their global crop forecasts, and although not particularly positive for prices, does provide some hope for the future. The report indicates that in 2017/18 global wheat production would fall from 745mmt to 735mmt, with end stocks to be around 484mmt versus 513 this year. It has to be tempered that this would still remain the 2nd highest stocks in history. However, it does start to show a depletion in global stocks.
Anecdotal reports of revived restocker activity within the young cattle market suggest that recent rainfall may have given a boost to prices along the Eastern seaboard. But does the underlying data for the Eastern Young Cattle Indicator (EYCI) show this to be the case and if so, is it evenly spread across the Eastern states? Is just a simple glance at the broad restocker activity all that is needed to give a robust picture of the market or is it central to beef analysis to delve a bit deeper into the figures? 
Using the underlying EYCI data we are also able to filter and analyse specific components of the broader EYCI market to determine if the robust restocker demand this season is stemming from a particular region. Separating EYCI restocker purchases into northern and southern saleyard groups, with Dubbo saleyard marking the mid-way point between North and South, we can assess how evenly distributed the restocker activity is along the East coast.
Taking a look at the price spread patterns for Southern and Northern sale yards we can see that there are some stark differences between restocker activity in each region. Figure 3 shows that Southern restockers have been happy to pay a premium spread above the EYCI trending along the top of the normal seasonal range and peaking last week at 8%, equivalent to 687¢/kg cwt. In contrast, Northern restockers are paying a premium spread in the lower end of the normal range and below the seasonal average level for this time of year at 2%, equivalent to 649¢/kg cwt – figure 4.
The above average volumes of cattle being purchased by restockers in both the North and South certainly shows the intention to rebuild the herd is evident across the Eastern seaboard. Although, considering the magnitude of destocking experienced in the North during the large turnoff during the 2013-2014 seasons the current volume of cattle going to restockers in Northern saleyards isn’t much dissimilar to levels seen last season.
Lamb prices continued to charge higher this week, despite stronger yardings. The higher prices are showing no signs of dampening demand, with some categories hitting new highs, while others eased off this week.
It was NSW which drove the ESTLI higher this week, as the 25¢ rise saw a new record price of 659¢/kg cwt. Light lambs in NSW saw a 42¢ rise to be the highest indicator in the land, at 673¢/kg cwt. By contrast, light lambs in SA fell 58¢ to sit at a paltry 539¢/kg cwt. For a 17kg cwt lamb that is a $23/head difference.
The rain from Cyclone Debbie shouldn’t impact the lamb market too much, but it won’t hurt. Lamb supply out of northern NSW is likely to be disrupted, so we can expect some solid support for lamb markets. Some forward contracts for trade lambs have been floating about this week at 670¢ for May.
Figure 1 highlights the rainfall pattern across the nation this week with the impact of cyclone Debbie clearly evident. Rainfall further south also present and helping to lift restocker spirits in the southern regions as outlined in the 
The national cattle indicators mostly higher this week with 2-4% gains recorded for all categories except heavy steers. The national heavy steer indicator dropping 3.4% on the week to close at 294¢/kg lwt. The Eastern Young Cattle Indicator (EYCI) mirroring the broader market up 4.4% on the week to close at 649.75¢/kg cwt. Young cattle prices continuing to find support from restocker buying and the added benefit of higher beef export prices, with the 90CL frozen cow up slightly – figure 3.