Basis Commodities – Australian Crop Update – Week 27 2022

Market Update

Australian cash values continue to slide with further sharp falls in U.S. and Matif futures after Russia unveiled changed to its grain export tax. The Australian dollar has also aided competitiveness with its weakness against the USD but for old crop at least, cash wheat is struggling to compete with EU new crop values in the international market.
As an observation, it is interesting to see cash values continue to remain disconnected from U.S. futures and this has created value for basis buyers both on the way up, when we saw basis drop to historically low levels, and now on the way down, hopefully with an option strategy in tow to protect the cash purchase.

The bottom line is that U.S. wheat futures have been incredibly volatile, but I would argue, haven’t accurately reflected where the global cash markets have been for a while now. I suspect consumers are going to be reminded of that when they try to secure supplies into Q3 and Q4.

It’s been the busiest week for export stem additions in Australia since mid-May. Close to 700KMT of wheat was put on the stem in the past week, 160KMT of barley, 100KMT of canola as well as some oats and pulses. The CBH export capacity auction was well subscribed with, encouragingly for consumers, an increasing number of export participants. We now look forward to Viterra’s export capacity going under the hammer next month.

From a weather perspective, the Bureau of Meteorology (BOM) continue to predict July to September rainfall is likely to be above median for the northern half of Australia, northern and eastern South Australia, New South Wales, and northern and central Victoria.

National crop conditions have improved over the past month. Western Australia has been picking up regular showers and conditions are above average. South Australia received a late break (planting/germination rain) at the end of May, but June has been favourable and crops are catching up. Victoria is excellent and this pattern extends into southern New South Wales. Central and northern New South Wales is patchier, and we have lost acres to flooding and farmers not being able to get into the paddocks to plant despite a drier June.

Ocean Freight

Rates continue to be put under pressure by an overwhelming level of supply and at last some weakening in bunker prices in the Pacific.

AUD – Australian Dollar

The Australian dollar extended the recent downturn, marking fresh 2-year lows below US$0.68 amid sustained recession fears and a broadly stronger USD.

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