AWB 2018/19 Harvest Pool December EPR (Market Update)

It has proved another volatile harvest market with wheat prices ranging $50/tn+ in SA & $25/tn+ in WA. On days when consumers step back we have seen prices fall sharply as growers are quick to get coverage. Our pool management team have been careful not to chase the market lower as we feel that wheat prices will be relatively supported in the long term, especially in comparison to barley and canola prices. At the same time the pool is committed to careful price participation, and we need to protect equity by selling grades and locations when they show value. At the time of this update we are leaving our 2018/19 Harvest Pool Returns (EPRs) unchanged. 

 

Market Insights

• Australian wheat is currently pricing international demand out of WA, it is a question of how much volume we can price at these levels and whether the East Coast consumer needs to discourage these flows by bidding the price up.

• The new crop Sorghum price is erratic as it continues to trade weather forecasts. It is particularly important this year as the large planted area has the potential to displace large volumes of barley and wheat feeding. 

• There seems to be no relief to the strained trade relations between US and China. This will continue to drag on global commodity markets, but if things are unexpectedly resolved, we could easily see wheat futures rally to US$6/bu on the positive sentiment. 

Key Activity

• We have started our Harvest Pool program by selling grades we feel over-valued, and today we have sold close to 12% of current receivals.

• March 19 CBOT futures appear to have bottomed in the short term trading down to close to $5/bushel in November. As a result US wheat once again finds itself price competitive, winning business into Iraq.

• Currently we like the exposure to US futures, particularly when exporting origins Argentina & the Black Sea are also rallying, signalling they do not have much capacity to increase exports. 

 

If you would like further information about our pools returns, please refer to the pool returns calculator. 

The Harvest Pool is AWB’s post-harvest pool designed to commence marketing from the time farmers begin delivering into the program. The pricing mandate in place for the Harvest Pool is designed to ensure that the pool can participate in market opportunities from harvest and through until October prior to the following harvest. The Harvest Pool objective is to provide market participation across the marketing window and works to protect and improve pool returns through active management of physical, futures and currency components.