Global Bears Continue to Weigh on Markets

by Bridie George

With planting underway across the east coast, attention now turns to the arrival of follow-up rain to assist with crop establishment and building further moisture for those yet to get the planter out of the shed. With an improving winter crop outlook for home soils and the latest United States Department of Agriculture World Supply and Demand Estimates delivering a bearish sentiment for global markets, domestic prices remain under pressure for both new and old crop.

The USDA’s numbers were burdensome on the supply side, with a 6% year-on-year increase for world wheat production and both old and new crop stock numbers in the US climbing. Predicted increases across the other major exporters; Argentina, Australia – pegged at 22.5 million tonnes, Canada, Europe and Russia contribute to a new record high of 293 million tones for new crop wheat world ending stocks, up approximately 20 million tonnes from pre-report estimates. Conditions are currently looking generally favorable across the board for the US, as well as the Black Sea and European crop production areas.

It also appears that a resolution to the US/China trade war is riding further into the sunset with US President Donald Trump last week delivering some tweets alluding to being in absolutely no hurry to settle the trade war and proceeding to levy more extensive tariffs, to the tune of a 15% increase on $US200 billion worth of Chinese imports. This is obviously not good news for US soybean stocks which are already very heavy on the balance sheet and are relying on China to return to the buying party to shed some volume.

For the bulls, the latest Commitment of Traders report showed that funds hold sizeable shorts across all grains, which could be the major player in any short-term market spark. Domestically we are also seeing dry conditions on the West Coast which is seeing some growers be somewhat conservative with their planting decisions, with some early predictions leaning towards a below-average season and resulting in a firming market on that side of the country.

The next month will be pivotal in establishing the east coast winter crop, with the 15 day outlook alluding to some moisture on the horizon which could see planters returning to a 24 hour roster.

Canola has become a notable victim of this year’s plant, with estimates of area planted back as much as 50% through much of central and southern NSW. However on the back of the weekend’s global news, local track values opened the week by falling $2 in both the Porta Kembla and Newcastle zones.

In the northern markets sorghum saw a $5 jump to the upside in the Newcastle zone on Monday, regaining some ground from the $10 losses last week. Brisbane zone values stayed steady and are likely to remain in the status quo for the time being unless there was some renewed interest from China to buy a significant volume. Current pricing levels could lend themselves to exports should this happen, and is a plausible option given current tensions between China and the US, their most recent origin of choice to supply the Baijiu market.