Grain trade strength in dollar drop

A SHARP drop in the Aussie dollar combined with persistently solid global demand and so-far disappointing storm rain in Southern Queensland and Northern NSW has kept grain markets well supported.

For wheat, NTP bids have generally kicked A$5-6/MT in the last week depending on port zone, with sorghum rallying $6-10/MT and chickpea bids up $7-9/MT.

Barley has rallied about $5/MT in Northern NSW and Southern Queensland.

The Aussie dollar has been a key contributor to this price strength, with its two cent fall over the last week adding between A$4-6/MT to Aussie grain values depending on underlying price and whether the grain is destined for domestic or export channels.

According to the shiny bum sector, the resultant drop in the AUD/USD to sub 0.9200 confirms that the downtrend the currency has been in since April remains "technically intact", leaving the door open for a potential drop toward the August lows below 0.8900.

Currency aside, it appears that global demand remains solid across the grains complex.

Since the start of October, weekly US corn sales have averaged a massive 1.5 million MT per week (old and new crop combined).

Meanwhile, export demand for European and Black Sea grain is also strong, with German July-September grain exports of 3.6 million MT up 44pc on last year, and Ukrainian July-November grain exports of 12.8 MMT 16pc stronger than year ago figures.

Clearly, US and Black Sea corn values at close to US$240/MT C&F North Asia are attracting strong demand from feed millers and consumers, while milling wheat continues to find good consumptive demand.

For example, Iraq's recent tender saw 150,000MT of Canadian wheat sell at US$347.75/MT and 50,000MT of Australian wheat sell for US$349.29/MT C&FO.

Meanwhile European contacts suggest Moroccan buyers have been lining up daily for French Wheat scheduled for arrival from January 1 when the country will suspend import duties.

There is also some optimism that demand could be bolstered as a result of the weekend deal between the P5+1 countries (USA, Britain, China, Russia, France and Germany) and Iran, whereby they agree to limit their nuclear program in return for lighter economic sanctions.

While this deal would obviously have some relatively "micro" impacts on potential Iranian wheat import demand, the larger influence would be on macroeconomic sentiment and the deal's potential positive geopolitical implications for the region.

Closer to home, rainfall totals have remained patchy and - with the exception of parts of Central Queensland and some South Eastern Downs locations - disappointing for summer cropping areas. There has been and will still be more early sorghum planted, but it's too early to say whether it will be sufficient to bridge the supply gap that looks likely to bite some time in early to mid-February.

That said, from a domestic demand perspective, the Australian Lot Feeders Association September quarter cattle on feed numbers suggest there has actually been a national 10pc reduction compared to the June quarter, with 787,000 head now on feed.

Most of this reduction was in NSW, but the Queensland figures of 504,078 head were still off almost 4pc compared to the June quarter.

Topics:  commodities grains matt schmerl