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Tuesday, June 30, 2015

Global grain market rally pushes local prices to 5-year highs

By Augusto Semmelroth  |  Source: CME, ASX, ICE

International grain markets have rebounded from five-year lows amid recent weather fears in North America and Europe. CME Wheat has managed to break through a five-month trading range with prices rallying 20% over the last 10 days. Locally, wheat and barley markets are moving towards a five-year high as higher international prices, a depressed A$ and strong basis sees ASX Wheat Jan-16 futures above the A$325/t mark.

Key points:

  • International wheat and corn markets have struggled to make a comeback after reaching five-year lows this year on the back of comfortable global supply.
  • That said, this scenario has shifted considerably in the last week or so as the US winter wheat harvest is delayed by an overly wet weather and production/quality downgrades.
  • As a result, CME Wheat Dec-15 futures have rallied US100¢, or 20%, over the last 10 days to see prices approach US600¢/bu for the first time since January.
  • In percentile terms, international wheat markets have moved back towards their 40th percentile after spending most of the last five months confined between the 5th and 30th percentile.
  • Corn has also moved higher on the back of rising wheat prices, albeit by a more modest 10% over the last week or so. This puts spot prices at the 30th percentile and the CME Dec-15 contract close to 40th.
  • When looked in A$ terms, international wheat markets are faring much better at around the 80-85th level.
  • Locally, ASX wheat and barley markets have also rallied as a result of firmer international prices. ASX Jan-15 Wheat has gained around $30 in the last two weeks to $327/t this Monday.
  • With El Nino fears still priced into the market (strong local basis) and an A$ below US80¢, spot and new crop local prices are now faring close to their 5-year highs.      
  • On the oilseed front, canola markets continue their recovery as the Canadian crop continues to be downgraded. Since late April, the ICE Canola Jan-16 contract has gained CA$82, or 18%, to reach a 22-month high of CA$524/t this Monday.
  • In A$ terms, ICE Canola Jan-16 has posted similar gains and is now quoted close to A$560/t (73rd percentile level). 

Read more about how to interpret and use percentiles

Mecardo information is provided to assist in your marketing decisions. It contains a range of data and views on the current market. It is not intended to constitute advice for a specific purpose. Before taking any action in relation to information contained within this report, you should seek advice from a qualified professional. The information is obtained from a variety of sources and neither Mecardo nor Ag Concepts Advisory will be held liable for any loss or damage whatsoever that may arise from the use of information or for any error or mis-statement contained in this report. 

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