MARKET WIREIS THERE STILL LIFE IN THE OLD CROP MARKET?

GM CANOLA DATA DASHBOARD

EU-CHINA PRICES (A$ TRACK EQ.) KWINANA GM SPREAD

2018/19 EXPORT MATRIX (‘000 MT) GEELONG/KWINANA PRICE

PRODUCTION MATRIX TOTAL CANOLA HECTARES

GM CANOLA MARKET REPORT

GM SITE BID SHEET 2018/19

PORT EQUIVALENT BID SHEET 2018/19

*NB Wagga Market Zone prices are for delivery in February, 2019

GM CANOLA MARKET REPORT

LOCAL MARKETSOver the last week we have started to see some life come back into the domestic canola market. Public grower bids continue tolanguish, however there are signs in the trade markets that this will pick up and we will start to see convergence between grower and trade numbers. Following their expansion project, Graincorp are running at more than 1000 mt a day, which obviously puts a dent in any carry over stock or harvest purchases pretty quickly. As such, we are seeing both Graincorp and AWB work around the edges a little more as they look forward and try to procure seed for the remainder of the season. Crush margins are lean, but there is still a strong incentive for crushers to keep crushing rather than to go into a shut-down. If margins compress another $30-40 then maybe that conversation will happen a bit more.WA: Over the last fortnight WA prices have been nominally back $5-10 to $585 FIS for non-GM with minimal new business getting done. The focus seems to be around executing the existing sales on the books and shipping the last tonnes of non-GM out the door. The much higher market share of GM in the west this year is working into export and transshipment homes, however the larger supply is keeping the spread at around $45 below non-GM. The higher oil content in the west is again providing more marketing options, with exporters and east coast crushers being able to take advantage (given the lack of oil in the east coast seed). New season prices are slightly softer, coming back from $595 FIS to $585 for non-GM, with GM spreads starting out where they finished off at $40.NSW/VIC: East coast markets are on the rise and demand is starting to pick up. Grower bids remain around the $560s for site in the south for non-GM and crusher bids have moved $5 higher to around $605 delivered. Trade markets are nominally $10 firmer at the moment. GM spreads are softening due to the competition from higher oil WA seed and a lack of demand for the lower oilGM seed into the export market. This may change if we see more of the southern crushers look to switch into a GM crush given lack of general seed supply, but for now it looks like the spread may widen from $30, out to $40. The new season market is stillpoorly defined, some bids are being posted at around $545 port, but given where WA is pricing, realistically we should be seeingprices closer to $575-580 port, especially given the seasonal uncertainty, record crush demand we will have and lack of carry-over stock.

GLOBAL MARKETSGlobally the soybean market continues to find some support due to the artificial buying coming out of China on the back of the trade discussions. China is attempting to appease the US by committing to volume purchases of US soybeans, despite the fact the US is no longer the cheapest product on offer in the market. The March 1st “deadline” before a resumption in tariffs occurs is fast approaching and it is expected that when China returns from its new year holiday next week, we will see more focus and press around the issue again.

The recess in the government shut-down is due to expire on the 15th of February, and unless there is some middle ground made (which is becoming more likely) on the immigration policies, then shut-down will return. We have been able to squeeze in two months worth of USDA WASDE reports, however, the market was generally disappointed with the lack of volatility in the numbers reported. In the meantime we continue to see old export and CFTC data filter into the market, we are not expected to catch up for another 10 days (assuming the government stays open). So until then, more uncertainty in the fundamentals.

Further still on politics, Europe is yet to publicly announce what their proposed minimum price is for Argentine Biofuels (to go with the stated 1.2 mmt annual quota). This is a big factor that will set the scene once more for the EU rapeseed market. Whilst in Canada, recent delays and issues that have restricted the exports of Canadian canola seed to China have been resolved. Logistics in the interior of Canada are slow due to weather and Canadian exports remains well behind pace, which is building stocks further.

CASE STUDY – Life in the old dog?“More enquiry in the eastern states is suggesting there might be some life in the old crop market.”

Whilst there has been a reasonable amount of cash-flow selling from farmers that have fertilizer bills and fertilizer back-freight to consider, we are starting to see more competition from the consumers in the eastern states. By more we mean some, given the overwhelming lack of liquidity in the market over the past two months.

We are seeing signs that finally crushers are starting to work through their inventory left over from last season and from early season purchases. Since harvest, farmers have been reluctant to come to the market at the prices on offer (falling back to near WA levels). With the season remaining dry, farmers are further incentivised to hold back from the market, selling grain and holding canola as some form of “drought” hedge.

These signs are showing up most strongly in the track and trade markets. Bids for volume at some $10 above where grower bids are suggest competition is starting to ramp up and we will see some more transparency and liquidity in grower land shortly. Likely that volume offers from growers will seek better than bid sheet prices in this type of environment.

The catch will be that if, or when, we start to see these higher prices flow into the grower bids, what will the grower do? Do they get high hopes of $650-700 prices, or take what is on offer? No doubt, some will shift the goal posts in a rising market, as it so often happens, however we must remember that whilst local supply is limited, WA GM is still not far from pricing into the east and crushers don’t have endless pockets, instead they will make decisions about shutting down early for maintenance.