MARKET WIRETAKE HOMES

GM CANOLA DATA DASHBOARD

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

2019/20 EXPORT MATRIX (‘000MT) GEELONG/KWINANA PRICE

PRODUCTION MATRIX TOTAL CANOLA HECTARES

GM CANOLA MARKET REPORT

GM SITE BID SHEET

PORT EQUIVALENT BID SHEET

GM CANOLA MARKET REPORT

LOCAL MARKETSWidespread rain for much of the SA, VIC and NSW canola growing belts has helped stabilise crop conditions and production forecasts in those regions. However, WA and Central NSW remain a concern and we continue to see area lost in those regions. Of particular concern is the WA conditions, given the relative size of the WA crop as a percentage of Australian production. Therain forecast remains dry so we can expect to see production estimates continue to decline in WA in the coming weeks.

WA: WA prices have firmed on the back of the global price rebound and the dry conditions. We are pushing close to $600 FIS for non-GM canola, GM spreads continue to track the Europe-Canada price spread (Matif-Winnpeg), with GM stabilising at $70 discount to non-GM. Old crop bids remain at full carry from new crop, circa $565 FIS. Export pace from the west has subsided, with most of the expected export business now done. However, we are showing slow transshipment pace to the east with only 70 kmt of the 170 kmt forecast complete so far. With the market at full-carry in the west, it doesn’t have much of a negative bearing on the prices in WA, but it could leave a hole in the east coast if it doesn’t get executed or prices don’t adjust to justify the shipment from WA to NSW.

NSW/VIC: East coast markets remain steady to slightly firmer in new crop and softer in old crop. Old crop is some $10-15 softer with minimal trade. This is in sympathy with the improved crop conditions and certainly does not encourage any further shipments from WA to either NSW or VIC at the current price relativities. New crop prices are following the global rebound a fraction, with the offset coming from the rain. New crop VIC prices $5 higher to $575 port. The focus in the coming weeks is twofold, how to solve the old season imbalance and where the next round of rain comes, in particular for crush deficit areas of Central NSW.

GLOBAL MARKETSAfter a couple of months with more of the same, plenty is happening in the global space throughout May. As we mentioned in the last report, May is a key month where weather starts to make its stamp on global production. We are seeing this happen all around the globe. In Canada, we have some apprehension with dry weather and early frosts, concerning enough that some analysts are pulling their crop estimates back from 20 mmt towards 19 mmt and even lower. It’s too early for us to get that far south, but certainly losing some production in Canada.

In Europe, conditions have stabilised thanks to recent rains, however the damage was done and it seems area in Germany, in particular, was lower than expected. As a results, estimates are generally sub 18 mmt in Europe.

In Ukraine, conditions are the opposite. Minimal winter kill and benign conditions through spring suggest a record crop of 3.6 mmt is still on the cards and will go part of the way to help the EU deficit.

In the US – it has all been about the wet weather and unprecedented planting delays. Something that has been front and centre in the corn market, allowing for a 50c rally, but as time ticks by and corn crops don’t get planted, it is also now getting serious enough that we may not see bean acres go in the ground.

China hasn’t missed out either. The trade deal with the US falling through, US suggesting bailouts which US soybean farmers will be major beneficiaries of, China African Swine Flue and now Armyworm infestations in China.

CASE STUDY – Take homesThe doors are sliding, lets recap the main take homes for the month ahead and what that means for Canola growers in Australia.

1) US bean acres – The usual play is if we don’t get the corn acres in then they all go to beans, which is bearish for beans and canola. However, this situation is so bad and so late, that we are no longer at risk of seeing bean acres explode. They are still likely to hold firm, with the US government support and extra time to plant, but with low prices some farmers are not growing anything. Overall, the short-term risk to beans is higher prices with this weather, which will drag canola with it. Be aware though that the US farming model is complex, politics can flip this around and the farmer can plant 50% of their crop in a week. Expect volatility to continue.

2) China-Canada trade discussion – Nothing new here and unlikely to be for the coming months. There is a Canadian election in October this year, both sides seem pretty adamant about not caving into China and remain strong supporters of the US. Over the next month, don’t hold your breath for any positive results that see a spike in prices.

3) US-China trade deal – Didn’t happen so US has lots of beans and is supporting the farmer, which unintentionally may cause farmers to plant more. This is offset by planting delays, but it’s not bullish.

4) EU and Aussie production vs. Ukraine – Still holding on but the needle is bending backwards, this is putting more and more pressure on supply and will continue to see EU and Australia basis remain firm. The trend there continues to be higher in the short-term, until we get meaningful rain in WA.

Local market update

Widespread rain for much of the SA, VIC and NSW canola growing belts has helped stabilise crop conditions and production forecasts in those regions. However, WA and Central NSW remain a concern and we continue to see area lost in those regions. Of particular concern is the WA conditions, given the relative size of the WA crop as a percentage of Australian production. The rain forecast remains dry, so we can expect to see production estimates continue to decline in WA in the coming weeks. WA: WA prices have firmed on the back of the global price rebound and the dry conditions. We are pushing close to $600 FIS for non-GM canola, GM spreads continue to track the Europe-Canada price spread (Matif-Winnpeg), with GM stabilising at $70 discount to Non-GM. Old crop bids remain at full carry from new crop, circa $565 FIS. Export pace from the west has subsided, with most of the expected export business now done. However, we are showing slow transshipment pace to the east with only 70kmt of the 170kmt forecast complete so far. With the market at full-carry in the west, it doesn’t have much of a negative bearing on the prices in WA, but it could leave a hole in the east coast if it doesn’t get executed or prices don’t adjust to justify the shipment from WA to NSW.NSW/VIC: East coast markets remain steady to slightly firmer in new crop and softer in old crop. Old crop is some $10-15 softer with minimal trade. This is in sympathy with the improved crop conditions and certainly does not encourage any further shipments from WA to either NSW or VIC at the current price relativities. New crop prices are following the global rebound a fraction, with the offset coming from the rain. New crop VIC prices $5 higher to $575 port. The focus in the coming weeks is twofold, how to solve the old season imbalance and where the next round of rain comes, in particular for crush deficit areas of Central NSW.

Global market update

After a couple of months with more of the same, plenty is happening in the global space throughout May. As we mentioned in the last report, May is a key month where weather starts to make its stamp on global production. We are seeing this happen all around the globe. In Canada, we have some apprehension with dry weather and early frosts, concerning enough that some analysts are pulling their crop estimates back from 20 mmt towards 19 mmt and even lower. It’s too early for us to get that far south, but certainly losing some production in Canada.

In Europe, conditions have stabilised thanks to recent rains, however the damage was already done, and it seems area in Germany, in particular, was lower than expected. As a result, estimates are generally sub 18 mmt in Europe.

In Ukraine, conditions are the opposite. Minimal winter kill and benign conditions through spring suggest a record crop of 3.6 mmtis still on the cards and will go part of the way to help the EU deficit.

In the US – it has all been about the wet weather and unprecedented planting delays. Something that has been front and centre in the corn market, allowing for a 50c rally, but as time ticks by and corn crops don’t get planted, it is also now getting serious enough that we may not see bean acres go in the ground.

China hasn’t missed out either. The trade deal with the US falling through, US suggesting bailouts which US soybean farmers will be major beneficiaries of, China African Swine Flu and now Armyworm infestations in China.

Take home messages

The doors are sliding, lets recap the main take homes for the month ahead and what that means for Canola growers in Australia.

1. US bean acres – The usual play is if we don’t get the corn acres in then they all go to beans, which is bearish for beans and canola. However, this situation is so bad and so late, that we are no longer at risk of seeing bean acres explode. They are still likely to hold firm, with the US government support and extra time to plant, but with low prices some farmers are not growing anything. Overall, the short-term risk to beans is higher prices with this weather, which will drag canola with it. Be aware though that the US farming model is complex, politics can flip this around and the farmer can plant 50% of their crop in a week. Expect volatility to continue.

2. China-Canada trade discussion – Nothing new here and unlikely to be for the coming months. There is a Canadian election in October this year, both sides seem pretty adamant about not caving into China and remain strong supporters of the US. Over the next month, don’t hold your breath for any positive results that see a spike in prices.

3. US-China trade deal – Didn’t happen so US has lots of beans and is supporting the farmer, which unintentionally may cause farmers to plant more. This is offset by planting delays, but it’s not bullish.

4. EU and Aussie production vs. Ukraine – Still holding on but the needle is bending backwards, this is putting more and more pressure on supply and will continue to see EU and Australia basis remain firm. The trend there continues to be higher in the short-term, until we get meaningful rain in WA.