Grain Wrap | Hot cotton redirects activity

Plenty of cotton farmers are busily trying to keep the water up to their crops to keep the plants cool.

WE’RE on the cusp of Christmas, and the heat is right on schedule. 

All states along the east coast have had a string of hot weather during the past fortnight, with most states having recorded at least a couple 40 degree days. 

Plenty of cotton farmers are busily trying to keep the water up to their crops to keep the plants cool. 

And for those that operate in both summer and winter crops, this may put the brakes on the marketing focus while the cotton demands the attention.

Markets have remained subdued leading into Christmas, after the retreat of all grain and oilseed markets over the past fortnight. 

The torrential rain that was forecast over the entire east coast largely missed the mark in the Western parts of Victoria, however large parts of southern NSW and north-eastern Victoria, were still hit very hard. 

Post the rain event, many would believe this to trigger a lift in high-protein grades across NSW to satisfy domestic millers, in contrast it has had the opposite effect.

Downgraded high-protein wheat (AH9), is used as a direct substitute for H2 or Australian Prime Hard (APH2), and at a $40 to 50  a tonne discount they will now focus on buying as much of this downgraded wheat as possible. 

Because of this, we are unlikely to see any short term squeeze in the high-protein market. 

However, if you are prepared to hold into 2018 then we may see stocks tighten depending on how much downgrading and how much high-pro feed wheat the milling companies are able to procure.

The other market that has seen a weakening since harvest is canola. 

Only a month ago we hit a top price delivered Newcastle of $593/t, today we sit at $550/t delivered for the same market, which is a big hit for anybody with tonnes still sitting in the silo. 

Personally I don’t think there will be a big recovery in the oilseeds market in the short term, everything globally is pointing to large oilseeds stocks for next year. 

A large Canadian canola production, large soybean crops in the US and South America and also the Australian canola picture becoming more and more visible. 

The same principal remains with canola, if you are happy to hold until next year when traders chew through the stocks they have bought at harvest, we might see localised shorts you can capture. 

The key to selling these shorts is being able to get the most bang for your buck now that we may have seen the canola high of this year slip through our fingers.

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