19th Apr 2013, by Agrimoney
Cargill's Australian grain trading business, AWB, revealed that it had accelerated the pace of wheat sales in expectation of a decline in prices, warning of a "not bullish" market outlook.
AWB, which Cargill bought last year, said it was on track to finish sales of grain held in its 2012-13 wheat pools in November, "well ahead of schedule", and only a little over a year after opening them.
"Sometimes, pools can run for 18 months, until April," AWB spokesman Peter McBride told Agrimoney.com.
Indeed, AWB is still wrapping up its 2011-12 pools, for which payouts to farmers are expected to be finalised next week.
Lower deliveries
The fast pace of sale of the 2012-13 crop was in part a reflection of a smaller volume of wheat submitted to AWB's pools, a drop Mr McBride attributed to high cash market prices at the time of harvest, late last year.
"When you have high cash prices, farmers are more likely to sell for cash than put grain into pools," he said.
"When you have prices over Aus$300 a tonne, it makes sense at that level to sell some of your crop for cash."
AWB, Australia's former wheat export monopoly, and CBH, which has a stranglehold over marketing in Western Australia, the country's top grain growing state, historically operate the largest pools, which can exceed 2m tonnes.
Mr McBride declined to comment on the size of AWB's pool this season.
Ahead of the pack
However, sales had also been accelerated for fear of sizeable crops from the likes of the European Union, the former Soviet Union and North America replenishing supplies, and so taking prices lower.
"We also acted to accelerate the programme to market volumes before the northern hemisphere crop comes onto the market," Mr McBride said.
"Once the northern hemisphere crop arrives, it can have an effect of lowering prices, especially if there is a good harvest. And signs are not too bad this time."
'Not bullish'
Many commentators are forecasting a sharp rise, in particular, in former Soviet Union production this year, following drought which curtailed output last year from a region which is a keen competitors on export markets.
Rabobank this week forecast the Russian crop rebounding 14m tonnes to 52m tonnes, although Moscow-based analysis group Sovecon cautioned over some deterioration in winter grains, which it rated at 95.1 points on a condition index, below an average of 100.
AWB's Richard Williams said: "The market continues to maintain a degree of risk premium in prices until we get a clearer picture of the northern hemisphere production.
"However, unless crop problems develop somewhere globally, the outlook for Australian wheat prices is not bullish.
"We continue to look for pricing opportunities internationally and domestically in a weather driven market to lock in good sales."
Early payout
The accelerated sales mean farmers who have signed up to AWB pools will obtain payment faster than had been expected, with 35% of the estimated total payout made already, compared with the 15-30% which had been pencilled in.
The group kept its pool payment estimates unchanged, at Aus$386 a tonne in Western Australia for prime noodle wheat, prized by Asian buyers, down to Aus$293 a tonne for feed in the south.
For 2011-12, the top price, of Aus$402 a tonne, was for high-grade durum wheat, with 13% protein, in eastern Australia, with Western Australia feed faring worst, at Aus$207.50 a tonne.
Cargill's Australian grain trading business, AWB, revealed that it had accelerated the pace of wheat sales in expectation of a decline in prices, warning of a "not bullish" market outlook.
AWB, which Cargill bought last year, said it was on track to finish sales of grain held in its 2012-13 wheat pools in November, "well ahead of schedule", and only a little over a year after opening them.
"Sometimes, pools can run for 18 months, until April," AWB spokesman Peter McBride told Agrimoney.com.
Indeed, AWB is still wrapping up its 2011-12 pools, for which payouts to farmers are expected to be finalised next week.
Lower deliveries
The fast pace of sale of the 2012-13 crop was in part a reflection of a smaller volume of wheat submitted to AWB's pools, a drop Mr McBride attributed to high cash market prices at the time of harvest, late last year.
"When you have high cash prices, farmers are more likely to sell for cash than put grain into pools," he said.
"When you have prices over Aus$300 a tonne, it makes sense at that level to sell some of your crop for cash."
AWB, Australia's former wheat export monopoly, and CBH, which has a stranglehold over marketing in Western Australia, the country's top grain growing state, historically operate the largest pools, which can exceed 2m tonnes.
Mr McBride declined to comment on the size of AWB's pool this season.
Ahead of the pack
However, sales had also been accelerated for fear of sizeable crops from the likes of the European Union, the former Soviet Union and North America replenishing supplies, and so taking prices lower.
"We also acted to accelerate the programme to market volumes before the northern hemisphere crop comes onto the market," Mr McBride said.
"Once the northern hemisphere crop arrives, it can have an effect of lowering prices, especially if there is a good harvest. And signs are not too bad this time."
'Not bullish'
Many commentators are forecasting a sharp rise, in particular, in former Soviet Union production this year, following drought which curtailed output last year from a region which is a keen competitors on export markets.
Rabobank this week forecast the Russian crop rebounding 14m tonnes to 52m tonnes, although Moscow-based analysis group Sovecon cautioned over some deterioration in winter grains, which it rated at 95.1 points on a condition index, below an average of 100.
AWB's Richard Williams said: "The market continues to maintain a degree of risk premium in prices until we get a clearer picture of the northern hemisphere production.
"However, unless crop problems develop somewhere globally, the outlook for Australian wheat prices is not bullish.
"We continue to look for pricing opportunities internationally and domestically in a weather driven market to lock in good sales."
Early payout
The accelerated sales mean farmers who have signed up to AWB pools will obtain payment faster than had been expected, with 35% of the estimated total payout made already, compared with the 15-30% which had been pencilled in.
The group kept its pool payment estimates unchanged, at Aus$386 a tonne in Western Australia for prime noodle wheat, prized by Asian buyers, down to Aus$293 a tonne for feed in the south.
For 2011-12, the top price, of Aus$402 a tonne, was for high-grade durum wheat, with 13% protein, in eastern Australia, with Western Australia feed faring worst, at Aus$207.50 a tonne.
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