Mar 14, 2022

Basis Commodities – Australian Crop Update – Week 11 2022

Market Update

It’s been an interesting week for Australian domestic markets. US futures fell by 10-15% before Friday’s modest bounce, but local cash markets were decidedly unmoved. Australian exporters that were short against nearby positions held bids, despite the decline in US futures and they were joined by domestic shorts who, until the invasion, were comfortable with limited cover on account of the record crop size.

Exporter bids for barley were higher across all port zones and this extended into the 2022/23 bids which emphasised what we have known for a while now – the disconnect between US futures and local cash markets. This disconnect has been evident for the past 18 months with the extreme weakness in basis and this may provide some longer-term opportunities as we move forward, although for now, caution is required.

It’s unlikely the Ukraine war will be resolved quickly. There may be a ceasefire, but removing sanctions takes a lot longer than putting them on and global buyers are now extremely sensitive to securing their supply chains given the reduced origination options.

For now, the market has covered what they can ahead of the northern hemisphere new crop inverse. The EU, we are told, is close to being sold out. Argentina is also down to fumes and although Indian exports will continue, it has its limitations from a phytosanitary and volume perspective. Australian export capacity is now largely booked through July and some in Southeast Asia have extended coverage into August/September and beyond.

Bureau of Meteorology – http://www.bom.gov.au/

Ocean Freight

Ocean freight remains firm, although we are starting to see some light on the horizon with fuel prices finally starting to drop. Whether this is a permanent fix or just a short-term blip is open to question and probably more influenced by OPEC than shipping. The ongoing imbalance between Atlantic and Pacific tonnage will continue at least in the short term. We are seeing vessels in Med being considered for Australian listings, such is the price disparity between the two. Although, the cost of the canal transit plus up-front bunker costs is a huge cashflow hit so it is not a major influence yet.

The paper markets for bunkers and freight are also stressing due to the potential for defaults on margin calls. The size of the margin calls and the risk of having Russian money somewhere/somehow in the chain has everyone questioning the very basis of their operations. Is that bunker hedge going to get paid even by a cleared exchange?

In this environment, anything other than spot or near-term business is very hard to execute.

Export Destinations

Australia exported 2.76MMT of wheat in January up from 2.18MMT in December as exports move into top gear. Exports are now running quickly in all states. Western Australia accounted for 899.5KMT followed by South Australia with 683KMT, New South Wales 548KMT, Victoria 449KMT and Queensland chipped in with 183KMT. Container wheat exports were strong at 264KMT. China was the largest destination with 687KMT. China has now taken 2.0MMT in the past three months. It’s being shipped from all states. Indonesia was the next largest behind China with 460KMT followed by the Philippines with 345KMT and then Vietnam with 222KMT. Yemen also took 187KMT.

Barley exports for January were 623KMT split between Western Australia, South Australia and Victoria. Saudi was the largest destination with 229KMT and has now taken just over 1MMT in the past four months. Jordan took another 126KMT. There is also a steady volume of shipments heading to the UAE, Qatar, Kuwait and Oman. Mexico took another 33KMT lifting the total shipments since September to 127KMT.

Canola exports for January were a whopping 763KMT. Most of this went to Europe apart from 70KMT to Japan, 111KMT to the UAE and 18KMT to Bangladesh.

Combined wheat, barley and canola exports for January were 4.15MMT.

Pulse exports were also very strong with Bangladesh the major destination.

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Australian Hay Update – Monday 29th April 2024

29 Apr, 2024

The 2024/25 season for Australian Oaten Hay has started with sowing well underway for all growing areas. The initial expectation for the upcoming year is much the same as the current season where we saw a significant increase in acreage planted and a higher than average quality profile. With the return to normal freight rates despite the international pressures and an Australian Dollar that has been well below the 0.700 cent handle for much of the past 12 months, there has never been a better time for exporters of Australian Oaten Hay to develop new markets. Growth in interest has been seen from the Middle Eastern markets with the integration of Oaten Hay to the ration alongside alfalfa with excellent results forthcoming. As part of the Basis Commodities service offering, we like to share our insights and knowledge on our products to better support our customers. Please enjoy this report on the various considerations for Oaten Hay during the growing stage as well as our future reports in the coming months as we head towards new crop which is due for export in October/November 2024. Australian Oaten Hay: Despite the concerns with a drier season for cereal crops, less moisture, particularly at the end of the hay growing season produces a far better product to suit the dairy and livestock industries. In this month’s report, we will explain the reasons why less rainfall can actually benefit an oaten hay crop. Fibre Length and Thickness: Too much moisture during the growth cycle of an oaten hay crop will produce thicker stems and longer fibre lengths which reduces the feed test value. This is due to the nutrients of the plant being spread across a larger fibre length diluting the high levels of water soluble carbohydrates (sugar content important for palatability) and increasing the acid and neutral detergent fibres leading towards poor fibre digestion and absorption rates Lodging: Lodging is defined as the permanent displacement of a stem from a vertical posture. It is often caused by high wind speeds, made worse by wet conditions. It can happen quickly or relatively slowly, with stems initially leaning, then falling under the pressure. If too much water is received on an oaten hay crop, the plant may grow beyond a stable position and fall over. This is because the root system of the plant has not penetrated deeply enough through the soil as it has not had to search too far for moisture. The plant falls and then regrows which renders the crop unusable due to soil contamination.

Basis Commodities expands service offering to soybeans.

18 Apr, 2024

In late 2023, Basis Commodities successfully executed its first shipment of premium non genetically modified soybeans from Romania to Egypt, via two small vessels. Basis has many years of experience managing trade flows and relationships within the Middle East and we were pleased when the opportunity to add a new product – Soybeans – arose out of discussions with our suppliers in Romania and buyers in Egypt. To ensure the safe arrival of the produce, the company worked with several parties to facilitate the execution of this new flow for the company including managing due diligence, testing, insurance and contract execution. Soybeans are a primary source of protein and edible oil, making them essential for human nutrition. The largest producers of soybeans in the world are the United States, Brazil, and Argentina. These countries account for most of the global soybean production. Ukraine is the leading exporter of soybeans in Europe. However, Romania is seeing growth in this market after a long hiatus. This growth can be attributed to various factors including increased demand for soybeans globally, improvements in agricultural technology, and favourable climatic conditions for soybean cultivation in Romania. Egypt is among the top importers of soybeans in the world. The country imports large quantities of soybean, primarily for the production of soybean meal, a key ingredient in animal feed formulations. The country's growing population and expanding livestock sector contribute to the increasing demand for soybeans as a source of protein-rich feed. Basis Commodities General Manager in Dubai, Nader Ahmed said assisting companies making connections in the movement of soft commodities is a speciality of the company “we are committed to fostering international trade partnerships and promoting the exchange of quality agricultural products in the Middle East” and “We’re proud to have played a role in bringing premium soybeans into Egypts market”. For more information on how Basis Commodities and assist your business, reach out to the team on the details below