Commodity Market Decline

 

By James Massina

5^th August, 2024

The last couple of weeks have been much like the Olympics opening ceremony, for the most part rather boring and when it wasn’t that it left you scratching your head. Generally, we have seen a decline in values across the major commodities and this despite an Aussie dollar also under quite a bit of pressure. Poor economic data out of China indicating tempering demand for the AUD on top of the expectation that a contracting economy in that country will lead to lower demand for commodities more broadly. This adding weight to a grain and oilseed complex that is already under pressure. 

The old crop cereal markets have been steadily in decline recently as consumers have largely been absent from the market and any open demand, they have had has been comfortably filled by nearby on farm stocks. As the calendar moves into August and those with stock still on hand realise time is running out to clear it before new crop, there has been an uptick in enquiry and engagement from the sell side. This resulting in the narrowing of old crop-new crop spreads as well as shifting the draw zones of various regions across the East Coast. 

New crop wheat and barley markets have been similarly softer weakening under the pressure of old crop selling, a crop that continues to increase in size, and a grower that is typically undersold for this time of year. Consensus seems to be that crop numbers need revising upwards in most cases and many experts calling the national wheat crop above 30 million metric tonnes and barley above 12. In New South Wales specifically, this year still feels a way off the production seen in 2020 and 2021 however it is moving in the right direction. Sorghum hasn’t escaped the sell off also as it struggles against a lack of demand, both on the export and domestic front.

Oilseed markets have also been weaker recently as global factors weigh heavily on local cash markets. The local markets have been pressured by a weak soybean market as European supply and a softening demand situation in China attributed to the economic slowdown. This weaker economy is purportedly having an impact on pork demand which is in turn having an effect on soymeal. A court ruling in the US related to the biofuel mandates also impacted markets however the final effect of this is still unknown.

Canola prices have decreased in both old a new crop by $30-40 a tonne in most regions with most sellers struggling to come to terms with current bids. There are still old crop tonnes coming to market though new crop selling has been more subdued.