Using accurate data to minimise your risk in the commodity market
Who we are
Lachstock was founded in 2007 as a result of the deregulation of the grain market. The grain market experienced changes to procurement, distribution, product release and an increase in grain price volatility. With more participants and products hitting the market the buying and selling of grain became a complex process.
Using accurate research and market analysis, we take the complexity and noise out of the commodity market. We tailor our commodity advice to your personal requirements, setting reasonable personal targets to increase profitability but also reduce risk. Opinions are great, but we use the data!
Lachstock Consulting holds an AFSL #320 562 to provide advice to wholesale clients on derivatives and foreign exchange.
Who you are
We adapt our commodity marketing services to meet your needs within the grain industry. Whether you are a corporate business looking to improve business strategies, a farmer who grows grain or a grain consumer looking to lower your outgoing costs, we have a solution for you. Through market analysis we aim to reduce cost, reduce risk and thus improve your margins.
Commodity Research and Advice
Example Wheat Supply & Demand Report
30th September 2020
Wheat take aways:
- Australian 20/21 wheat production down 125kmt to 28.08mmt. WA is -1.1mmt to 7.99mmt, SA unch @ 4.85mmt, VIC unch @ 3.4mmt, NSW +980kmt to 10.4mmt and QLD unchanged @ 1.43mmt
- WA continues to suffer from a lack of rainfall and has further downside should rain not come in the coming month. SA looks to receive another saving rain this week, likewise for the Mallee region of VIC. Southern VIC remains excellent. NSW continues to escape from any significant frost and conditions remain optimal. QLD is starting harvest and we expect lower yields and higher screenings in early harvest, with later crops holding on well
- NDVI based WA conditions continue to move lower and are approaching 80% of normal. Conditions were better early in the year than last year, so we don’t expect a fall to last years levels, but a crop around 7mmt can not be ruled out
- CBH and Viterra will update their wheat stocks later this week. SA tightness in old crop remains a key factor with some wheat moving from VIC to SA to satisfy small consumer shorts
- 20/21 exports were reduced in WA and increased in VIC and NSW. The falling WA exports will put pressure on South Korea in particular, who have not purchased from other states since 10/11
- Strong export business continues to be reported out of new crop Australia given the relative values
- Global production sees USA +500kmt to @ 50mmt in line with the USDA, Canada unch @ 33.8mmt, EU unch @ 135mmt, Argentina -1mmt to 17.9mmt, Russia +1mmt to 81.5mmt, Ukraine unch at 26.6mmt
- Black Sea weather remains dry for the new crop, but the current crop still has 38mmt of exportable surplus for Russia and the Black Sea market is inverted into the 2021 new crop. Strong export pace and a lack of farmer selling, despite high prices (especially in Rubles), is keeping old crop values firm for now
- Strong tenders and demand from consumers through the end of the calendar year is obvious, in the lead up to more availability of Australian supplies and the market keenly awaits more liquidity in the black sea
- China imports are unchanged at 7.8mmt, US export sales to China have ground to a halt in September
- Commodity funds continue to add length and are structurally long across the grain and oilseed space with investors looking for inflation hedges. Increase incidents of COVID and political risk may cause a tempering of these higher weighted positions
Australian 20/21 wheat production is down 125kmt to 28.08mmt. WA is -1.1mmt to 7.99mmt, SA unch @ 4.85mmt, VIC unch @ 3.4mmt, NSW +980kmt to 10.4mmt and QLD unchanged @ 1.43mmt.
WA has had a less than optimal season, but until recently they have been able to wave off any major crop reductions with some crop “saving” rains. However, through the critical September month rain has been absent and there have been periods of heat. This will continue to be a key focus as crops fill in October. As a result, conditions have deteriorated dramatically and we have revised our forecast lower and further downside is possible.
Farmer selling in WA has been reasonable up until this point and with crops falling, we don’t expect to see the WA farmer at the selling table in the coming month until harvest begins. This may provide short-term support with a large export book already committed to.
SA and VIC continue to receive timely rain and should get crops through on average or above yields. There is further upside in VIC if October is favourable.
NSW big crops are getting bigger, avoiding in detrimental heat or frost through flowering and is now set up to achieve well above average yields. Further upside is there, 500-750kmt, if crops fill without sustained periods of heat in October. Some heat will be beneficial for protein, however sustained heat will take out the top side of yields on what is a larger area than the record years of 10/11 and 16/17.
QLD harvest has just started, and we will likely see higher screenings and lower yield reports in early harvest. Later harvest should compensate. This concern and variability on quality is keeping farmers from committing to further sales.
The old crop 19/20 season stocks reports will be updated later this week and we don’t expect to many surprises. SA is extremely tight as noted previously, so much so as we are seeing small volumes of wheat trade across from VIC, counter to the “normal” trade flows.
Australian export demand remains firm given the relative value to major competitors and with some in the market looking for a crop above 30mmt, which is increasingly impossible with the deterioration in the WA crop.
With WA falling and being the sole exporter from Australia to South Korea, this will put more pressure on exports to be reallocated for some other destinations to the east coast.
Concern remains amongst Australian exporters about the execution risk to China. Whilst nothing is confirmed or has been rejected at this point, and we are seeing exports continue thus far to China, the trade remains cautious about executing canola, wheat and sorghum to China in the current environment.
The global market continues to see Russian crop estimates above 80mmt, however the recent dry weather and strong season to date shipping pace out of the Black Sea has kept values uncharacteristically firm given the export program expected. That said, we still see a pretty sharp inverse in Russia through to the 2021 crop, which seems a little out of line if the market is holding up on concerns of new crop production and the potential for export restrictions. Its an expensive process for the government of farmer to carry wheat through at these values in an effort to protect domestic supplies later in the 2021 calendar year. Especially given the wheat price in Rubles has hit multi-year highs.
US planting pace is on par for the upcoming crop, there is some dryness out there but it is very early to be calling a problem in the US and the fact the crop is going in the ground puts a base there.
US wheat sales to China have slowed or ground to a halt during September, far being outpaced by the ongoing bean and corn demand, however China …..
To begin a research trial and see the full report, please follow the link below.