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 Canola Supply & Demand Report
25th June 2020
Canola take aways:
- New crop Australia production increased 160kmt to 2.95mmt (WA unch @ 1.375, SA unch @ 304kmt, VIC +40kmt @ 638kmt, NSW +120kmt @ 627kmt)
- ABS 18/19 survey released and brought area back in line with LSC figures, however yield still very high given the season. Revisions made per below
- SNSW, SA, VIC all look very good, potential upside. CNSW increased. WA dry, capping yields but not cutting just yet
- Interstate transfers are 150kmt done vs. 210kmt forecast
- Export on pace, only have 30kmt WA to Japan remaining in the forecast, rest is shipped
- No major changes to global figures; EU prod steady at 16.4mmt, Ukraine 2.9mmt, Canada 19.4mmt
- Old crop Canada export pace on target to meet our 9.65mmt number, with 1.9mmt out of 2.2mmt to EU done
- Dry weather in Southern and Eastern Saskatchewan being offset by better than normal conditions in other higher production regions
- Brazilian export pace continues and trucks continue to load as normal at the ports
Conditions in NSW look very good, especially in the Central West. We increased yields there to be above the 2010-16 “normal” average. Other areas in NSW set back to average of those seasons, removing the recent run of poor years in the averaging model.
VIC is similarly going well. It might be a shade too wet in southern VIC, but the Wimmera is looking excellent and we have increased yields to above average there.
SA on track, no changes but potential upside noted.
WA is behind the 8-ball still, the season so far will limit the upside in yields, even if we get a favourable or average season from here. We have not changed yields yet, but flag potential cuts next month if the winter moisture profile has not been built up. This could lead to a 150kmt reduction if realised.
The ABS released their 18/19 7121.0 commodity survey results in late May. In 17/18 there were a large number of outliers in their data for NSW & VIC, but we had seen a “negative” stocks situation created through the end of 18/19 given the stronger than expected exports out of VIC. This left an error in LSC figures that we wanted to resolve by increasing historical production after we had further validation from the ABS 18/19 figures. The 18/19 figures brought NSW/VIC area back in line with our forecasts. This suggests that whilst the 17/18 data is likely in part an outlier, we needed to meet some of the variance in the middle to balance out. We increased 17/18 yield and area by 10% and 18/19 yield by 10%. As far as what this means for 19/20 and 20/21 in NSW & VIC, we don’t see any significant changes. Areas were largely re-aligned to LSC figures and given the poor seasons in those two years its not prudent to use them in an average yield model this year. Per above, we have focused on the preceding 7 years which were more consistent seasons and more analogous to 2020.
Old crop demand is on track to meet forecast. The interstate movements from Albany to Newcastle continue at a steady pace and with NSW stocks likely depleted, we can expect further shipments to occur in order to maintain NSW crush forecasts.
Exports are all but done, we have only one more Japanese vessel ex-WA to come out. Plus the usual container demand moving ex-Melbourne.
Putting it all together for new crop, NSW has surplus for the first time in 4 years, although this is likely to be limited to GM canola. We can expect most non-GM to remain in the state for crush with some GM making its way into VIC or even to export. The flow on effect is for VIC to increase exports by 150kmt since last report (now in line with 19/20 export levels), SA unchanged and WA has been decreased by 50kmt.
Australian values remain competitive to export in the new crop both for GM and non-GM products. WA prices remain relatively firm given the dryness and lack of farmer selling, whilst we can expect to hold wider than usual GM non-GM spreads this season given 1) the eastern states hold an exportable surplus, 2) the wide Matif-WPG (EU-Canada) price spread, and 3) the lower AUD. Regionally we should see this weakest in the west. In VIC a large portion should move to export also and approach WA type spread levels, whilst in NSW there will be some middle ground with crushers paying nominally over export values to meet their GM crush requirements.
After a busy May, things in June have been pretty ho-hum in the global canola scene. No signs of life in the China-Canada situation, whether has been mixed in Canada and stabilised in Europe and the Ukraine. Overall we have not made any significant changes to our global S&D this month.
Export pace in Canada continues at a steady pace and we are on track to meet our forecasts, likewise for crush. Canadian production has some flags in Saskcatchewan but many other areas have over compensated for the potential yield losses there.
StatsCan release their updated figures next week, there is a chance for a revision on their 19/20 season production estimate of 18.4mmt (i.e. higher) but they have been known to make those revisions further down the track and they may prefer to have more clarity on spring harvest before they consider any adjustments. Outside of that, we don’t expect to many surprises from StatsCan next week.
In the EU and Ukraine, we see….
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