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
22nd July 2020
Canola take aways:
- Welcome rain in Western Australia keeps national production unchanged at 2.95mmt
- Interstate transfers continue as expected, no new vessels in July. Export largely done
- No major changes to global figures; EU prod steady at 16.4mmt, Ukraine 2.9mmt, Canada 19.4mmt. Bias is higher with EU and lower with Ukraine (200-300kmt each)
- Old crop Canada export forecast lifted 250kmt to 9.8mmt with strong export pace continuing
- Conditions in Canada ok, some dry areas but still offset by other higher production regions
- China domestic markets continue to appreciate rapidly, flowing through to huge Canadian cash oil premiums of 900+CBOT (vs. normal range of 200-250+). Lacking a circuit breaker at the moment. Seems a common theme for China raw commodity prices these days!
Local conditions continue to look pretty promising for the most part. This time of year is not a major growth period and with the rain in the west, we have kept our forecast unchanged for now. In another month things start getting interesting as the plant draws more moisture and temperatures warm up. Upside potential remains in the eastern states, whilst WA still doesn’t have a huge amount of moisture and needs to get an average or above average spring to maintain potential.
Exports are done and whilst there isn’t any new vessels on the stem bound for Newcastle, we expect further nominations in Aug-Sep to see the crush through to the normal planned shut-downs in October in readiness for what looks like a much more appetizing NSW harvest in 2020.
Australian values remain competitive to export in the new crop both for GM and non-GM products. The main unknown here is how China is going to play their hand. As you will see below, China domestic values have continued to firm. A strong rebound out the back of the COVID pandemic has seen domestic demand run up, and at a time when they have restricted supply choices. Canada is maxing out its oil export capacity and its “allowed” seed export channels, whilst Australia is out of stock for old crop. The Ukrainian crop is tending lower so it puts China in a bit of a pinch. Much like it is in feed grains.
The options for China include:
1) Paying a premium for Aussie GM new crop seed to release the pressure valve a little, this will not suit EU crushers
2) Import more Ukrainian and EU oil, whilst continuing to Max out Canadian channels
3) Eat humble pie and open the doors to more seed imports from Canada
Its seems that the China government doesn’t much like the taste of humble pie, so we expect to see a lot of competition for seed as we move through the year. This may irrationally allow the GM spread in Australia to hold or firm, despite what a likely widening in the global GM spreads (Matif-WPG). Certainly volatility should remain.
Globally the focus has been largely centred around China. A lift in US Soybean purchases plus a explosive domestic market has put all eyes on the China sea. As discussed above, how to solve it remains largely a political matter and its not going to be a story that passes through quietly.
Canadian cash canola oil premiums have popped dramatically as a result, with all export paths being maxed out. We can expect to see a little more movement into the US to lift North American crush, but for the most part there isn’t any more material capacity to give.
EU early harvest looks to be better than expected, so we may see some upside in forecast numbers there during the next month. Whilst in the Ukraine its the opposite. Wet weather early in the month is causing analysts to consider lowering forecasts. For the most part these look to offset each other in terms of global trade.
Overall we remain supportive…..
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