Month: October 2017

StockCo and AWN partner to
provide livestock funding solutions

Media Release

StockCo and Australian Wool Network (AWN) are pleased to announce an exciting partnership that will provide AWN’s extensive customer base with access to StockCo’s strategic livestock funding solutions. Through entering a distribution agreement, AWN will now be able to offer StockCo’s innovative livestock funding solutions directly to their customer base.

StockCo’s Australian COO, Tim Pryor, said he was delighted to be working with AWN and their customers. “AWN is well recognised and highly regarded particularly across Australia’s sheep and wool industries. We’re excited to be working with AWN’s high quality team of wool brokers and livestock specialists and look forward to partnering with them to assist AWN customers to maximise livestock production via access to StockCo’s livestock funding facilities.”

Rick Maybury, AWN’s Chief Operating Officer said, “StockCo is a genuine customer-focused model that delivers livestock finance specifically tailored for farmers.”

“We were attracted to the flexibility that StockCo’s livestock funding facilities can provide our clients, especially those in need of seasonal funding support to help grow their livestock operation.”

About StockCo:
StockCo is Australia’s largest specialist livestock funder with a solid record of providing innovative livestock funding solutions in Australia and New Zealand since 1995. These funding facilities offer assistance with financing the purchase of sheep and cattle for backgrounding, finishing or trading purposes and are available to fund livestock in both feedlots and on pasture.
As part of this service, StockCo will fund 100% of the purchase price and only requires payment of the purchase price and accrued finance charges once livestock is sold. In most cases, StockCo will only take direct security over the livestock being purchased.

About AWN:
AWN is Australia’s largest independent wool broker offering a range of wool marketing and selling services. As such, AWN is the only wool marketing company with its own Australian-based wool manufacturing facility and a dedicated retail presence to market its client’s wool directly to consumers.
AWN and its subsidiary in WA, Dyson Jones, markets in excess of 275,000 bales of wool across Australia for some 8,000 woolgrowers and has specialist wool buying activities in NSW, VIC, TAS and SA.
The company’s core business is focused on delivering value to its client base by embracing innovations and establishing strategic alliances that will deliver financial benefits to its client base.

For more information visit www.stockco.com.au or contact your local AWN Wool & Sheep Specialist.

For media enquiries please contact:
Tim Prior
Chief Operating Officer
0407 754 535
[email protected]

 

 

Upside for some

More wet weather this week cut cattle yardings in Queensland, and encouraged restockers to return to the market in NSW.  At a time of year when prices generally fall, or are steady, we saw a further appreciation in the Eastern Young Cattle Indicator (EYCI), but not in all categories.

In general, the cattle market lifted this week. The EYCI continued its rally, gaining a further 13¢ to hit 565.75¢/kg cwt.  The EYCI has now rallied for a month, and gained 12%, now sitting at a 12 week high (figure 1).  The EYCI seems to be heading on a similar trajectory to 2015, although the previous prices trends have been starkly different.

EYCI yardings were a touch weaker in the week ending Wednesday, but are not really abnormal.The 14,698 head yarded this week were down 5% on last week, and 29% on the same week in 2016, and 7% below the five year average (figure 2).

The main movers in price terms which drove the EYCI, were trade steers in Queensland, which gained 18.5% to move back to 559¢/kg cwt. This is just 3¢ shy of trade steers in Victoria and NSW.

Restocker steers in NSW also made a move, likely on a combination of tighter supply and stronger demand.  NSW Restockers paid 11.5% more for the most expensive cattle in the country (according to reported indicators) at 349¢/kg cwt. To be fair Victorian restockers paid the same money.

Over in the west the WYCI continues to hover in the 520-530¢ range. While this is obviously discounted to its eastern counterpart, it’s still a great price for what is generally a strong supply period in WA.

The week ahead

After three wet weeks the rain is expect to abate in NSW and Queensland next week.  This might pick up supply a little as cattle will be able to move, but there might be restockers waiting for them. It’s hard to see prices falling over the coming weeks, but upside is reliant on restocker activity as a lot of the fat for processors and feeders has disappeared with the month long price rally.

A Quick Billion Dollars

We’ve ticked over the billion-dollar milestone for total value of wool sold this year which is something of an achievement. At this point in the season last year the value was 26% lower than it is today despite the cumulative bales sold being just 10% lower.  The wool market hasn’t reached this mark by week 17 since 2002.

The Eastern Market Indicator (EMI) rose 10¢ on the week to 1,578¢ in Australian dollar terms. However, the falling Australian dollar has put some real pressure on the EMI in US dollars. It saw a drop of 13¢ to the week back to 1,218¢. This is a win-win situation, with Australian sellers receiving a higher local price and overseas buyers getting more “wool for their buck”. The Western Market Indicator also supported by the shifting currency by rising 20¢.

Sales were fairly strong across the board, with the real achievers again being in the fine wool category. Wool 19 MPG and finer gained between 35 and 45¢ in the Northern market while similar rises were only received for superfine wool (16.5 MPG) in the Southern Market. Premiums for fine fibres over medium fibres this season have been significant- Figure 1. Prices across the rest of the Merino market were generally positive, rising on average 10 to 20¢.

Crossbred fibres took another hit this week as all buyer interest seems to be mounting on finer fibres. Price reductions were mostly between 20 and 40¢ while the better prepared lines managed to attract a little support.

The skirtings market had another solid week seeing gains of 20 to 50¢. Buyers were particularly happy to pay more for low vegetable matter. Cardings indicators rose 30¢ on average across all three markets.

The response from growers this week was to pass in 3.2% of the offered wool, resulting in 43,473 bales sold. This is a slight retraction on last week but still considerably higher than last year.

The week ahead

47,266 bales are rostered for sale next week across the three selling centres (Figure 2). Melbourne is set for an extra day of sale on Tuesday, while Sydney and Fremantle are operating Wednesday and Thursday as usual.

Keep an eye on the local market

The futures markets are largely quiet, as the northern hemisphere is largely complete for 2017 and seeding progresses for next year. At a local level, it is important to start considering local premiums and how to take advantage of them.

This time of year is always bereft of data to move markets, in this crop calendar (link), it is clear that the year is largely finished for the global wheat crop. The only majors remaining alongside Australia to harvest are Brazil and Argentina.

The lack of strong data, has left the market largely directionless. In figure 1, we can see that spot futures have trended downwards since December became the spot contract. Last night was the first this week to end the day in the green, albeit marginally. In good news, US export sales were up considerably week on week, which will help futures prices if maintained.

At a local level, harvest has begun in the north and it won’t be long until the bulk of farms around the country will be ‘reaping what they have sown’. During October, rainfall has been strong through much of northern NSW and QLD, although not adding much in the way of benefits to the winter crop has added confidence in the summer crop. This has resulted in consumers reducing some of their buying appetite, as they reassess the situation for the coming 6 months.

In recent weeks, prices around Australia have started to depreciate. In figure 2, the APW port price is shown for all zones. Over the past ten days prices have fallen 4% on the east coast and 2% in Kwinana. Basis levels have fallen in recent weeks, however remain at strong levels. The lack of grower selling, in combination with the fact that production & carryout will exceed requirements, increases the likelihood of falling prices/basis.

At these very high basis levels, and low futures prices it is worthwhile examining a long swap/reverse swap strategy which has been outlined in ‘Lock in premiums, keep exposure to the market’.

Next Week/What does this mean?

At present there are considerable premiums available for growers. As growers start to sell the crop, the logic would be for basis to fall.

In order to avoid this, it is worthwhile examining your potential production with a view to commencing your sales program (if not already). This can be carried out through flat price sales or in conjunction with a reverse swap.

 

 

 

Northern rain helps price gain

The Eastern Young Cattle Indicator (EYCI) lifted again this week, recovering a further 3% to see it close at 558.50¢/kg cwt with some good rainfall to much of Queensland providing a bit of a boost. Gains noted too across the East coast for Heavy and Feeder Steers, up 1-2% to round out a reasonably firm performance for cattle markets.

Table 1 outlines the week on week and year on year performance for a selection of cattle prices as at this weeks close, with marginal weekly falls noted for Trade and Medium Steers. Interestingly, a comparison of young cattle prices to finished steers from this time last year shows that the EYCI currently sits 17.8% below where is was last season, while Heavy Steers are just 10.6% softer.

It points to how much optimism was sapped out of restocker buying activity during the Winter dry spell, but that may change if the northern rains continue and NSW starts to get a bit of decent rainfall too. Figure 2 shows the national rain tally over the last week with Queensland the clear beneficiary and next week’s forecast calls for a continuation across much of the north and spreading into NSW which should continue to support demand for young cattle by restockers.

Indeed, our analysis piece released earlier this week took a look at how the October rains may assist prices for the remainder of the year, in a similar fashion to the 2011 season. Click here to recap on the report.

Additional support for young cattle prices is likely to come from a narrowing of the current discount spread of the EYCI to the 90CL beef export price. Given the tightness of supply experienced this year the spread discount wouldn’t be expected to widen much further from current levels – figure 3.

The week ahead

After a recent lift the 90CL is knocking on the door of 600¢/kg CIF again and with the Bureau forecast of a fairly normal November rainfall pattern and a good chance of a slightly wetter than average December all indications are for continued support for young cattle prices in the coming weeks.

 

Exports soaking up extra lambs

Last week we spent a couple of articles looking at the interesting price phenomenon that we are currently seeing in lamb markets.  Strong prices continued last week, in the face of strong supplies, so today we take a look at the export data to see where the extra lamb is going.

Meat & Livestock Australia seem to be having some issues getting slaughter data out of some NSW and Queensland plants, and as such we are currently being denied total weekly slaughter data.  We do know, however, from what we can see in Victoria and SA, and saleyard yardings, is that supply remains stronger than last year.

Prices remain around 600¢ for lambs, which is similar to last year, but it was this week in 2016 that prices started their seasonal dive.

Figure 1 shows that the extra lamb supply we have seen hit the market since June is being soaked up by export markets.  The increase has been diminishing, with September exports sitting 13.4% above last year.  The three month total increase for July to September is 25%.  Interestingly lamb exports for the last three months are not a record, falling just 0.75% behind the levels of 2014.

A simple indication of increased demand is the fact that in 2014 the Eastern States Trade Lamb Indicator (ESTLI) averaged 459¢/kg cwt from July to October.  This year the ESTLI has averaged 604¢/kg, 31% higher.

Pinpointing the source of increased demand is a little difficult.  Lamb exports for July to September were up 38% to the US, 21% to the Middle East and 36% to Asia.  These three destinations have accounted for 83% of lamb exports for the year to date (figure 2), so it’s safe to say demand is up in all our major markets.

It’s also not exchange rates driving stronger demand from export markets.  Figure 3 shows the ESTLI in US dollar terms, and while it’s not at record highs, it hasn’t been this strong at this time of year since the very tight supply of 2011.

We are left with the fact that all our major lamb markets are buying more lamb, and seemingly paying more for it.  This is the key indication of stronger demand.

What does this mean?

We have in the past seen significant jumps in lamb demand from exports markets, and we might now be seeing early indications of the next one.  Significantly larger export volumes, coinciding with similar or stronger prices suggests that consumers in the US, Middle East and Asia have become comfortable with the higher lamb prices seen over the past nine months.

This bodes well for future lamb prices, as increasing supplies are unlikely to push the market as low as it got last year, with a 550¢ floor a possibility.

Lamb markets don’t rally in October – or do they?

Spring in general, and October, in particular, are known for falling lamb prices.  We usually see supply increasing as winter and spring lambs hit the market, pushing all sheep and lamb markets lower.  The price rally this week is particularly unusual.

This week the Eastern States Trade Lamb Indicator (ESTLI) rallied 19¢ to hit a 13 week high of 621¢/kg cwt.  The ESTLI has only traded higher in October over July one other time in the last 10 years.  In 2011 the lamb price trend looked very similar to this year.  There could be a warning in this, as prices declined after Christmas.

There is a key difference in supply between this year and 2011 however. Figure 2 shows that back in 2011 lamb slaughter didn’t really increase from winter lows, hence the steady price.  This year we have seen a solid jump in lamb slaughter, to the point where it is running 10-15% ahead of last year.

We keep saying it, but strong prices, and strong supply mean stronger demand.

After a couple of weeks of intermittent supply data, sheep slaughter has hit 136,925 head (figure 3), the highest level since the end of 2015.  Remarkably, mutton prices also rallied this week, the National Mutton Indicator gained 24¢ to sit back at 397¢/kg cwt.

In the West prices are lagging behind.  Despite gaining 14¢ to 556¢, the WATLI is currently 65¢ behind its east coast counterpart.  The WA Mutton Indicator fell 35¢ to 288¢.  This is not as low as a fortnight ago, but still the cheapest sheepmeat in the country.

The week ahead

When prices rise like lambs did this week, it’s an indication that buyers are looking for more lambs. Its likely restockers are helping drive the market, with NSW rainfall this week being widespread.  Whether higher prices are enough to draw more lambs to the market while it’s raining is yet to be seen, but we do know that growers who sell lambs in October have never had it so good.

Fine fibres intimidating the rest of the market

Wool was the hot topic of industry conversation again this week but it wasn’t enough to distract the market from deciding on what fibres it wants to support. Results were particularly mixed with fine fibres attracting premiums whilst the rest of the categories felt losses.

Overall, the market indicators held reasonably still considering there were very mixed results between categories. The Eastern Market Indicator (EMI) improved slightly on last week, gaining 2¢ to 1,568¢ in Aus$, while in US$ terms it rose 7¢ (figure 1). Western Australia fared worse off with the Western Market Indicator (WMI) falling 7¢ to 1,614¢.

There was a distinct preference split between fibre categories across the country this week. The total market has been moving in sync for much of the last few months so this divergence could be a return to greater differentiation between the activity of wool types. Finer fibres of 19 microns and under all received price gains on last week, up to 45¢. Buyers were clearly chasing the finer microns as reflected in the solid trend of the finer the micron the increase in price gains to the week.

On the other hand, medium to coarse wools of 19.5 to 23 MPG weren’t as readily sought after. Prices fell on average 20 to 30 ¢ by the weeks close. Crossbred wool followed the lead of the medium to coarse Merino fibres, losing ground across the board. The harshest fall was in 28 MPG at an average drop of 30¢ in both Fremantle and Sydney markets.

Again, the finer fleece led by example to the skirtings and cardings market. Improvements were on average 20 to 35¢ for cardings indicators and generally ranged from 30 to 60 cents for skirtings. .

45,792 bales were traded this week, with a pass-in rate of 6%. We’re still seeing the offering at much higher levels compared to this time last year (up 11.8% for week 16 this year), reflecting the performance of this season.

The week ahead

The number of bales on offer next week is expected to drop down to a listing of 43,764 for the three selling centres over Wednesday and Thursday (figure 2). The focus on micron this week might be an indication of where the market is starting to move to. Some strong forward prices in the 18.5 and 19 micron wools where buyers were willing to pay a premium out to next year suggest that preference for the finer wool is likely to grow.

ABARES tell us what we know USDA surprise

The Australian Bureau of Agricultural Resource Economics and Sciences (ABARES) made an interesting move this week, warning of crop downgrades.  Meanwhile the United States Department of Agriculture (USDA) made their monthly predictions.

ABARES don’t often flag what they are going to say in their reports, but this yesterday they put out a release telling us what we already know.  Growing conditions have not been great in NSW, and there is likely to be some yield downgrades, but they also noted that recent rain may have saved some crops in the Riverina and Central cropping zones.

This news was picked up in international markets, but like here, it has been widely reported and didn’t have much impact on markets.

The World Agricultural Supply and Demand Estimates (WASDE) from the USDA did move the market however.  Figure 1 shows the changes from September, with the headline figures being the downgrade in Oilseed stocks, and the upgrade in wheat stocks.

The USDA predicted lower yields for soybean crops being harvested now, and this wiped half a million tonnes off US production.  The market was expecting an increase, and the report saw soybean prices jump 2.4% higher.  Unfortunately for Australian growers this didn’t really translate into higher prices, with ICE Canola up just $2 to $CA502.6/t for January 18.

Global wheat production was lifted 5.3mmt thanks to improving production in the EU and India.  The USDA did downgrade the Australian crop by 1mmt to 21.5mmt.  Figure 2 shows we are still well and truly on track for a record carryout for 17/18.

The week ahead

Wheat prices in Chicago lost a few cents last night, but the AUD was up so swaps will be a bit weaker today.  Domestic basis is driving most of the change in price at the moment, and recent rain has seen it weaken, especially in southern states.  Sellers will obviously be more confident of production now.

Historically October marks the seasonal low for corn and soybean prices, so we might find some support for international markets over the coming months, translating into better prices here.

Cattle rally continues

There was a significant jump in yardings this week, but this failed to dampen cattle prices, which continued to rally.  In fact, it seems to be rain that is doing the opposite of dampening prices, with prices finding strength, almost across the board.

Figure 1 shows a 61% lift in east coast cattle yardings, but this still remains below the very strong levels of September.  In fact, the lift in yardings is likely to be more due to the public holiday in the previous week, with a bit of a backlog of cattle hitting the market now. Yardings this week of 40,044 head on the east coast were however well below the five year average.

This suggests that producers are holding back cattle in response to recent rain.  For October so far, rainfall has ranged from ‘a start’ to very useful across the east coast.  It will be interesting to see if yardings remain low, figure 1 shows that on average, and last year, yardings tend to jump in the third week of October.

The Eastern Young Cattle Indicator (EYCI) continued to rally, but the pace slowed.  The EYCI gained 8¢ this week, to lift it to the levels of five weeks ago, at 541.25¢/kg cwt (Figure 2).

Heavy Steer prices managed to break back through 500¢ in NSW (507) and Victoria (518), but somehow managed to slip below those levels in Queensland (492¢).  Perhaps there are still a few of the record numbers of grainfed cattle coming to the market.

The weakening Australian dollar managed to give beef export prices a small lift.  The 90CL Frozen Cow gained 3¢ to 594¢/kg cwt which just moves our target prices a little higher if the rain continues.

The week ahead

There has been widespread rain over the last 12 days, with parts of Queensland by far outstripping the monthly average.  The forecast says there is more to come for at least half of Queensland (figure 3), and this suggests that there is only one way for cattle prices to go next week, especially young cattle prices.