MARKET WIRESLIDING DOORS

GM CANOLA DATA DASHBOARD

EU-CHINA PRICES (A$ TRACK EQ.) KWINANA GM SPREAD

2019/20 EXPORT MATRIX (‘000MT) GEELONG/KWINANA PRICE

PRODUCTION MATRIX TOTAL CANOLA HECTARES

GM CANOLA MARKET REPORT

GM SITE BID SHEET

PORT EQUIVALENT BID SHEET

GM CANOLA MARKET REPORT

LOCAL MARKETSRain generally has not been forthcoming for much of the canola belt in Australia, there has been some patchy rain across parts of NSW and the forecast for the week ahead looks positive for VIC and NSW with 15-40 mm expected. SA & WA remain dry and have little on the horizon to get excited about. The BOM is still calling a 70% chance of El Nino, however with a caveat that is it likely to be short lived. We have already seen a chunk of area switch out of canola into wheat and barley due to the moisture. There is still a lot of dry sown canola that has gone in and needs rain to catch up or it risks being replanted to grain in the coming weeks.

WA: WA prices have firmed a touch in the last month despite ongoing weakness in Canadian markets. Support continues to come on the back of the dry conditions in WA and crop concerns in Europe. FIS grower bids have nominally increased $10 to $550 on bid sheets for non-GM, with trade interest still higher. New crop prices are sitting at $585-590 FIS, higher than the full carry from old crop. GM spreads remain wide in sympathy with the explosion in the Europe-Canada price spread (Matif-Winnpeg), which has widened by some US$20 in the last two weeks. GM spreads have stretched to AUD$60 in both old and new crop. Given the burdensome outlook for Canada, and the challenge it is having in finding export demand with the absence of China being in themarket, there is certainly pressure on the global GM market. That being said, it is not so much about GM canola but rather Canadian pressure. So whilst it is understandable that the spread has blown out, we would expect a large volume of demand forAustralian GM, in combination with non-GM shipments to Europe.NSW/VIC: East coast markets remain steady. Old crop delivered to Melbourne is $587 and new crop port pricing is sitting around $570, up $5-10 in the last month, again on the back of the drier weather. However, with firmness in WA (and Europe), VIC canola is still pricing a modest discount to WA export parity, suggesting that the weather premium in the east is still minimal. Further imports into the east from WA have been slow. We see 20 kmt being shipped in both April and May, but this is a far cry from the 250 kmt we need to see to complete the balance. There has been no further talk of any crush capacity slowing down, so it will become very interesting, come June, as to how the imbalance in the east will be solved if we don’t see ships starting to load.

GLOBAL MARKETSThere has been nothing new on the China-Canada dispute and we don’t expect to see anything play out to improve the situation until after proceedings have taken their course in the upcoming months. The big discussion was how reactive the Canadian farmers would be to this situation and if they would cut area significantly as a result. Farmer surveys didn’t seem to be too drastic, down 1-2%, however the trade survey was closer to down 4% and StatsCan then came out and pushed it lower than that. Canadian production is being pencilled in either side of the 20 mmtrange at the moment and whilst conditions in parts of Canada remain dry, any significant changes are likely to be limited in the coming weeks until we get into the heart of the growing season.

Ongoing delays in corn plantings are suggesting a major shift out of corn into beans and this is further compounding the issue that Canada has trying to displace supply in to markets like the UAE and Mexico. Again, no change to the US-China trade discussion, so the silver bullet of demand for US beans is still being sought after.

African Swine Flu continues to dominate headlines in China, however it is yet to play out in soymeal demand, so the jury is still out as to the significance of the problem.

Europe has received some rain recently, but otherwise it has been quite dry, and crop estimates have started to decline yet again, with talks of 18 mmt numbers now in play. Conversely, the Ukraine has come out of winter with minimal winter kill and is looking like a garden. Combine the projections for above average yields with a record area and we are starting at a 3.5-3.8 mmt crop.

CASE STUDY – Sliding doorsMay is the month when things start to really fire up, with weather around the globe and politics continuing to bubble, the coming month will start to dictate the year ahead. So what do we need to watch out for?

1) US bean acres – IF we can’t get a break in the weather THEN we will see significant swings to bean acres which will put a lot of overhead pressure on canola markets trying to push into non-EU markets.

2) China-Canada trade discussion – IF we get a resolution in the coming months THEN Canadian prices will whipsaw back significantly, with relative values some US$30 out of historical alignment. This is a big factor for the market on both flat price canola and also on GM spreads. The long-term money is on a resolution, it’s just going to take time to play out.

3) US-China trade deal – IF it plays out THEN it will more than offset the larger bean acres out there. Expectations are for a resolution before the Canadian situation is resolved but, given it is already 2-months overdue, the market is losing confidence.

4) EU and Aussie production vs. Ukraine – IF the Ukraine is able to hold this record outlook THEN it will be hard for the EU and Australian markets to continue to rally. However, the highwater mark in the Ukraine must be getting close and we still have lots of potential downside in EU and Australia given current conditions. In WA and SA, in particular, the crop remains in major jeopardy and we could easily carve out 500 kmt in those regions in the coming month.

Overall the supply and demand is doing a nice job of balancing the ledger but, as mentioned above, there are some big uncontrollable aspects of today’s market that can swing things around - more so to the upside, but we can’t rule out the ongoing downtrend.