This months current key commodity driving forces.
Today 01/05/20 This time last year
USD exchange rate 0.6001 0.67
Oil USD price/ barrel $72.98 /b $20.65 /b
Canterbury 2020 harvest would be one of the best in the past 10 years. Prices started to soften, but in the past four weeks have found some support due to the high PKE prices. Grain growers are sensing an opportunity of a shortage in supplements. There has also been some grain go to the North Island, to help alleviate feed shortage from this years drought. This would not usually come from the grain pool of Canterbury, but grain in Australia still trading a lot higher than normal, meaning that imports from there are more expensive than South Island grain. Expect prices to remain flat for next 3 months, while the winter plays out. We do not see prices falling much further from the current prices but there is more risk that a prolonged winter could put pressure on grain prices in the spring and see prices jumping by $30-$40/T reasonably quickly. We would recommend getting some cover for the coming season before the winter starts.
Internationally the virus has upset many supply chains. One that has been negatively impacted is PKE. There were issues a few weeks ago where it looked like all shipments may have been stopped. And that crush plants would cease production due to the infection of staff. This hasn’t played out yet, but that doesn’t mean it won’t. There are still factories that aren’t working at full capacity, so that is having a affect on stockpiles presently. Also it is Ramadan, which traditionally would see less workers at the factories as they usually go off and celebrate the festival. International prices have been high over the last three months due to poor crops and harvest in Malaysia. This coupled with the drought in the North Island put real pressure on supply. They have started to process more fruit in the last couple of months so meal supply is freeing up, but still a good 15-20% behind last year. Also compared with this time last year the dollar is 11% weaker, meaning it is costing an extra $30.00/T. We see the price for PKE to continue to fall in the coming weeks, but not to the lows we have seen in the past two years. The unknown is how the Malaysian government reacts to the virus. Will factories be shut? Prices in the mid to late two hundreds should be considered good buying for next season.