WELL, we said to expect volatility, but not even in our wildest imagination could we have expected what we have predicted the past month or so.
Firstly, there was a heavy sell-off driven by lack of demand from the sub-continent as India’s conditions looked near ideal for their own production and global prices of all pulses plunged.
Now prices have rallied back to where we were (or higher) a month or more back as weather conditions have taken their toll on crops here in Australia and forecast production.
So where to now?
Some points for consideration in determining price direction from here:
1. What is the likely final Australian production number? At the moment we know that parts of NSW (particularly the central west) have significant waterlogging and disease problems with some suggesting the crop could be down by 50 per cent.
In Queensland conditions have been better but with the rain this past seven to 10 days and forecasts for more we are starting to see growing concern particularly in south-western Qld.
In other areas such as central Qld and the Central and Northern Downs the crops remain in generally very good condition and with excellent yield prospects.
Of course the problem remains that some long-range forecasters suggest these weekly rain events are going to hang around for a while potentially increasing the threat to crops.
2. In India stocks of Chana (chickpeas) are very low, but the supply and inventory of other pulses is growing rapidly and at significantly lower values so substitution will be high.
The monsoons have also been very favourable and we continue to see rain events, so the outlook for the planting of their own chickpea crop is very good and the current low stocks and high prices will encourage farmers to plant more chickpeas.
So demand from India past the November shipment will be very limited as no-one will want product arriving in the market past the middle of January 2017, as by early February they will see the first of their own harvest.
3. The net result of the above is, if production is still above one million tonnes then the market has sufficient supply if India’s weather remains favourable.
If production starts to dip below one million tonnes then supply starts to tighten.
The bottom line is I don’t know that anybody can possibly answer the above question given the current weather forecasts.
Until it stops raining and farmers and their agronomists can re-enter paddocks to properly assess conditions we are all simply speculating.
As we stand today, current prices are a reflection
of grower concerns and wash-out requests and are not being supported by demand from consumption markets.
Market direction from here will be driven by mother nature and the ability and skill of our farmers and agronomists to control disease pressure in trying circumstances.
