The AUD was weaker against most of the majors overnight, falling up to 1% against the Yen. The AUD remains bent by the trade dispute between the USA and China. It’s a little ironic as the weaker dollar will actually help Australia in its efforts to sell exports…….to China.
Trump and Xi are still expected to meet at the end of the month. Both parties will look to “sell a win” to their respective countries after the meeting. A win / win would be the best outcome, and would help pave the way for higher demand as both economies recover from the recessions neither of them are having.
The US FED have suggested another rate cut is likely late this month. This may spike the AUD unless the RBA follow and reduce local rates here. So much of our grain price volatility, as little as there has been, is due to fluctuations in the AUD.
A rally in the AUD in November / December would be the exact opposite to what producers would like to see and may temper harvest selling even more so than it is already expected to be. The prospect of a higher AUD also raises the question of “is selling prior to the US FED meeting an option”, probably. The next question would be “will it expose you to the usual issues associated with a forward contract if you have not already harvested your canola”, the answer is of course yes it will. You may also run the risk that the RBA will track US rates lower and the AUD could potentially soften. It’s not unlike the RBA to reduce rates just before Christmas in order to stimulate a bit of consumer spending.
Looking at current canola values at say roughly US$537 FOB Aussie, plus 2c to the AUD would mean a reduction of roughly AUD$25.00/t. A fall of 2c in the AUD would add roughly AUD$25.00/t to the current canola price.
It also raises another interesting question about the ISCC “premium” into Europe and could this possibly be abandoned for oil and seed for Chinese imports. COFCO has already ordered up to 540kt of Aussie canola. Considering the potential demand China could have for Aussie canola it’s entirely possible that more Aussie canola will go to China than to Europe in 2025-26. Asian countries make up the lions share of late season exports from Australia anyway.