The price of Argentine sorghum has been volatile this week. Varying up to US$20.00 / t on some days. Last night was one of those days. Conversion comparison between up river rates on Wednesday and Thursday, and taking the AUD into account, show a day to day gain of roughly AUD$13.29/t.
Conditions have been very wet in Argentina over the last 7 – 14 days. Much of the north seeing 30-70mm in the last 7 days, bringing monthly rainfall in some places to more than 300mm, many locations seeing 150mm+.
It’s hard to confirm if this is the reason that Argie sorghum values have become more volatile, but given the recent rain and the reports of flooding across many provinces, it’s starting to become a safer bet. Combine the poor harvest conditions with an area reduction of about 10% year on year for sorghum and we may be painting a clear picture. It also appears that their 1% reduction in their export tax has been swallowed up by higher FOB values.
The flip side in that sowing delays for the second corn crop in Brazil may see some producers move away from corn and into sorghum. This is worth keeping an eye on as Brazil recently signed export standard agreements with China. Does Brazil have the potential to displace US, Australian and Argentine sorghum into the world largest sorghum importer if they can meet these export standards, time will tell. Sorghum production there will be clearer, as will Brazilian export potential, come their harvest in July / August. Roughly coinciding with the US harvest.
The biggest problem we have here today is the sharp jump in the value of the AUD against the USD. The AUD briefly pushed above 72c in overnight trade and closed towards the higher end of the 12 hour trading range, putting on almost half a cent for the session. The action seems to be on the back of the Japanese intervening to prop up the Yen against the USD. After many months of weakness the Japanese government have officially stepped up in an attempt to help the currency, buying the Yen. The news surged the Yen 3% higher. The Yen had fallen to 160USD, triggering the BoJ to state a rate hike is likely in June. Heavy speculation on the Yen has been on the sell side, this news may result in a lot of short covering and repatriation of funds in the short term.