Commodities: Grains July 215 Kristen Hopkins
Disclaimer This material contains information only. The information is for education purposes only and any advice should be sought from a professional adviser. If you are seeking advice (including a recommendation or opinion) about a financial product you should consult an Australian Financial Services Licensee. To the extent permitted by law, no responsibility for any loss arising in any way (including by way of negligence) suffered by anyone acting or refraining from acting as a result of this material is accepted by. This disclaimer extends to any private discussions or correspondence with the presenter of this information. 214 Limited ABN 98 8 624 691 2
Basis What is basis? Why does basis matter? Basis is the difference between the physical grain price and futures price. More commonly, basis is any traded relative value spread by location, quality, physical or derivative. When using futures to hedge traders are still exposed to basis risk, i.e. movements in basis determine the effectiveness of a hedge. Brisbane APW1 Track (Dec15-Jan16) Basis $315 MT +$17 MT Factors that influence basis; Local market supply and demand Logistics Weather and crop conditions Seasonality AUD/USD volatility NSW Wheat Futures (Jan16) $298 MT 3
USc / bu Hedging Australian Wheat using offshore Futures NSW Wheat Versus Chicago SRW Wheat Hedging Australian wheat using Chicago SRW wheat futures exposes your overall hedged position to moves in basis: 16 14 Jan '16 NSW Wheat basis Dec '15 Chicago SRW Wheat 139 USc/bu 7 AUD/MT 8 7 12 6 1 5 8 4 D 112 USc/bu D 56 AUD/MT 6 3 4 2 27 USc/bu 13 AUD/MT 2 1 1-Jul-14 1-Aug-14 1-Sep-14 1-Oct-14 1-Nov-14 1-Dec-14 1-Jan-15 1-Feb-15 1-Mar-15 1-Apr-15 1-May-15 1-Jun-15 1-Jul-15 4
Hedging Australian Wheat using Offshore Futures NSW Wheat Versus Chicago SRW Wheat Using Wheat Futures is an efficient way to get exposure to Australian Wheat basis Chicago Wheat. Example Exporter at Harvest Getting long 2,MT Australian Wheat basis Buying Jan-16 NSW Wheat at 16USc/bu over Selling Dec-15 SRW Wheat Leg Long @16USc/bu..if you want to Short @16USc/bu 1 lots January 216 NSW Wheat @ 298 Buy Sell 15 lots December 215 SRW Wheat @ 515.25 Sell Buy FX Forward: 596, AUD @.766 Buy Sell Notional contract value: 596, AUD (2MT x 298 AUD/MT) Converting to USc/bu: 621.25 USc/bu = (298 x.766 x 1) / 36.7437 Calculating Basis: 621.25 515.25 = 16 USc/bu 5
Hedging Track Markets - Brisbane Vs Grain Futures 8 6 4 Brisbane APW Track Basis 12% 1% Brisbane Track Price Correlation 2-2 8% 6% 4% 2% -4 % 211-215 212 213 214 215-6 14 12 1 Brisbane APW Track Basis $45 $4 $35 1th to 9th Percentile Ranges 8 6 4 2-2 -4 $3 $25 $2 $15 $1 $5 $- 212 213 214 215-6 6
Hedging Track Markets - Newcastle Vs Grain Futures 5 4 Newcastle APW Track Basis 12% Newcastle Track Price Correlation 3 1% 2 1-1 -2-3 8% 6% 4% 2% -4-5 % 211-215 212 213 214 215 12 1 8 Newcastle APW Track Basis $5 $45 $4 1th to 19th Percentile Ranges 6 4 2 $35 $3 $25 $2-2 -4-6 $15 $1 $5 $- 212 213 214 215 7
Hedging Track Markets Port Kembla Vs Grain Futures 3 2 Port Kembla APW Track Basis 12% Port Kembla Track Price Correlation 1 1% -1-2 8% 6% 4% -3-4 -5 2% % 211-215 212 213 214 215 1 8 Port Kembla APW Track Basis $3 1th to 9th Percentile Ranges 6 $25 4 2 $2 $15-2 -4-6 $1 $5 $- 212 213 214 215 8
2-Mar-11 2-Apr-11 2-May-11 2-Jun-11 2-Jul-11 2-Aug-11 2-Sep-11 2-Oct-11 2-Nov-11 2-Dec-11 2-Jan-12 2-Feb-12 2-Mar-12 2-Apr-12 2-May-12 2-Jun-12 2-Jul-12 2-Aug-12 2-Sep-12 2-Oct-12 2-Nov-12 2-Dec-12 2-Jan-13 2-Feb-13 2-Mar-13 2-Apr-13 2-May-13 2-Jun-13 2-Jul-13 2-Aug-13 2-Sep-13 2-Oct-13 2-Nov-13 2-Dec-13 2-Jan-14 2-Feb-14 2-Mar-14 2-Apr-14 2-May-14 2-Jun-14 2-Jul-14 2-Aug-14 2-Sep-14 2-Oct-14 2-Nov-14 2-Dec-14 2-Jan-15 2-Feb-15 2-Mar-15 2-Apr-15 2-May-15 2-Mar-11 2-Apr-11 2-May-11 2-Jun-11 2-Jul-11 2-Aug-11 2-Sep-11 2-Oct-11 2-Nov-11 2-Dec-11 2-Jan-12 2-Feb-12 2-Mar-12 2-Apr-12 2-May-12 2-Jun-12 2-Jul-12 2-Aug-12 2-Sep-12 2-Oct-12 2-Nov-12 2-Dec-12 2-Jan-13 2-Feb-13 2-Mar-13 2-Apr-13 2-May-13 2-Jun-13 2-Jul-13 2-Aug-13 2-Sep-13 2-Oct-13 2-Nov-13 2-Dec-13 2-Jan-14 2-Feb-14 2-Mar-14 2-Apr-14 2-May-14 2-Jun-14 2-Jul-14 2-Aug-14 2-Sep-14 2-Oct-14 2-Nov-14 2-Dec-14 2-Jan-15 2-Feb-15 2-Mar-15 2-Apr-15 2-May-15 5 4 3 2 1-1 -2 Hedging Track Markets - Geelong Vs Grain Futures Geelong APW Track Basis 12% 1% 8% 6% 4% Geelong Track Price Correlation -3-4 -5 2% % 211-215 212 213 214 215 1 8 6 4 2-2 -4-6 Geelong APW Track Basis $45 $4 $35 $3 $25 $2 $15 $1 $5 $- 1th to 9th Percentile Ranges 212 213 214 215 9
New Eastern Australia Wheat Contract Expanded delivery arc to include extra port zones of Brisbane, Melbourne and Geelong in addition to existing port zones of Newcastle and Port Kembla. Improved flexibility with an increased confidence to be able to deliver the current grain specification anywhere across the east coast. The contract will price where there is most supply adding to correlations with export parity and making the contract more relevant to exporters and a wider array of end users both domestically and abroad. 1
Want to know more? Contact Us Kristen Hopkins Manager, Commodities Sales Kristen.hopkins@asx.com.au www.asx.com.au/grainfutures +61 (2) 9227 197 +61 () 417 367 443 This document provides general information only and may be subject to change at any time without notice. Limited (ABN 98 8 624 691) and its related bodies corporate ( ) makes no representation or warranty with respect to the accuracy, reliability or completeness of this information. To the extent permitted by law, and its employees, officers and contractors shall not be liable for any loss or damage arising in any way, including by way of negligence, from or in connection with any information provided or omitted, or from anyone acting or refraining to act in reliance on this information. 11
Thank you 12