Cautious Optimism after the Rain

by Angus Groves

It has now been well over a week since NSW saw some handy rains through north-eastern New South Wales and the Hunter Valley. Whilst this rain was very beneficial, particularly in the Castlereagh river system, it is hugely important we see timely follow up rain.

Many farmers who were fortunate enough to land sufficient moisture last weekend would have begun planting grazing oats and winter grazing wheats. 20km South of Forbes, Jarrod Amery sowed a crop of Victory Canola in early April, which has germinated well.

But as the week wore on and temperatures began to climb, the moisture seemed to slip further and further away from the sowing rigs, and by Friday sowing into moisture had ceased altogether. It is a difficult task sowing into a dry profile not knowing when the next rain will come.

However the good news is with the increased temperatures, the seed that was planted on moisture should establish quickly and provide feed for hungry stock before too long. This is a positive for growers that may have been feeding for many months, if not years, in towns like Coonabarabran and Coonamble.

The market globally has been range bound for the past week, meaning the Australian market has lacked direction with most of the wheat in the hands of traders around the country. The Chicago market traded in roughly a 20c range last week, equating to approximately $6 AUD in the May futures contract. This meant little movement in local Australian prices week on week, as ASX futures still remain well above export parity due to the ongoing dry conditions across much of the country. So with all the wheat in the hands of the trade, and both the feedlot and milling consumers well covered for the next few months, where to now for the East Coast wheat market? Well, it’s the same question farmers face each and every day. It all depends on rain.

If we see a general planting rain greater than 50mm, over the next 3 to 4 weeks, we will see a huge percentage of wheat and barley planted in the traditional timeframe. If this scenario plays out the market is at risk of gradually moving lower as the crop transitions through establishment into emergence and hopefully into tillering. As the crop evolves the trade and consumers begin to get more comfortable with production and they will take the foot off pricing, knowing that production will be there come harvest.

However if we miss a general planting rain, or, the rainfall is not general but variable (as the pattern has been recently), there is every chance the wheat market will begin to move higher as weather premiums are built in and end use consumers begin to take some cover.

Our crop establishment period in Australia runs in tandem with the most volatile northern hemisphere period, and if there are any hiccups in the northern hemisphere combined with establishment concerns in Australia, the market could very well be set alight.

Conditions in the US remain quite cautious as well, due in most part to the devastating floods across the Midwest over the past three weeks. This certainly has the wheat market on notice that any other issue could be promising.