Markets susceptible despite the nice drop

by Angus Groves

A slow moving weather system featured across the eastern states last week, with the rain beginning in South Australia and moving slowly North-East as it filtered into QLD over Friday and Saturday.

Last week’s rain was just what the doctor ordered for NSW, and although it was fractionally late for some areas, the totals were fantastic for most of the state.

The North-West was under some of the best falls on Friday with Walgett collecting 43mm, Coonamble 28mm, Narrabri 30mm and Tamworth 40mm. Further south the totals were not as high, but still consistently in the 10-15mm range, with Trangie and Peak Hill recording 17mm and 24mm respectively, which were the stand outs.

Certainly for crops that were germinated prior to this rain, it will be a nice boost before the cool temperatures really take hold in the coming months. However, those that only collected 10-15mm for the week will be hoping for more rain to ensure dry-sown crops germinate evenly. For the seed sown into heavier soils, 10-15mm of moisture may not be enough to germinate these crops adequately, so follow up will be needed before too long.

With this rainfall now ensuring a general plant, for the cereals at least, people should be wary that the market will be very susceptible to falls as further rainfall comes into the forecasts. The trade still hold reasonable length in wheat and barley from the bulk they purchased at harvest time, at values significantly higher than where we are today. Because the consumer is happy to sit on the sidelines and purchase what they need month-to-month, this leaves the trade open to further falls in cereals as new crop supplies become more certain.

The surplus from last year’s bumper crop in Western Australia will also be weighing heavily on local markets, and this will need to find export homes before new crop comes online later this year. These export homes were thought to be made up of a mix of drought destinations in Eastern Australia and overseas markets, but if the rain continues to fall on the east coast there may be more West Australian grain available for global export destinations than first thought. It needs to be noted that global stocks are high and there is plenty of competition for Australian wheat.

The primary cause of concern for the barley market still remains the uncertainty of the anti-dumping allegations from China. Old crop barley markets remain elevated due to drought affected east coast domestic markets, however pricing for new crop barley remains $60-75 behind those values as the China situation weighs on the market. And as the rain continues to fall across the eastern states, the drought demand may also subside leaving us with a surplus of barley when new crop comes available.

There are a few situations that may alter this path, the obvious one is the resolution to the trade disputes with China, and this should see immediate relief for barley pricing at harvest. Let’s hope for this outcome. The other situation is continued drought which would absorb all of the additional surplus….but let’s not even go there.