Strap yourself in for a trip around global grain markets
by Matthew Trewin
To provide an update on the grains market these days you almost need to be a foreign correspondent. There are so many influences from around the globe combining to form a picture of the current market and its future direction. So strap yourself in for a trip around global grain markets.
Firstly, to the United States with the USDA acreage report for June. The biggest news to come out of this report was the 2019 corn acres planted coming in at 91.7 million acres with trade estimates at 86.662 million acres and down just 1.1 million from the March estimate. The market was anticipating far worse following the deluge in the Midwest which slowed planting and many thought would severely limit the acreage under production. Some pundits thought the gap between market expectations and the USDA report was one of the biggest market misses in recent memory. The news hit corn values big time and wasn’t helped by an improvement in weather conditions that may see acres increase further. The market rebounded somewhat when it was revealed that more than 15 million acres of corn counted in the survey, actually wasn’t planted and that 14 states will be resurveyed in time for the August report.
The USDA report on wheat was a bit more predictable and wheat merely followed the antics of the corn market on the day. The USDA report all acres planted at 45.6 million acres, roughly in line with the trade estimate. Across the Atlantic, the European Commission reduced wheat forecast to 142.3 million tonnes, slightly down from the previous month. While the dryness in the Black Sea region has been well discussed, there has been some new revelations coming out of India. It is being reported that India has recorded its driest June in five years. About 55% of India’s arable land relies on rainfall and some report that if sufficient rain does fall in the next few weeks, India could face a crisis. Monsoon rains were a third lower than average but were even lower in some states. Farm Ministry data shows farmers had planted 14.7 million hectares, down about 10% from the previous year.
Remaining in Asia, the G20 Summit has been grabbing the headlines. While our own Prime Minister Scott Morrison has been advocating for our trade interests with US President Donald Trump, it is Trump’s meeting with China’s President Xi that captured everyone’s attention as the world waits to see which direction the US-China trade war will take. Unfortunately, there doesn’t appear to be any quick fix. The leaders have indicated they will not escalate the trade, but they are not backing down either. Meanwhile, there is no news on our own issues with China on the anti-dumping claims for Australian barley. This remains a critical issue for the Australian barley market.
With our Middle Eastern foreign correspondent’s hat on, Saudia Arabia last week traded predominantly Black Sea grain for August, September and October shipment. Australia was on average about USD $35-40 out of the market. From a domestic perspective, consumers are not looking too far out for new crop with uncertainty surrounding the weather in the north weighing on feedlots and cattle markets.
So that’s it. Hope you enjoyed the trip. While local influences will always play a role, staying abreast of your international news is a pretty good habit for Australian grain grower to have as we undoubtedly play in a global market.
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