May outlook driving farmer confidence

By Matt Wallis

There is growing optimism as this year’s sowing program advances with the arrival of rainfall across the traditional ANZAC day period and widespread follow up of 30-70mm throughout NSW and VIC cropping belts accumulated at the beginning of May. April was generous to the east coast belt with the BOM outlooks building further confidence in what is shaping to be a farmer’s year. WA has still yet to record any significant rainfall events in the growing season which keeps the state on the watch list, while after an encouraging early start, QLD cropping regions will be looking for follow up rains in May after receiving less than 50% of their April average. 

Locally, canola plantings are generally on the early side this year where early soil moisture was taken full advantage of. Although plantings are expected to be slightly lower year on year, the production prospects are much healthier in excess of 3.5mmt, an increase of over 1mmt from the 2019/20 season. At present, new crop canola in the Port Kembla zone has been well bid between $600-$610 track discounted by $5-$10 into the Melb/Geel zone. Grower selling has been strong as a full moisture profile has seen farmers regain confidence while the opportunity to forward sell at a premium and risk free with some specialty programs has them hitting the sales boards. 

The volatility of late in canola markets has been largely thanks to currency movements of the EUR: AUD trading a range of 5c during the COVID-19 pandemic. The underperforming Euro combined with huge losses and uncertainty regarding future oilseed demand has resulted in heightened levels of volatility for the commodity. 

Wheat markets domestically have held up well considering the potential this season is showing. Generally, strong pricing and healthy supply don’t coexist while for the time being, we are seeing both. New crop at Port Kembla has been well bid ranging from $315-$330 coinciding with new crop production forecasts ranging from 26-28.5mmt. Different story on last seasons crop with offers far exceeding the bid side of the ledger and delivered markets falling in the vicinity of $25-$35/mt over April. 

Futures markets have been closely watching the dry conditions develop throughout the Black Sea and Europe where recent rains have bought time but not enough to bring the crop home. Of late there has been less bullish inputs to the market while locally the domestic end users step back as the panic supermarket buying eases. 

Early barley pricing signals are aggressively translating to a conversion from barley to wheat plantings where possible. As political tensions with China rise, US corn approaches $3USD/bushel and domestic drought feeding declines, new crop barley finds itself priced $75 under APW wheat. The old crop market is taking a break with offers far outweighing bids working lower to break the current inverse standing at $70/t. This has seen feedlots withdraw bids completely as they gamble the market will move lower.