Generous June Delivers Potential
By James Urquhart
The month of June has been generous with its rainfall adding valuable moisture to the coffers of the New South Wales broadacre farmer. For some, the rain has been welcomed as a fair dinkum season opener, whilst for others it has consolidated what has already been a very good start to the 2020/21 growing season. As expected, crop conditions are responding positively however grain markets can also be very responsive to rain and with the excellent local conditions, as well as some improvement in overseas production prospects, grain prices have been on a steady downward trajectory in recent weeks.
Across NSW, the rainfall’s impact is clearly evidenced by an improving Normalised Difference Vegetation Index (NDVI). Using satellite imagery the NDVI provides an indication of plant health and whilst it is not setting anywhere near the same record pace we saw last year, a state-wide average for the NSW cropping belt shows this year’s crop treading a similar path to that of the 2016/17 season, another harvest that most growers would be happy to revisit.
Unlike 2016/17, and last season for that matter, New South Wales will enter the coming harvest with a considerable carry-in, in fact will be carrying the vast majority of the country’s surplus. This is despite the export program running at full capacity and likely to continue to, until the headers start rolling. Demand for feed grains into the Darling Downs is such that requirements are being met with supply from the north of the state, however it is the export channels that are providing the benchmark for pricing.
With trucks in short supply, the tight road freight situation has seen the spread in bids between road-only sites and rail sites widening, with exporters and domestic consumers with rail assets well incentivised to own grain in rail sites. There does not appear to be a short term fix for the road freight shortage, and with current crop prospects suggesting we have another big export-driven market crop ahead of us, it is probable that the market will again be preferencing stocks in those key NSW rail sites once again.
As it typically does at this time of the year, Northern Hemisphere weather is providing a lot of the direction to today’s grain markets. At the same time as some much anticipated rain has been received across the Mid-West region of the United States helping corn and soybean crop ratings in those parts, the US Spring wheat crop is suffering at the hands of relentless heat and dryness and is in the worst condition seen for a generation. This dryness also manifests itself in mounting crop concerns across parts of Canada and Russia, which will continue to remain an important consideration of the market going forward.
Any market decline is always disappointing for growers, however with prices holding at historically good levels and enough possible weather issues around the globe to provide further marketing opportunities, there remains a lot to be optimistic about. The greatest cause for optimism though, is the sight of full rain gauges and green paddocks.
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