Here comes the grain
By Darcy Ingram
With welcome rain across the month of June the majority of Australia’s cropping regions are shaping up to have an average to well above average production year for 2021/22. Victoria and South Australia have made significant steps in recovering from a late break, New South Wales and Western Australia are showing potential for a bin buster season, whilst farmers in Southern Queensland have reported the best start to winter cropping in nearly a decade. Even with significant changes to Australia’s production potential, a considerable carryover suggests we will almost certainly be heading in to another strongly export focused year.
The overall positive outlook for Australia’s grain production and significant carry-in stocks is beginning to present itself as a potential problem for the trade in placing the grain and establishing fair value. Locally, old crop grain values have been experiencing a downward trend in recent weeks as export and consumer shorts are seemingly gaining access to stocks without too much difficulty following the beginning of a new financial year. Likewise in new crop, cereal values have softened as the trade takes in to account a growing crop size and Northern Hemisphere harvest pricing pressure. Canola remains the shining light of opportunity, quickly recovering to near record domestic values as the Canadian crop burns up under extreme drought conditions.
As expected, global values have come under pressure in recent weeks with harvest underway in the Northern Hemisphere and more grain enters the marketplace. Surprises in the USDA stocks and acreage report and overseas weather concerns have provided some bullish inputs to partially offset an otherwise bearish market period. US winter wheat harvest has surpassed the halfway mark and while much has been made of the extreme heat and drought conditions in the North and South growing regions, the central and eastern zones received timely rainfall with the USDA rating the winter wheat crop 47% good/excellent as of last week. Wheat harvest has just begun in the key export region of the Black Sea and despite a less than favourable start, yields are only expected to be slightly down on the five-year average. Russia is expected to dominate the wheat export market yet again.
With high ocean freight rates seemingly here to stay and an overall positive outlook for global wheat production, export competition is expected to be fierce this year. Perhaps where pricing opportunity lies for Australian wheat growers is our freight advantage into Asian markets and the ability to produce high protein quality wheats. Whilst US winter wheat has escaped the worst of the North American heatwave, US and Canadian spring crops are in a very bad way. The US spring crop condition, of which 95% is grown in the Northern Plains, was rated at just 16% good/excellent last week compared with 70% last year. The US spring crop produces a sizeable portion of the region’s high protein wheat and with protein levels reportedly low in the US Hard Red Winter crop thus far we may see a squeeze in high protein quality wheat that will hopefully extend into Australian markets.
Weather driven rally for grain prices
As we see off the month of June and for most people, the end of sowing, the BOM reports that last month produced above average to very much above average rainfall for a large part of the New South Wales cropping belt. Undoubtedly there are some that would appreciate a top up, however the general consensus is that a few days of dry weather would be a welcome break.Read More
Generous June Delivers Potential
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.Read More
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As Phillip Lowe, the Reserve Bank of Australia governor said last week, the performance of the Australian agriculture sector throughout the Covid pandemic has helped underpin the nation’s economic recovery.Read More
Crop Forecast looks strong, but will prices hold?
So much of 2021 is yet to unfold, including the all-important spring, however recent rains have the New South Wales crop starting to resemble that of 2020. Unfortunately the same cannot be said for some other parts of the country.Read More
Variable harvest predicted
As expected, the production figures for the 2020-21 harvest and prospects for the 2021-2022 harvest are forecast at well above average, however worth noting this is not without regional variation.Read More
SA Market Wrap - May
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