WA Market Wrap - June

By Ben Cotsford

One consideration that must be made this year, is how are we going to store the predicted large production of grain across Australia this season. Last year many storages across Australia were empty due to multiple droughts on the East Coast and domestic demand from the west to east. This year we are off to a similarly great start as the 20/21 season although there is a considerable volume of tonnes remaining in the bulk handling systems and on-farm storages mainly in the east.

Export pace in the west has been slowed by natural disasters. Fires, cyclones and extreme rainfall events have affected all ports which will invariably result in some carryover stocks, results in a better than average harvest last year across both West and Eastern Australia. So, with potential carry-over stocks across Australia including that in on farm storage may result in potential for a lower-price environment come harvest time and a scramble to store a potentially record crop.

The Australian grain grower has been fortunate that grain prices have recently rallied on the back of reduced acres of corn and some extreme hot weather in Canada pushing the Winnipeg canola market higher. Winnipeg currently trading higher than the French Matif exchange. Normally Canadian canola finds its way into Europe so this is quite rare for this to occur and may correct at some point. The soybean/canola balance sheet will remain tight into the new season, which should continue to provide underlying support for these commodities.

Currently the Russian and US wheat crops are above average although the demand for wheat continues to remain strong as it is a feed substitute for corn. Unless there is a continued supply problem in corn or wheat prior to our new crop Australian harvest period, the world should have enough feed grains.

The recent downgrade to acreage numbers on corn in the US mid-west has provided some much needed support to wheat in Australia with FIS hitting $330/mt again in the first week of July., Historically these are respectable price levels and coupled with the yield potential, gross margin outlooks remain high. This has presented a great opportunity to top up forward sales for growers who after the continued good rains in Western Australia and the forecast for a good spring according to the BOM, are more confident of production.

Those looking to increase forward sales should choose their timing wisely especially this year as the Australian crop looks in great condition and currently there are some great opportunities to price at what is considered historically good levels. Feed barley demand is still playing on the trade’s mind even with the strong rally in corn there hasn’t been supported for an increase in cash markets in Australia. Given the exit of China from the Australian market 12 months ago and with predicted yields to be better than average both in the east and west, there will need to be some new markets found to support feed barley prices into harvest.