WA Market Wrap - March
By Ben Cotsford
The past two months has seen some great rainfall totals over a large part of the West Australian wheat belt with a few lucky areas now over 150mm of summer rainfall. This now presents some great opportunities and given a timely break in early autumn allow the Western Australia grain grower to plant their full cropping programs. In recent years we have seen an increase in rotational fallows in the eastern areas of wheatbelt and the temptation will now be there to increase plantings depending on the timing of the opening break.
The grazier/cropper, after last year’s record stock prices, is significantly down on their DSE numbers. These low numbers are also a result of the East Coast drought breaking and the re-stocker demand from graziers across the Nullarbor resulting in over 2 million sheep and 300k cattle heading east. This reduction in stock numbers for many graziers could also see extra paddocks be earmarked for cropping. Confidence in the season is growing with summer rainfall and pressure on pasture paddocks being greatly reduced with the lower stock numbers. This recent summer rainfall will hopefully keep pastures going until we receive the opening break normally in late March/April.
Good summer rain and the prevailing forward indicators for canola, wheat and malt barley are very strong for this time of year which could mean we see one of the biggest plantings on record if the break comes on time.
We are hitting peak export demand on the record Australian crop with shipping numbers under pressure and this is expected to last a few more months before Northern Hemisphere grains come onto the market. It is unknown if supply chains will hold up, especially on the East Coast and with the recent fire and flood damage to the rail infrastructure in the west, the question is whether it will slow the accumulation pace in the short term. What is certain is that all storage and handling companies across the nation will be scrambling to get as much grain exported before any new crop comes in to allow space for a potential big harvest.
As we stand today most commodities forward markets are showing higher than average levels for this time of year. On a Kwinana basis canola (CAN1) is the early standout trading up to $670 FIS and APWMG wheat up to $325 FIS, feed barley trails behind at about $265, with malt values tracking at $300 FIS on a fixed grade basis with Bass and Flinders at a $12 premium to the predominantly grown Spartacus variety. The strong prices this time of year should give the grain grower some confidence that given an average crop there should be some profits to be made.
Rain, rain, come again
A week can be a long time in grain markets and the week just passed was no exception. With over eight inches of soaking rain received in parts of Southern and Central New South Wales cropping belts since Thursday last week, agriculturalists will look back fondly.
Read MoreTightening ocean freight exerts its influence on local markets
The tightness in the global freight market is certainly being felt in supply chains across Australia. Naturally, as the cost of vessels rise, freight rates to move the product also rise and as a result the cost of moving grain and oilseeds from Australia to consumers globally also increases.
Read MoreSummer crop rounding the halfway mark
The past week has seen some handy rainfall totals down the East Coast, with Queensland and Northern New South Wales the primary benefactors. Those with later Summer crops planted, especially in northern areas and into the Liverpool Plains, are now all but assured of an above average result.
Read MoreFeed grain surplus as we hurtle towards sowing
With the export market largely dominated by milling grade requirements, there is fear that feed grain markets will come under significant pricing pressure in the next 4-6 weeks.
Read MoreAussie dollar thaws while US/Russia freezes
There are fears of a winterkill across the US plains where large quantities of wheat may have been affected; this will get a lot of attention now and in the coming months.
Read MoreA return to pricing fundamentals
Overseas markets have been erratic over the past couple of weeks, to say the least. With most markets predominantly being driven by China recently, with their New Year holiday taking place, US futures have turned to fundamentals for price action.
Read More