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Home//News Hub // Volatility likely to remain a key theme as we near sowing window
  • News Hub

Volatility likely to remain a key theme as we near sowing window

By Angus Groves

16th March, 2022 

 

As the devastating situation in Ukraine continues to reverberate around the world, we saw the dramatic effect on commodity markets last week with large price swings as the market digests each headline.

All futures markets, be it, wheat, corn, soybeans, or canola are now showing significant inverses, which merely mean the market is willing to pay more for these products in the short term than it can be expected to pay in future. Simply put, the situation in Ukraine is already having a dramatic effect on global trade flows.

Certainly, in Ukraine the ports are now closed and while Russian ports remain open many are closing their operations due to safety concerns. There are also concerns about the planting of the Ukrainian crops.

Back home on Australian soil I write this article with a somewhat guilty feeling in the bottom of my stomach. Conditions could not be better back here as we push through the middle of the first month of Autumn. Farmers are busily sowing the earliest of crops, which include oats and grazing cereals and with mild conditions expected while La Nina winds down, we should see a positive sowing experience as we push into April and May.

One thing to consider is when to begin making new crop sales with forward cash prices at hugely elevated levels. Many farms are opting to hold off sales until the crop is either in the ground or has emerged from the ground in good condition. And even when this occurs most would only conservatively sell 10-20% of their budgeted production at this point.

Based on the soil moisture profile, the medium-term rainfall outlook and the strong cash prices, forward sales should certainly be considered if you are confident of your workload required to get the crop established on time.

Another key question this year is around crop rotation and whether to switch from one crop to another. I know there are many producers across NNSW considering a switch from chickpeas to canola this year. This decision is made primarily due to the troubles selling chickpeas this season, but also due to the strong forward pricing and multitude of buyers available for canola.

It’s worth going back to basics with your local agronomist comparing gross margins for one crop vs the other. Canola can be a difficult crop to establish effectively and certainly is more costly to grow with input prices elevated. But there are also many benefits of growing canola including chemistry available to control weeds and strong buyer interest in the commodity itself. As always with canola it pays to get the crop established early when soil moisture is available.

       


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