Dry conditions in Northern Hemisphere strengthens markets 

By James Massina

20th June, 2023 

Futures markets have found some strength recently as dry weather continues to be the order of the day throughout much of the US. The ten-day forecast for the corn belt shows no sign of improving and the longer-range picture into mid-July is telling much the same story. With the funds currently holding relatively square positions in the futures markets, they certainly have the firepower to continue to push this market higher until the forecast turns. Reports out of northern Europe are also tending to the drier side and declining crop conditions only further supporting the bulls in the market. Global cash markets too are generally stronger with the only standout the Russian FOB wheat market which seems to behave entirely oblivious to everything that’s going on around it.

Locally the cash market has been trying to resist the move in overseas markets with barley being the most stubborn, and to a lesser extent wheat. The rally in soft seeds has seen the local canola market appreciate giving those with unsold old crop the opportunity to exit some inventory at values nearing $700 track through New South Wales. Selling in the new crop canola space through the eastern states has been less regular as the constant reminder of the long-range weather forecast through this region remains a factor in people’s decision making. With a drier bias, and cash values well below what we’ve seen over the last twelve months, the grower is understandably lacking the impetus to engage here.

Conversely, the domestic consumer is seemingly becoming increasingly concerned with the outlook and has been willing to extend old crop coverage through the back end of this cropping year. Justifiably wheat is making up the core of the feed ration through northern New South Wales and Queensland as barley continues to price at values such that those that can substitute out of that grain will do so. And with old crop barley now pricing itself into the Southern Queensland domestic market from the Central West of New South Wales, that market has probably found its peak for the time being.

Sorghum is also doing its best to price itself out of the domestic ration as that grain persists in making its way off our shores in boxes at a rapid pace. Sorghum values have been on a slight incline partly due to the box trade but also as US offers into export destinations creep higher on deteriorating crop conditions through those regions in the US. Australian values look too expensive from a bulk perspective however as long as the boxes continue to flow, the market could remain stubborn and supported for a while longer yet. With Central Queensland now pricing by road into Brisbane, perhaps it is the export shorts in the market that determine price direction for the time being.