U.S China Wheat Trade Tensions Drive Market Decline
By Paige Hill
19th March, 2024
US wheat led the falls on the news developing that China has supposedly cancelled or rolled several Australian wheat cargoes, adding to the cancellation from US exporters last week. The ASX May wheat contract was down A$3/t to $318.50/t on Friday as the responded to reports of China cancellations. European wheat markets also fell with the news; however, falls were less severe, with lower production in the coming season due to excessive rainfall and soil moisture starting to gain more attention. Wheat markets continue the downwards trend as weak demand supported by plentiful global supplies saw no reason to push markets higher. Growers are still searching for domestic and export demand for wheat as the combination of pressure from new crop planting and on farm storage constraints. Soil moisture levels through much of the east coast have great potential coming into planting with NSW, SA and Vic picking up some handy rainfall totals over the week/weekend, while the WA totals were hit and miss.The 8-day forecast issued yesterday has more rain on the way for NSW and eastern Vic, while Qld is expected to pick up the highest totals with 10-50mm pencilled in for most cropping regions.
Sorghum production is taking centre stage as harvest progresses in northern New South Wales and Southern Queensland with earlier harvested crop heading into container packers. Delivered Downs and Brisbane is currently pricing $15 - $20 better than the track market with growers opting to avoid the depots due to the current pricing for April/May delivery. Feeding demand from the poultry and pig sectors are estimated to have enough coverage to get them through April-May, when harvest volume is expected to peak. Sorghum growers are still waiting on demand from export markets, which will hopefully see some movement over the coming months, as crop forecasts now exceeding 2Mmt there will be a surplus of sorghum if there is no more.
Quality so far has been very good, and this is expected to continue barring any significant widespread weather event that is not currently on the forecast.
As sowing approaches and provided soil moisture levels remain ample, the expectation is unsold tonnes will continue to come to market and meet prevailing market prices. There will invariably be cereals kept on farm and carried post June as a financial strategy, and a drought hedge. The market since harvest has so far not been friendly to those carrying grain however opportunities to exit these positions will invariably present over coming months. Whether we see values similar or better than harvest remains to be seen.
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