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Feed grain update: Prices turn south

by Luke Walker, Robinson Grain Trading, 18 October 2011

Luke Walker, Robinson Grain, ToowoombaAustralian feed grain prices have taken a steep decline due to excellent rain over large tracts of crop growing areas on the East Coast. 

Reports of low protein wheat being harvested in central Queensland and the Western Downs are also putting downward pressure on prices.  

Markets have dropped $15 to $20 in the past fortnight. This has lot feeders excited and they have been taking advantage by buying wheat from January to June 2012 on the Downs in the $224 range for feed wheat. 

Contributing to the downward pressure has been the sell-off of futures in the US due to bearish USDA reports, based on an increase in global wheat stocks of more than three million tonnes. This takes world stocks-to-use ratio to just over 30pc – a 10 year high. 

World supply of wheat is 681 million tonnes.  World demand is 674 million, with world stocks at 202 million. 

The low protein wheat currently getting harvested is a concern because of a lack of high protein wheat globally. Low protein wheat will struggle to find export homes as it competes with the US and Russian supplies, while the high protein is being sort after by millers world-wide.

The grower will have limited enthusiasm to sell low protein wheat at current price levels, although cash flow will be needed.  I think growers will be inclined to use pools and store grain on farm or in bulk storages waiting for price spikes. This could impact domestic consumers such as lot feeders as growers hold and wait to market their wheat until 2012. 

Another contributing factor to weaker prices is growers cleaning out old crop wheat and barley before harvest starts.

Currently new crop wheat is trading on the Downs in Dec/Jan at $222.  Sorghum is trading at a premium to wheat at $226 on the downs, which is unusual to see wheat at a discount to sorghum. Barley is trading at $215 delivered downs in Nov/Dec.  Liverpool plains feed wheat is trading at $215.  Victorias Western districts wheat is $214 for Jan and South Australia ASW1 wheat trading in the $220 range for Jan.

  • Prices quoted in this column are of an indicative nature only to illustrate trends and do not represent a definitive buy or sell price at a given point in time. For specific prices for your region contact the author at luke@robinsongrain.com.au or             (07) 4659 0755       or twitter @lukergtgrain

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