BARLEY’S discount to wheat in new-crop slots is helping it to price into early 2020 feed rations, while on the production front, a dry end to winter is threatening yield prospects for crops in some lower-rainfall areas in all mainland states.
A combination of strong winds, some unusually warm days, a few frosts and no rain have battered the yield potential of crops.
Affected areas include north-west Victoria, southern Queensland, some districts west and north of Temora in New South Wales, the Upper Eyre Peninsula and Upper North in South Australia, and parts of Western Australia.
Some barley and wheat crops in these areas could well be cut for hay if they do not get at least 20 millimetres of rain in the next three weeks.
Offsetting this are good production outlooks for most crops in southern NSW, Central Queensland, and WA’s and South Australia’s southern districts, as well as Victoria in districts south and east of the Northern Mallee.
Divergent crop conditions have made it trickier than normal for traders to develop a buying strategy, particularly given the knife-edge situation for some plains crops in NSW, which may be cut for hay, and could yield 1-3 tonnes per hectare, depending on spring rainfall.
“If you had to say where the knife-edge for crops was, it would be around the Murrumbidgee River, and the Newell Highway,” one trader said.
“Anything south or east of those is generally okay, but everywhere could do with some rain.”
Some exceptions exist, and include the Rankins Springs and Goolgowi districts, and irrigated and inner slopes crops in parts of central and northern NSW.
In the southern Queensland market, sorghum for prompt delivery to the Darling Downs has traded in small amounts this week at $355/t, well below WA wheat at $420/t ex Brisbane.
WA wheat continues to be a major supplier to grain users at coastal and inland sites, but new-crop WA barley at $375/t delivered Downs for January is buying demand in feedlot rations.
“It’s pretty cheap compared with old-crop sorghum,” Horizon Commodities manager Aaron Jones said.
Limits pushed to extreme
CQ is expected to harvest 350,000-400,000t of wheat between mid-September and late October, and Darling Downs end-users are hoping supply-side pressure from Australia’s earliest wheat crops will depress prices.
However, this depends on CQ growers being willing to meet the market, and the strength of export demand for cargoes out of Mackay and Gladstone, and containerised wheat out of Brisbane.
In the Riverina market in southern NSW, ASW wheat is quoted at $360-$365/t for prompt delivery, down from its highs of recent weeks because of the switch in focus to new-crop, which is trading at around $330/t.
ASW wheat delivered to end-users on the Liverpool Plains of northern NSW is trading for September delivery at $410/t, and $380/t in the new-crop market.
Agracom trader Brett Donoghue said some northern end-users still had open positions for November-December, and were waiting to see how crops in the northern half of NSW fared before advancing coverage.
“It’s always a tricky time to trade when you’ve got an inverse, and it’s harder this year because the difference between the northern and southern crops is as extreme as I’ve ever seen it.”
Mr Donoghue said new-crop boat barley was looking like an attractive option at $375/t delivered Downs, $30/t under wheat.
“That premium for wheat will encourage people to switch to barley.
“At the moment, the premium for old-crop delivered Downs is still paying to bring it around from WA.
“In the new-crop, we’re at full execution on barley and that’s why it’s trading.
“It’s already pricing form WA and SA and on the wheat, we’re very close to full execution again.”
South Australian traders are offering grain into the Brisbane and Downs markets, but Victorian offers are yet to be seen.
“The Vic crop could be anything, and we could be exporting wheat out of Victoria and importing it into Brisbane from WA.”
Cereal crops which have a yield potential of 1t/hectare or less could be cut for hay in coming weeks, as those feeding sheep and cattle north of southern NSW continue to scramble for roughage to add to their rations.
From his base on the Liverpool Plains, Mr Donoghue said crops were “on a knife edge”.
“If we don’t get some rain in the next three weeks, growers are going to have to make some tough decisions.
“This year more than any other, we need spring rain to keep crops alive.”
In spite of a rising market cottonseed stockholders saw no reason to clear dwindling reserves, overwhelmed by the bleak situation amid scarcity of irrigation water to grow a 2020 cotton crop.
“Current crop cottonseed is around $15/t firmer this week, Gwydir Valley over $580/t, Namoi Valley $570/t, Macquarie Valley $540/t and MIA sites $510/t,” Woodside Commodities manager Hamish Steele-Park said.
The market has pretty much run out of cottonseed sellers. By the same token, the demand is drought driven, implying that the feedlot consumer typically is not there to purchase current crop cottonseed either at this time or at this price.
“New crop cottonseed quotes reflect only the buyer at around $530/t ex Gwydir and Namoi Valleys, virtually unchanged from previous week, and there are no sellers.”
ASX open interest retreats
It was a week of low activity for Australia’s ASX wheat futures contract, but barley was relatively active and open interest, a measure of the flow of money, was down on both commodities.
The eastern wheat (WM) January 2020 contract settlement price yesterday was $327.50/t, up $1.50/t over the week, volume traded during the week was 454 lots and open interest on Wednesday was 10760 lots.
The week high settlement was $334/t on Monday and Tuesday.
ASX reported options on its Eastern Australia wheat contract (WM) traded on Tuesday, the first such activity in recent times, with 92 $330/t put options trading at $15-$17.50/t.
The ASX feed barley (UB) January 2020 contract traded 422 lots during the week.
It settled at $280/t on 21 August, and a price rise late last week saw the peak settlement last Friday at $287/t.
Open interest on Wednesday had fallen slightly to 1317 lots.