PATCHY rain in Western Australia and dry conditions in Queensland have arrested drops in feedgrain values over the past week amid softening domestic demand from northern feedlots in particular.
The exception is new-crop wheat, which has firmed amid fading hopes for an average-sized wheat crop in Queensland as it heads into its typically driest months.
The Brisbane track-market bubble for nearby sorghum appears to have burst after hitting a high in recent days of $550 per tonne, and is now back to $410/t, $100/t above the new-crop March-April 2021 market now trading in small volumes.
“A few people are looking to wash out of June-July commitments because they haven’t got the cattle coming in they thought they’d have once the April-July export numbers clear,” one source in the feedlot sector said.
Prospects for wheat and barley crops in New South Wales, South Australia and Victoria look excellent thanks to timely planting rain, backed up by showers in the eight-day Bureau of Meteorology forecast.
WA can wait for rain for at least four weeks before yield potential on its crop now being planted will start to slide.
However, WA’s many growers who received less than 10 millimetres in recent days are growing anxious about crop germination and establishment.
|This week||Last week|
|Barley Downs May-June||$375||$380-$390|
|Barley Downs Jan||$282||$285-$290|
|Barley Melbourne nearby||$298-$300||$305|
|Barley Melbourne Jan||$265-$270||$270-$275|
|Sorghum Downs Jun-July||$410-$415||$425|
|Wheat Downs July||$455||$475-$480|
|Wheat Downs Jan||$330||$325|
|Wheat Melbourne nearby||$385||$390-$395|
|Wheat Melbourne Jan||$315-$320||$315|
Table 1: Indicative delivered grain prices in AUD per tonne.
Clear Grain Exchange Adelaide-based national manager business development Tom Guthrie said southern Australian markets appeared to have settled at lower levels after softening in the past week.
“We saw a bit of softness in the old crop market and that flowed through to this week,” Mr Guthrie said.
“After coming off the boil, wheat has started to pick up now, with wheat trading in Victoria on CGX through the week, APW1 at $367-375 track and ASW1 at $342-367 track.“
“There’s still some inherent demand to cover domestically in the July quarter.”
Mr Guthrie said the old-crop WA wheat market appeared to be supported by tight supply, inelastic demand from Asia for noodle wheat, and WA’s domestic market, which has grown in recent years.
“WA wheat and barley look overpriced for old-crop transhipment to Queensland, Victoria probably presents the best value if you need to originate for this market at the moment.”
Mr Guthrie said global factors being watched included the dive in demand for ethanol.
“One of the bigger challenges for the feed grain complex is what happens to corn as ethanol demand declines on the back of softer oil values”
“Globally, we’re going through the normal cycle for northern hemisphere weather, and forward prices for Black Sea wheat are well priced into most destinations.
“Now it’s a function of where its final production will be, come late July and early August.”
Sources have told Grain Central consumers were being asked to pull grain from the Brisbane free-on-truck market as soon as possible to free up space for more grain due to arrive by ship from SA and WA.
“There’s pressure on barley from feedlots trading back out of some of the contracts they’ve booked,” one source said.
“Once we get into July, nobody would want grain sitting in Brisbane come October.
“There’s no reason to have it.”
Robinson Grain Toowoomba-based commodity trader Anthony Furse said the price impact of a softening in Queensland’s near-term demand for feedgrain was being countered by dry conditions in most cropping areas of the state.
“All the markets feel soft and weak, but it gets interesting because it’s gotten so dry and June-July are typically our lowest-rainfall months.”
On top of that is the impact of COVID-19 on domestic and global markets, particularly with some US meat-processing plants shut down, and what appears to be a souring relationship between China and the US.
“How many chooks do we need to feed, how many cattle go into feedlots?
“There’s a lot we’re not sure about.”
While dry conditions in Central Queensland (CQ) and the Darling Downs are limiting potential for the state’s new-crop wheat, consumers in southern Queensland look assured of a ready supply of wheat and barley from NSW, where the season is off to a flying start.
Frost has caused some damage to sorghum in pockets of the Downs, and some crops are being cut for silage to supply local feedlots because their expected grain yield at 2.5t per hectare or less is around half the long-term average.
Prevailing dry conditions are seeing hopes fade for a sizeable CQ sorghum crop as it moves into its last weeks prior to desiccation and harvest.
ASX rolls with market
Stalled demand and good rain prospect cut prices of any grain market perceived too dear to clear. In ASX grain futures wheat was particularly affected.
While current crop barley was 1pc firmer this week, the current crop wheat futures price ended the week 6pc lower. The July wheat contract yesterday settled at $370/t, down $22.50/t from the $392.50/t settlement a week earlier. The July barley contract settled yesterday at $298/t, up $2/t from a week ago.
The 2021 and 2022 wheat contracts saw less severe movements. January 2021 east coast (WM) wheat yesterday closed $315/t, unchanged from a week earlier, and January 2022 yesterday settled at $318/t, up $3/t compared with a week earlier.
The barley January 2021 contract yesterday settled at $253/t. A week earlier it was $259.80/t.
Cotton pick underway soon
Cottonseed trading activity remains minimal as ginning in New South Wales is likely to get underway in earnest in the last half of May, four weeks later than normal.
“Values are nominally unchanged, quoted gin period around $580/t and $590/t ex Namoi and Gwydir Valley sites, and delivered Darling Downs $620/t last half May to July,” Woodside Commodities manager Hamish Steele-Park said.
The new crop 2021 situation continues to reflect a hefty inverse, ex gin Gwydir Valley quoting $330/t gin spread.
“NSW dams are still only 15-18pc of their water storage capacity, so there’s a long way to go for a decent cotton crop to be planted in NSW this spring.”