THE QUITTING of some long positions held by the trade has put sell-side pressure on grain values this week, despite deteriorating prospects for sorghum production, and continuing dry conditions.
Carpendale Farms trading manager Andrew Jurgs said weakness in international grain values, as reflected in Chicago and MATIF contracts hitting lows in recent days, had also contributed to the softer market.
“Interest in buying wheat and barley is down at the moment, and the length in the market is held by the trade,” Mr Jurgs said.
Trade sources have said a lack of interest from China and Saudi Arabia in Australian barley, and from the world market on competitively priced US wheat have added to softness.
This has narrowed the spread from wheat to sorghum from $100 per tonne to less than $60/t in recent weeks, which makes wheat, as available in large quantities from cargoes out of Western Australia via Newcastle and Brisbane, good buying.
However, limited grower selling and the ratcheting down of traders’ long positions is expected to limit further price drops.
“The market is running out of sellers.”
The southern Queensland sorghum harvest is now thought to be around 70 per cent complete, with a chunk of it harvested last week prior to damaging winds associated with Tropical Cyclone Oma.
Growers were fearful winds would cause widespread lodging in the already stressed plants.
“It’s been falling over all by itself – it doesn’t need the wind,” one trade source said.
Some growers were desiccating sorghum and harvesting it three or four days later, much less than the usual minimum wait time of 10 days, at moisture well above the required delivery cut-off of 13.5 per cent.
The shortened drying down period has been created by a truncated growing period, caused by continued dryness and excessive heat during the grain-fill window.
High screening and low test weights continue to be the hallmark of many crops.
“There’s some Sorghum 1 out there but there’s a lot more Sorghum 2 or 3.”
While some late irrigated and dryland crops are some weeks away from harvest, most of the summer grain is expected to be off by mid-March.
With yields low and on-farm storages empty, or close to it, most growers in northern New South Wales and southern Queensland have opted to warehouse or sell a portion of their sorghum, and store the majority on farm.
While NSW sorghum has also had problems with screenings and test weights, some of it has been making its way into feedmills as far away from origin as the Riverina, the Hunter Valley and Sydney and surrounds.
Despite the on-farm prices of around $355-$360/t on-farm northern NSW, plus up to $60/t freight, not making sense on paper compared with wheat delivered into southern NSW at around $400/t, backloads are making numbers stack up.
Trade sources have said growers and traders are trucking sorghum south, and making the trip viable by bringing back loads of cottonseed from southern NSW warehouses, or canola meal from Newcastle.
Sorghum on-farm on the Darling Downs of southern Queensland has been trading at around $340/t.
Mr Jurgs said the forecast for continuing dry conditions in southern Queensland was likely to encourage growers to keep hold of their grain as a cash-flow source should planting rain for the winter crop fail to fall.
“The grower has seen $20 come out of the sorghum price in the past 10 days.”
“They will be thinking this will be their hedge if it stays dry, and they might hold on to 20-30pc of their crop.”
Trade sources in southern NSW have reported a drop in wheat values of around $15/t in the past week, based on a lack of bids, and adequate covering from volume end-users like Baiada at Hanwood, and corporate-owned feedlots.
Southern NSW consumers have been drawing grain from the Riverina and northwest Victoria, and liquidation of traders’ long positions has brought what could be described as delayed harvest pressure to the market.
Graziers, farmers, traders and consumers are now watching the forecasts for a pointer to the autumn break, which will regenerate pastures and allow grain-and-graze crops like oats, barley and long-season wheat to be planted.
Delivered silo bids for barley are sitting at less than $345/t and attracting little attention on the buy or sell side.
Norco trader Simon McDougall said some crops on the Liverpool Plains and in surrounding districts were in good order, but some just did not have the moisture under them, or enough well-timed rain, to make quality any better than crops on the Darling Downs.
“If there’s a quality problem on the Liverpool Plains, it’s screenings.”
“The crop’s run out of moisture and as it’s dried down, those smaller grains that could have filled haven’t.
Some growers have washed out sorghum 1 contracts in the past week, and this has pushed some traders into the market to cover their delivery commitments.
However, near-term volume demand for sorghum has been limited, especially as the small Australian crop is likely to preclude bulk cargoes loading in Newcastle and Brisbane.
“Wheat is looking more attractive as it gets cheaper.”
Overhanging the market is the realisation that the trade holds plenty of WA wheat which is likely to make its way to east-coast consumers in coming months.
Cottonseed markets today bore a $200/t inverse between nearby delivery and new crop ginning period commencing in April.
Central Queensland gins have commenced production but not in sufficient volume to cut spot cottonseed premiums. St George gin is expected to start early March however consumers and traders expect that significant price relief will only begin to be felt when the northern New South Wales gins, yet to accumulate sufficient picked cotton into their gin yards, commence in April. MIA gins, weather permitting, are likely to be running by late April.
Spot cottonseed values delivered Darling Downs were quoted steady at around $750/t.
Traders said NNSW and southern Qld markets were receiving odd truck-loads of cottonseed which was the north-bound leg of south-bound truck movements of sorghum carting from northern into southern NSW.
Woodside Commodities manager Hamish Steele-Park said Macquarie Valley and MIA cottonseed was being sourced at around $685 to $690/t fot.
Mr Steele-Park said the dry weather had pushed new crop offers firmer this week.
Moree was quoted between $540/t and $545/t fot, Macquarie Valley gins $50/t lower than Moree, and MIA $480/t fot gin spread 2019.
“Dry weather is causing the size of the cotton crop to shrink, particularly as the dryland crop is in trouble due to lack of rain in the Gwydir and Namoi Valleys.”
The Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) crop forecasts around planting time last September pitched the 2019 area at 250,000 hectares (ha), cut by half from previous year on inadequate available moisture, projecting cottonseed output at 820,000t. Meantime the ABARES February forecasts saw additional planting in Queensland on some timely local rain, lifting the area projection from 250,000ha to 280,000ha, but raising cottonseed production forecast only to 821,000t as yield prospects waned everywhere.
Namoi Cotton this week said its expectation of Australia’s 2019 cotton crop was about 2.25 million bales compared with 4.52 million bales in 2018.
“The rainfall in early December facilitated additional late plantings although this has now been offset by the extreme hot weather conditions throughout January 2019, which has lowered yield expectations,” it said in a statement.
Industry today was calling the crop in the range 1.9 to 2.3 million bales, which would indicate a cottonseed outturn of 650,000t to 800,000t during 2019 ginning.
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