Feedgrain Focus: Wheat-to-barley spread widens

Liz and Henry Wells, 27/02/2020

WHEAT prices have risen around $5 per tonne in the northern market in the past week, while barley has fallen by the same amount.

Wheat is now trading at $455/t per March-April delivery to Darling Downs consumers, compared with $375/t for barley.

Barley is now thought to be cheap enough to be buying demand in the northern and southern markets.

“The normal rule of thumb for the wheat-barley spread is $15-$30,” one trader said.

“It’s $80 now, which makes you wonder if wheat’s pretty tight, and there’s more barley around than we need now that drought feeding and backgrounding for the feedlots has quietened right down after the rain.”

In southern Queensland’s new-crop market, the July delivered Downs sorghum market is trading at $320/t in minimal volume, while January new-crop wheat is trading at $340/t, $30 above barley.

AUD supports barley

A weakening Australian dollar is making barley look more attractive to exporters.

This is expected to support prices in the near term.

The AUD’s continued slide took it to less than US 66 cents in overnight trading, a low not seen since 2009.

“Domestic prices are walking a fine line between a very competitive AUD, a tight old-crop balance sheet and improving winter-crop prospects,” Flexi Grain analyst Lachlan Hume said in the company’s daily market report.

Grower selling picks up

Cloud Break Grain Marketing managing director Ed Scamps said barley’s increased discount to wheat was buying it some demand from South Australia’s non-poultry feed millers who can switch between the white grains.

“End users are picking up their barley-buying program.”

Mr Scamps said end-users already had some cover through March-April, and were likely to extend it where possible due to the tightening wheat balance sheet.

“From a grower point of view, they’re fairly well sold, and stocks in SA are getting tight in the system and on farm.”

In the South Australian feed market, wheat delivered consumer is trading at $355-$360/t, steady on last week, but barley has eased a few dollars to $288-$290/t.

“With currency where it is, barley is nearing export parity, and its balance sheet is nowhere near as tight as wheat’s.”

Mr Scamps said concerns about COVID-19 and its impact on global grain demand also had growers keen to tidy up old-crop stocks, and looking at forward selling some tonnage at these high-decile prices.

Drought far from over

In New South Wales, grower selling has also picked up from negligible to modest levels on recent rain.

While patchy, the rain has enabled some producers to feel cautiously optimistic about the upcoming winter-crop season, and will allow them to start their ground preparation.

Falls in the NSW grainbelt in the week to 9am today include 23 millimetres at Ardlethan, 30mm at Mungindi, 42mm at Moree and 33mm at Tamworth.

Western Australia’s grainbelt has had widespread rain, with 80mm at Bencubbin, 104mm at Coorow West, 122mm at Gabbin, and 95mm at Mingenew being among the highest totals.

Registrations have been even patchier in Queensland, with Meandarra receiving 56mm, Roma 126mm, Springsure 39mm and Surat 145mm.

However, some districts keep missing the rain, and the NSW and Queensland drought is far from over.

The Central Queensland sorghum crop is now mostly planted, and forecast to yield 300,000t, above the standing ABARES estimate of 260,00t for all of Queensland.

China may take some of that crop which will hit the market in July, but the domestic stockfeed industry, and possibly the Dalby Bio-refinery, is expected to buy most of it.

Softer up-country

Robinson Grain wheat trader Jock Benham said the Melbourne wheat market had firmed, but inland values have largely stayed put.

“There’s a bit more grower grain coming to the up-country market, but wheat is pushing a bit higher in Melbourne.

“With the rate that wheat has been shipped out of Australia, it will probably remain where it is.”

Wheat is trading in the Griffith market this week at around $380/t delivered, $3-$5 above the Melbourne market, while barley is trading at roughly $304-$307/t delivered Melbourne.

“Drought feeding has slowed up, although it’s still worth putting grain into lamb with lamb prices the way they are.

Cottonseed hopes freshen

Heavy rain last weekend, particularly in the upper reaches of Queensland’s Maranoa River system, has sent a run of water through already full storages at St George.

The water will travel through the Dirrinbandi area into NSW watercourses which join the Darling River above Bourke.

The water situation generally has improved in the northern NSW cotton valleys, and looks set to secure late 2020 planting of cotton for picking in April 2021.

ASX mixed

The ASX wheat futures January 2021 contract settled $12/t cheaper this week, trading 260 lots last Friday.

Current-crop wheat contracts traded 1332 lots, settling in a narrow price range which ended the week within a dollar or two of last week.

January WM east coast wheat yesterday settled at $325.50/t, down from $337.20/t a week ago.

The March and May contract settlement prices yesterday were $361/t and $365/t.  They settled a week ago at $361 and $365.90/t respectively.

Barley traded 360 lots during the week.

It would appear to have been mostly Mar/May spreading.  No new-crop lots traded. The January barley contract settled yesterday at $277.50, 50 cents below a week ago.

March and May contracts were lower this week by $6/t and $5.50/t respectively.




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