Feedgrain Focus: Coverage switches to new crop

Liz Wells, August 12, 2021

This crop of Leabrook barley at Brigalow on the Western Downs is one of many across the region with above-average yield potential. Photo: Angus Dalgliesh

CONSUMERS and traders have advanced their buying of new crop this week now that growers are starting to forward sell reasonable amounts of wheat and barley as offshore markets drive values to new season highs.

Trade sources have said the grower has been slow to shift focus away from heady new-crop canola prices, but multigrade wheat contracts are being taken out now that new-crop values are close to $300 per tonne.

On the production front, a week of relatively dry weather in all states bar Western Australia has been a blessing for growers wanting to apply nitrogen and spray weeds ahead of the onset of warm weather.

The big question remains the protein profile of wheat in New South Wales especially, and domestic feedgrain users are seeing barley as the best buy as the drought in Canada and the northern US and lower-than-expected yields in Russia drive up the wheat complex.

Nearby New-crop
Barley Downs $288 down $2 $284 up $9
Wheat Downs $340 down $4 $320 up $10
Sorghum Downs $290 down $2 $270 steady
Barley Melbourne $280 up $5 $284 up $12
Wheat Melbourne $348 up $8 $349 up $12

Table 1: Indicative delivered prices in Australian dollars per tonne.

Protein propels exports

At Young on the south-west slopes of New South Wales, Grain Focus principal Michael Jones said local wheat markets have risen on the back of offshore strength.

“It’s pretty firm, and that’s just because it’s following the overseas market up,” Mr Jones said.

“End-users aren’t desperate; they’re getting plenty of offers on barley, and enough wheat.

“Everything that’s been done is August-September delivery or pick-up, so we’d be getting close to booking October deliveries now.”

Mr Jones said the prompt market has been reasonably stable over the past two weeks, but new-crop has risen by around $20/t.

“Growers were excited about doing canola doing earlier on, and now the focus is turning to new-crop wheat because we’re close to $300/t delivered depot now.”

Mr Jones said growers in this high-yielding cropping region have managed to spread considerable amounts of urea to nourish the crop ahead of its critical growth phase in spring.

Delivered NSW port bids are stronger than relative up-country bids, which indicates that export demand is buoyant as Australia gets close to its last month in the current marketing year.

NSW was expected to have a wheat carry-out of at least 3 million tonnes (Mt), and is expecting another big crop, as evidenced by GrainCorp’s announcement earlier this month that it will build 1Mt of extra storage capacity in northern and central NSW and north-east Victoria ahead of harvest.

While barley and wheat yield prospects for the NSW and southern Queensland crops are above average, quality is the great unknown.

A wet spring would likely result in a larger-than-normal proportion of the crop being classified ASW- or APW-grade wheat, and this would likely displace barley in cattle, pig and poultry rations.

However, a hot and dry spring would lift the protein profile for crops with plenty of nitrogen under them to the AH-grade or better that the world is crying out for due to drought-reduced supplies from the Canadian Prairies and US Great Plains.

Inverse averted

Flexi Grain pool manager Sam Roache said the quality profile of current-crop carry-out was well suited to current domestic and export demand.

“I’m not sure it’s going to get blended with new crop; what’s happening is the price of that wheat for August-November shipment is strong enough to stop the inverse ahead of new crop,” Mr Roache said.

“If it were ASW or APW-type wheat, there would be an inverse.”

Uncertainty over wheat protein is also encouraging domestic flour millers to book additional coverage from warehoused or on-farm wheat, which is creating extra competition for domestic feedmillers.

Growers are booking some new-crop tonnage on multigrade spreads, and watching the premium for protein balloon to $30-$40/t, up from more like $10/t prior to the North American drought impacting the effect.

In South Australia, Australian Grain Exports trader Tyson Hewett said the Melbourne market had strengthened more than the Adelaide one.

“We were $5-$10 above Melbourne, and now we’re on par,” Mr Hewett said.

“That shows there’s now more demand in Melbourne.”

Port Adelaide, where Viterra operates two terminals and Cargill and Linx a mobile shiploader each, is the only Australian grain port with four berths, and has been shipping cargoes for a number of exporters.

Ex Port Adelaide cargoes have been drawing grain from as far east as the Victorian Mallee in recent months.

“That’s been for export and domestic demand.”

“I think most of the domestics are covered now.”

Mr Hewett said the latest rally was encouraging growers to offload more tonnes ahead of new crop.

“Now that the price has gone up, they’re getting rid of a bit more now, and it’s coming out of private sites and silo bags.”

North done on nearby

Feedlots in southern Queensland and northern NSW have all but completed their buying ahead of new crop, with the first loads of barley expected to arrive at their mills late next month.

An ideal growing season means crops throughout the region are expected to yield about 50 per cent better than average, and with cattle on feed numbers at below capacity, local supplies should keep them ticking over into January.

“Most feedlots are done on old crop,” one trader said.

“Growers have been hanging on to their Prime Hard wheat, but I think there’ll be plenty of barley around, and that’s where we’re looking.”



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