Markets

Feedgrain Focus: Moves mixed amid rain, big yields

Liz Wells, November 4, 2021

Showers have stopped harvest in some parts of central and southern NSW today, but have mostly missed farms in the states north including this one at Pallamallawa. Photo: Kim Storey, Avalind Photography

SOUTHERN markets have dropped this week as some big yields start to weigh on strong price signals coming from global markets, while northern prices have mostly firmed based on buoyant demand from export accumulators.

With plenty of showers forecast for south-eastern Australia in the coming week, domestic feedgrain users are feeling increasingly confident that offers of downgraded wheat will appear before the month is out.

This has kept their buying to a minimum, but they are conscious that grain may be hard to move, either because of the limited supply of road transport, or because rain prevents outturn.

Nearby January
Barley Downs $270 up $10 $285 up $15
Wheat Downs $340 steady $340 down $10
Sorghum Downs $315 up $5 $300 up $10
Barley Melbourne $275 down $15 $285 down $11
Wheat Melbourne $323 down $49 $330 down $28

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

In the week to 0900 Thursday, rainfall registrations were patchy, and in Queensland included: Dalby 11mm; Jondaryan 13mm; Miles 47mm; Roma 16mm; St George 36mm;

In NSW, little if any rain fell in southern and central regions, but the north copped some heavy falls, and registrations include: Narrabri 14mm; Pallamallawa 41mm; Quirindi 18mm; and Warialda and Wee Waa 35mm.

Rain was more general in South Australia, with 5-25mm over much of the Eyre and Yorke peninsulas, 2-10mm over regions north and east of Adelaide, and 15-25mm over much of the South East.

In Victoria, some parts of the Mallee and Wimmera got 5-20mm, and registrations were above 20mm in much of the Western District.

In WA, most growing areas got a few millimetres at most.

Harvest in South Australia has just started to get going in earnest this week, and has ramped up in New South Wales and Victoria, while Queensland has passed the halfway mark.

Western Australia’s bulk handler CBH Grain yesterday said it had received 1 million tonnes of grain into its system from the harvest to date, mostly in the Geraldton zone.

Delivery time a northern factor

Southern Queensland’s wheat harvest is in full flight, and many growers are getting near-record yields, high protein and good quality.

The crop’s profile has exporters, with vessels booked out of Brisbane, providing stiff competition to local consumers.

Amid the storm lotto, growers are harvesting winter crops, planting summer crops and spraying weeds popping up after recent rain.

One trader said this means growers were not in a position to be delivering their own grain, and trucks were hard to find.

“Just about everything coming through the door in the wheat department is H2 or better, and Brisbane homes are more amicable with delivery hours than a lot of the Downs consumers,” he said.

“Some carriers are having to wait a long time to unload at mills on the Downs, so that’s not helping.”

Barley remains at maximum inclusion rates, and is pouring into feedlots on and north of the Queensland-NSW border from Moree north as consumers look to get their requirements covered into January.

“With more rain forecast, and Christmas not that far away, some people need to get a move on with their buying.

“If you think you’ll be loading on-farm over Christmas and New Year when everyone will be at the beach, you might like to think again.”

Showers slow south

Mostly light rain has stopped harvest today in parts of NSW.

While falls will be of benefit to cereal crops in later areas in southern NSW, it needs to stop this week in plains and outer slopes districts where harvest is under way if downgrading is to be avoided.

One trader in southern NSW said while the offshore complex was bullish, the domestic market was bearish given the size of the crop coming its way.

He said the limited availability of trucks was a factor in the near term in both markets.

“The Melbourne market is paying good money, but you’ve got to get the wheels under it,” he said.

Consumers in central and southern NSW are already seeing a reduced availability of road transport as operators head to the state’s north to cart for harvest.

Meanwhile, many growers are hitting the bids they are seeing for grain they still have on farm for the last of their 2020-21 grain.

“More than anything, growers are trying to make space, and they’re not getting any sour taste from having to take the prices on offer.”

“Consumers are looking out the window and seeing there’s a big crop coming and asking why they have to pay big numbers, and it’s because we’re really well priced internationally.”

Variable yields

Much of South Australia and the Victorian Mallee had a late start to the growing season, and below-average in-crop rainfall.

In contrast to much of Queensland, WA and NSW, these regions are expecting average yields at best, and the attractive elevator margins and choice of export terminals has bids into SA at above comparable values at NSW and Victorian ports.

“We’ve got a number of different supply chains in SA, and on the flipside, we haven’t experienced great volumes yet,” Pinion Advisory executive director Chris Heinjus said.

“Harvest is in first gear here, whereas the NSW market is pricing 4-5 months’ carry through the storage and handling system.”

Mr Heinjus said there was a strong buyers’ call market for export and domestic business, and operators like T-Ports which are handling for several buyers were supporting the bulk handlers’ call market.

This was creating competition for the domestic market.

“The domestic consumer always thinks it’s going to get cheaper; the compound stockfeeder will look at La Niña, increased rainfall and the increased chance of downgraded grain.”

Mr Heinjus said market direction was hard to call based on global factors including demand from China and fertiliser pricing.

“If you think you know where this thing’s going, I bid you well with your crusade.”

On the Eyre Peninsula, Next Level Grain Marketing Services director Nick Booth said some of the risk premium built into EP grain over the very dry August and September has eroded now that harvest has started.

“The thing that has us in good stead is our elevation capacity.

“I think the trade is quite keen to see Dec-May business – that gut shipping slot; that’s keeping a fire under it.”

“We do have to assume the Northern Hemisphere is going to bounce back next year, and I think the trade is going to be a little cautious.

“It’s aware there’s a price inverse once we get into May-June.”

Flexi Grain pool manager Sam Roache said supply-side pressure from big yields in NSW and WA in particular could well weigh on values ahead of that.

“Despite global market strength and the relatively cheap pricing of Aussie wheat and barley, there is an increasing chance for significant harvest pressure as more of the crop hits the bins,” Mr Roache said.

“Finance, logistics and risk limits will all be tested if the crop is as big as we think, or bigger.”

Gapping higher

Cottonseed prices are exhibiting classic springtime behaviour which typically occurs after production shuts down at the end of the ginning season.

On the one hand, the looming prospect of a large crop next autumn cautions consumers not to get left holding unused stock come ginning time when old-crop morphs into new, while on the other hand, the holder of current-year stock will factor the six months’ risk of maintaining deliverable stock through the long summer and quit stock or hold accordingly.

“Ex-gin current crop cottonseed prices have spiked higher over past couple of weeks,” Woodside Commodities manager Hamish Steele-Park said.

At approximately $450/t ex Moree and $440/t ex Namoi Valley, November 2021 value would equate to close to $500/t delivered Downs equivalent.

Values ex the Riverina gins also were quoted above $450/t ex gin November.

“A lack of offers has forced buyers to chase a very thin offer side…values have been gapping higher.

“The price inverse has widened between current crop and new crop values.”

In the case of new crop, there is a very different set of fundamentals at play, including the high certainty of a very large 2022 cotton crop coming for which cottonseed will need to price itself into domestic and export homes.

New-crop cottonseed quotes remain range-bound at approximately $300/t ex Moree or $340/t delivered Darling Downs region for May to Aug 2022 delivery period.

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