Feedgrain Focus: Nearby firm, new-crop up to $20/t lower

Liz and Henry Wells, April 16, 2020

Sowing Illabo wheat in the Swan Hill district last week. Photo: Matt Witney, Dodgshun Medlin

PRICES for new-crop barley and wheat have softened in the past week as planting of both crops gathers pace, but current-crop values are holding ground as export and domestic markets compete for tonnage.

Melaluka Trading director Simon Pritchard said nearby values were holding firm for wheat and barley to reflect the recent run of export business.

“There’s wheat going out in containers and bulk barley, so the export market has set the bar,” Mr Pritchard said.

Trade sources said they expected farmer selling to ease now that growers across south-eastern Australia were preoccupied with seeding of their early sown winter crops.

“Quite a few growers let a bit of their grain go on the rally we saw when the dollar dropped, and they’re busy with sowing now.”

One trader said southern consumers were grappling with the changes in the domestic industrial and commercial environment brought about by COVID-19, and they now appeared to be covered until June.

“Most of the action in the domestic market is now for July forward.

“The change in the supply chain is what everybody is trying to deal with.”

He said grower sales had slowed down earlier than normal because farmers in Victoria in particular were getting an early start on their winter-cropping program.

This week Last week
Barley Downs nearby $403 July $404-$410 prompt
Barley Downs Jan $290 $297-$303
Barley Melbourne nearby $328-$330 $330-$335
Barley Melbourne Jan $285 no quote
Sorghum Downs Jun-July $420$425 $435
Wheat Downs July $502-$504 $500-$502 prompt
Wheat Downs Jan $345 $345-$350
Wheat Melbourne nearby $415 $410-$415
Wheat Melbourne Jan $330 $345-$350

Table 1: Indicative grain prices in AUD per tonne

China drives demand

China is due to release its finding into the historic pricing of Australian feed barley next month to wind up its anti-dumping investigation.

Ahead of the announcement, China has been a volume buyer of Australian barley.

FlexiGrain pool manager Lachlan Hume said the hectic pace of barley exports looked set to continue beyond this month, and domestic and export markets were competing for unpriced tonnage.

“We are assuming record domestic inclusions, given the high price of wheat and large relative spread to barley at around $85 per tonne.”

China’s Dalian Corn Exchange (DCE) futures have surged to five-year highs since late March, and while its values do not correlate perfectly to Australian barley, they indicate the strength of the Chinese market.

“China has made physical Australian feed purchases already, with some Chinese buyers happy to take on the risk and run the anti-dumping gauntlet, but most are wary, despite attractive import margins.”

“The Aussie dollar’s recent strength is limiting exports for now, making us expensive in US dollar terms, but our competing barley producers have also seen decent currency strength which is not making us overpriced into China.

“The inverse of new-crop northern hemisphere production could be an issue, and buyers love to use this as bear fodder, but the reality is that the inverse is not that big.”

Recent Saudi business has put Black Sea barley at US$210/t cost and freight value landed into China.

“Australia has reportedly done feed business into China at $220/t recently, but we have a $6.50 duty advantage, so we are only $3.50 over the price of Black Sea values into China.

“It’s worth noting also that there is a large appetite for barley ex harvest in the Northern Hemisphere to satisfy a reasonable Saudi short, so it’s hard to see these prices breaking too hard in the near term.

“There are rumours of more Australian feed barley cargoes sold into China as recently as last week.

“With wheat exports running out of supply, perhaps it’s barley’s time to shine.”

Northern markets covered

Trade sources said recent buying of barley and wheat has consumers in Queensland and northern New South Wales mostly covered until July at least.

While new-crop barley for January plus carry has traded in reasonable volume, little is happening on new-crop wheat.

“We’d like to see that number drop by $20/t before we do anything,” one consumer said.

Little sorghum has been planted south of Emerald in the Springsure district, but a reasonable area is in the ground from Capella north to Kilcummin and Mt McLaren.

“We’ve had bit of wheat go in in the past week, and there’ll be a fair bit of wheat and chickpeas sown down on to moisture in this next week or two.”

The thirstiest sorghum crops in central Queensland are losing yield potential by the day, and this could cut the region’s production by 20 per cent from earlier expectations.

However, consolidating prospects for a big wheat crop in NSW appear to be buffering the impact on the cash market of the shrinking sorghum crop.

Rain needed

In central Queensland, conditions are mixed for the crop which is now flowering and setting grain ahead of the harvest which will start late next month.

“We’re getting properly dry up here,” CQ Ag Services manager Darren Young said.

“Some of the longer fallow paddocks are holding on well, and some that were double cropped aren’t doing so well at all.”

On the Darling Downs, growers are waiting for around 25mm of rain to wet the topsoil so they can start planting their barley, chickpeas and wheat.

Cropping areas of Victoria have generally had little rain in the past week, which has enabled farmers to get going with the planting of canola and winter wheat.

NSW has had the best of the rain in the past week, with registrations in the week to 9am today including: Coonabarabran 65 millimetres; Coonamble 52mm; Dunedoo 74mm; Forbes 66mm; Narrabri and Walgett 33mm; Quirindi 20mm; West Wyalong 43mm; Young 40mm.

In WA, little rain has fallen away from the south-west coast and in cropping areas, and rain in South Australia in the past week has been negligible.

ASX drops, inverse widens

ASX grain markets traded only 695 lots in the shortened trading week to Wednesday.

All contract months ended the week at prices lower than they started.

Current-crop was least affected by the lower price, and wheat markets softened more than barley.

East coast WM wheat May 2020 settled yesterday at $401/t, down from $406/t one week earlier. The WM January 2021 contract yesterday settled at $328/t, down $13 over the week, and January 2022 fell to $313/t from $326/t.

Lower settlement price movements in the barley futures contracts were smaller than those for wheat, with May 2020 down $7.50/t to $304/t, Jan 2021 down $9.80/t to $270.50/t and Jan 2022  down $9.80/t to $289.20/t.

Cotton harvest delay

Cottonseed market quotations were reported little changed this week, though cooler, damper conditions appeared to have delayed onset of the main harvest.

“Defoliation and picking are really only  just starting, meaning that gins across northern NSW would not likely gin in earnest until the end of April,” Woodside Commodities manager Hamish Steele-Park said.

He expected Murrumbidgee Irrigation Area gin start dates would be at least mid-May.


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