Grain Prices

Slow and steady wins the race

Peter McMeekin, Nidera Australia origination manager, November 15, 2016

THE month of November has been all about races to date with the US Presidential Election and the Melbourne Cup in the first 10 days. The unusual thing is that many grain growers have had the time to actually take notice of such events as the mild spring and regular rain events continue to slow the progress of harvest, particularly across eastern Australia.

Nidera Australia, Peter McMeekin

Nidera Australia, Peter McMeekin

The Western Australia (WA) harvest is now in full swing with around three million metric tonne in the bin – approximately 20 per cent of forecast production.

The quality profile of the wheat delivered to date is certainly a reflection of the kind season with around 46 per cent going ASW, 34 per cent making APW grade and less than 3 per cent of the crop being classified as hard wheat.

From a barley viewpoint the malting barley selection rate is quite low at around 28 per cent, but the harvest is yet to move into the more traditional malting barley growing regions of the state.

The other point to note is the WA harvest is yet to ramp up in the frost affected regions of the state.

In South Australia (SA) progress has been far slower with less than half a million tonnes harvested to date – primarily on the Eyre Peninsula. Like most of the east coast the headers no sooner get moving then in rolls another rain event, followed by cool weather leading to another frustrating delay. Early yields have been better than expected, but it is probably too early to get an accurate picture on the quality profile of the harvest.

Victoria has seen some early barley harvest in the Mallee, but the progress has been very slow with high moisture levels restricting harvesting hours. The yield reports are well above long-term average and are certainly suggesting Victoria is in for a huge harvest this season.

Skipping to the Sunshine State where the Central Queensland harvest is winding down. On the whole the quality and yields of both chickpeas and wheat were very good. There was certainly a higher proportion of protein wheat than was anticipated. Early indications in southern Queensland are showing a similar trend but the test will be when harvest swings into gear in NSW, Victoria and mainland SA, where the wheat crops are huge and it is difficult to see how that won’t manifest itself in a lower quality wheat profile.

Downgrading due to blacktip as a result of the extremely wet season will be another challenge for eastern states wheat growers this harvest.  This is already evident in parts of southern Queensland and northern NSW with early AUH2 and AGP receivals higher than normal, with the downgrades mostly due to staining.

So what will this do to the grade spreads here in Australia? To answer that question the best barometer may well be the Russian market where 12.5 per cent protein wheat has rallied around US$20 over the past two months and feed quality wheat has remained relatively unchanged. As the Russians have been pumping wheat out of their ports into the export market, it appears that they are finding in increasingly difficult to find protein, suggesting that the quality profile of their crop is worse than the market has expected.

This same scenario could well play out here in Australia as the market clambers to secure protein wheat in a harvest where the quality profile is predominantly ASW or lower. The question then becomes will protein rally or the feed grades fall out of bed as harvest progresses?

This year’s harvest will not take as long as the US election, but it is certainly looking more like the Grand Annual at Aintree with its 30 fences over 6.9kms than the good old Melbourne Cup.

Source: Nidera Australia Weekly Market Report: Peter McMeekin is Nidera Australia’s origination manager.

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