Nidera Australia Weekly Market Report – 5 December, 2017

Given it’s been a massive weather week for eastern Australian cropping regions, a run around the country looking at how rainfall has impacted the major cropping regions is in order.

In the north attention is focused firmly on sorghum production.

For Central Queensland, whilst still 6-8 weeks away from the optimal sorghum planting window, any December rainfall will provide a much wanted and welcome boost to moisture profiles.

For Southern Queensland, the 20-75mm of rain falling over the sorghum crop has been well received.

It is highly likely that we will see additional hectares planted in December on the back of this rain. Despite the weather sorghum has maintained its price levels from last week. It is likely we will see farmer selling intensify as they become more comfortable with crop production. This could put pressure on the market given current sorghum production estimates suggest we need to see Chinese engagement to account for our potential exportable surplus. However, we are yet to see Chinese engagement at current levels. Wheat and barley values in Southern Queensland continue to track at, or near, import parity.

The Riverina in NSW and north-eastern Victoria was the epicentre of this week’s rainfall. As expected many received 80mm on average, others received larger falls, exceeding 100mm. With harvest pace running at around 50 per cent (pc) for wheat and 75pc for barley, it is highly likely that we will see some quality downgrades in severely affected areas. Ideally, a clear weather week ahead will be key for harvesting activity and any hope of salvaging the remaining milling quality.

In stark comparison to their northern neighbours, the western Victorian Mallee and Wimmera regions appear to have fared better, averaging only 40mm which was significantly less than forecast. These growers told us that this came with some relief though, as this region’s harvest pace trailed the rest of the nation. Overall, our Victorian farmers have harvested 30pc of their wheat, and 50pc of their barley and thankfully the lower rainfall amounts will mean that quality issues will likely be mitigated.

Like our western Victorian growers, South Australia too has experienced less than its forecast rain over the past week. For most, the average rainfall recorded was between 20-50mm with the largest recorded rainfalls being through northern Adelaide and Wallaroo zones. Harvest so far appears to have revealed limited quality issues and indicates that 40pc of wheat receivals to date are hard quality grades. Our estimates reveal harvest pace here is progressing nicely with approximately 40pc of wheat and 60pc of barley already harvested.

Finally, it looks like Western Australian growers have experienced the most favourable of harvest conditions so far. They are nearing the halfway stage of wheat harvest and barley edges near 75pc complete. Reports indicate there has been no notable rainfall in any of the regions cropping areas. Whilst it is expected to be cooler than normal over the next week, the forecasts feature little rainfall in all and this may help minimise quality losses. Any downgrades to date should easily be absorbed by the domestic feed markets.

In closing, ASX wheat contract traded a A$12/t range last week. Having opened at $266/t it firmed during the week on the weather forecast before peaking on Thursday at $278/t. Values then traded $4/t lower on Friday, settling at $269.50/t post the rain event. This suggests the rains have not yet exceeded the trade’s expectations.

Source: Nidera Australia, a member of the COFCO International Group