Market Update Wednesday, October 24 2018

October 24, 2018 4:00 am Published by Leave your thoughts

Domestic Market

Wheat

Some very welcome wet weather has finally arrived for many growers across the east coast in the last two weeks. Parts of the darling downs in southern QLD have now received up to 180 mm for the month of October.

Over the past fortnight, new crop domestic markets in general have drifted lower on the back of the rain that has fallen.  Whilst this weather event will have little effect on wheat production on the east coast, the prospect of the sorghum plant is looming over the markets here in the north to keep wheat under wraps.  Domestic up country feed values in general are back  below the point where WA ASW can execute around on bulk vessels.  At these levels, the market will rely heavily on the local grower to let go of a large proportion of the crop during the harvest period.  If this doesn’t happen values will need to do some work back to the up side to reconnect with the execution costs around from WA.

 

Barley
New crop feed barley has followed the wheat trend downward over the past fortnight. Relative to stock feed wheat, barley values are still well supported on tight supply and as such fail to gain much of a share of the ration in most of the large scale feedlotting operations. As a result markets here in the north are thin being pushed around on small volumes.  The rain has brought about a slow down of drought feeding  which seems to have taken the pressure off the old crop barley market.  This has allowed values to follow the new crop trend downward.

Sorghum
Finally we have seen some positive rainfall across much of the sorghum growing regions in Southern QLD and Northern NSW with more rain forecast for the darling downs next week. Planters are beginning to pull into paddocks to make a start on the massive fallow area that is a hang over from the failed winter crop.  Sorghum values have been tracking at an  $80 discount to feed wheat for new crop which is at an historically high level.  Even at this level, there still appears to be limited engagement from the feedlot sector to buy sorghum as an alternative to white grains.  Whilst the crop prospect remains positive and until buying comes in from either domestic or offshore consumers, there is little pressure for the gap to wheat to close in the short term.

                                                                                                             

Trucks busy delivering fertiliser this week as sorghum plant gets underway.

  International Market

USA wheat values have remained range bound for the past fortnight with limited news to spur the market one way or the other. The most recent USDA report cut Russian wheat production by a further million tonnes however overall, the report was interpreted as slightly bearish by the market.  Wheat exports from the USA remain slow as Russia and the black sea continue to receive the lions share of world exports.  The world wheat balance sheet still shows that at some point over the medium term Russian wheat supply will dwindle and a portion of demand will need to switch to USA origin.  If this happens it will be supportive of Chicago futures values.

The WA wheat crop continues to trade at values above where it can find buying interest into off shore milling wheat markets in significant volume. WA will need to reconnect with Asian flour milling demand to move a significant component of the crop out the door.  How this is done will depend largely on how supply from the black sea and Russia holds up.  If we see Russian export supply pinch out, South East Asian Milling demand will need to compete with the East coast of Australia for WA milling wheat.

What’s on at Agracom?

The Agracom team have been on the ground in Vic this week taking part in the Grain Industry Association of Victoria (GIAV) crop tour.   Initial reports from the team were that the winter crop down there was perhaps worse than the market had initially anticipated with significant moisture deficiency across much of the Mallee and in particular the Wimmera.  Further east in the Goulbourn Valley and the Riverina, crops have faired the drought a little better, but have borne the brunt of some significant frost damage.  In some areas, as much as 70-80% of the planted Canola has been cut to be baled for hay.

                                                                                                           

Wheat paddock on the southern edge of the Mallee that was inspected as part of the GIAV crop tour of Victoria. Estimated yield just under 1 tonne per hectare.

 

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This post was written by agracom

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