Wheat domestic values continue to track sideways with limited fresh intelligence to sway the market one way or another. It seems that after an initial logistical “squeeze” as the first new crop boats arrived at East Coast ports from the West, the industry seems to have now settled somewhat into a rhythm of executing Western wheat into the upcountry feedlots and other end-users in QLD and NSW. Whilst illiquid, values for stockfeed wheat have reflected this with the urgency to buy seeming to have disappeared from the market for now. End users in general seem to have fixed in supply out to the end of March, and are picking the moment to get further coverage, with many yet to make the final decision on what the commodity mix in their ration will look like there after. Wheat remains at a strong premium to barley and sorghum, but in general, is still finding itself the majority ration component in feed lotting rations. The hot and relatively dry summer to date has done no favours to sub-soil moistures. Still plenty of time on our side, but plenty of rain needs to fall to get us off to a good start to the winter wheat crop growing season.
Chicago wheat futures values continues to lack any volatility in either direction with values practically unchanged since the last report. With the US government finally reopening, we now have a release date of the 8thof Feb for the next USDA report on world crop production and demand. This will provide the wider market a much needed update on the global wheat balance sheet after the industry has been starved of information for so long. Russian wheat values seemed to have finally done enough work to the upside to price themselves out of competition into key wheat buying regions which will see the Russian export pace start to slow. As the Chinese/ US trade war continues, we have seen the Chinese offer to implement a buying regime of US origin wheat as a proposal to attack the trade deficit between the two countries. This is another potentially bullish story for wheat that, for the time being at least, has failed to develop to fruition. So until we see US origin wheat bag a bunch of exports, be it to China or elsewhere, we continue to eek toward the US new crop window with futures values still unchanged at below historical average levels.
Sorghum crop prospects are steadily diminishing with no relief from the hot and relatively dry weather in Northern NSW and in Southern QLD. As harvest ramps up for some in QLD, reports of high screenings are coming in with many growers seeking a down grade option on any sales contract. This quality concern coupled with a diminishing overall production forecast is underlining the concern that sorghum will not be able to solve as much of the feed shortage on the east coast as once thought. That said, the discount for sorghum underneath wheat continues to track at around $100 into southern QLD destinations with limited buying interest from non-traditional domestic end-users. We have seen an up-tick in interest from the poultry sector in NSW as end users seek to get coverage on new crop and maximise sorghum in the ration as a substitute for wheat. For now, it seems that the ducks and drakes game of who will and who wont use sorghum continue across much of the north. On the export front, there seems to very little interest for Aussie Sorghum off shore from China for the time being as they digest a large domestic crop. With so many dynamics at play here, the one thing we can count on in the sorghum market is more volatility to come.
Domestic feed barley values have weakened for the end user on the east coast. The discount to wheat is now as high as $50 per tonne on the darling downs, and as a result barley is finding a good wedge of the ration for feed lotters in that area. Whilst it remains hot and relatively dry in the pastoral regions to the east and north of the Liverpool plains, we are also just starting to see an uptick in drought feeder demand. The major dynamic at play in the barley market remains the Chinese anti dumping story. Whilst it is not clear what level of tariff will be imposed to pending sales, few exporters are willing to put a program together. Without the Chinese demand, barley values out of the West continue to tail off and as such, Eastern buyers do not have to compete on price to the same extent to keep the barley coming across to the East.
Categorised in: Market Report
This post was written by agracom