Nathan Michael, Agfarm Account SNSW
The fundamentals of this growing season will not change in the space of a week, although it has to be said there is certainly a different feel about the current situation. Buyers, consumers and most of all growers seem quite nervous about the prospects of a ‘normal’ season this year and how everyone is going to adapt to a lower production scenario. New crop pricing creeps higher and higher for all commodities but there is little engagement from growers at these levels. Given new crop APW is bid at $370/MT Port Kembla, we have to conclude it is not a question of price. There is a little rain predicted to round out this week and more for later next week which may help to provide some relief in the short term. Crops in a lot of areas are out of the ground and looking reasonably healthy but in a lot of cases are only 5 – 10cm high. So, in short (pardon the pun), they have a long way to go.
Exfarm feed type wheat has crept higher by around $5/MT over the last week to around $335-350/MT exfarm, while protein has increased by $5-10/MT. We believe there may be up to 20% of unsold wheat yet to find its way onto the market. Given the constant demand, supply of grain will remain relatively tight, especially as we move into August/Sep/October. But the risk of holding grain back from the market is buyers/consumers will source it from elsewhere, and the most obvious source is South Australia. New crop pricing is at astronomical levels, being bid at $370/MT Port Kembla.
Old crop barley is still holding steady with most large feedlots/consumers switched off from barley. It is still sort after from sheep feeders but even some of them have switched across to wheat which has been trading $10-20/MT under barley prices for some time now. Current old crop values are $310-370MT exfarm dependent on location, which provides good value. However, as we are seeing more and more, those who have old crop left are reluctant to let it go while the prospects of the 2018/19 season are still uncertain. New crop pricing has jumped up to around $340-346/MT Port Kembla track over the last week, which gives over $300/MT site for F1 at a lot of locations; unchartered waters for forward barley pricing.
You would think with conditions the way they have been and the supply and demand situation quite tight, we would be seeing strength with canola pricing in NSW on both old and new crop. But for now, it is not forthcoming. It’s expected there is a reasonable amount of old crop supply unsold in the system and most Australian crushers are somewhat covered until the new crop comes online. With the NSW production estimated at around 430,000-450,000 this will keep prices steady. On old crop pricing, the question to ask is; does the current market represent value historically? The next question… will the cost of carry ($2.00-3.00/MT per month – warehousing costs and interest) cover any price rises? Old crop canola is pricing at around $560/MT Port Kembla track while new crop is $10/MT higher at around $570/MT.
Prices as at 19th July 2018