Australian Sorghum Prospects Increasing
Chris Coore, Agfarm Advantage Manager
Australian grain markets continue to revolve around local weather, taking little direction from overseas markets, which is why Aussie grain is pricing its self higher than other exporting regions such as Russia and Ukraine. There has been some welcomed rain on the radar over the past few weeks, which has somewhat improved the southern winter crop production, however we cannot ‘out rain’ the reduction in planted acres and already established yield penalties across Queensland (QLD) and New South Wales (NSW). For some of these areas it’s just a little too late. So why have wheat and barley prices fallen from last month? Sorghum! The recent rain has improved the sorghum planting prospects through central NSW into QLD, and although it’s a far cry from a guaranteed bumper crop at the moment, it is a very welcome relief for inelastic domestic and export consumers to ease the pressure of strong demand verse a diminishing winter crop.
Now when we say wheat and barley prices have fallen, there is still a significant price spread between the north and south, and both wheat and barley are still being loaded onto trucks, trains and vessels and transported from NSW to South Australia (SA) destined for the Darling Downs and Brisbane. This recent rain in QLD and NSW with more on the forecast, has just created some comfort and positivity for consumers into next year, and if the rains continue, it’s likely to pull back northern prices, narrow the current drawing arc and make filling our inelastic demand much easier.
How will the inelastic domestic and export demand be filled?
Even though northern sorghum prospects have increased, the east coast consumer will still need to ensure their feed rations are filled by keeping grain within our shores, at least until they have significant grain purchases to cover most of their new season demand. As once the grain leaves Australian shores, it isn’t coming back. Therefore, although prices are expected to slide, particularly in NSW, this demand to keep grain in Aus should bode well for harvest pricing.
SA and Western Australia (WA) will be the main export states for the coming season and need to ensure there is enough wheat and barley of the right quality to fill our 11-12 million metric tonne (MMT) inelastic export demand. Year to date, Australia has exported 20MMT, so achieving 12MMT this coming season may not seem like too much of a feat. However, it is unlikely Australia will export much out of NSW or QLD where exports totaled nearly 5MMT this year. Victoria (VIC) is likely to contribute to wheat and barley exports for the coming season, however as grain is currently being sucked from the export channel in VIC and sent north, it is expected to be down dramatically.
Therefore, with the WA, SA and VIC winter crops looking relatively good across the board and the new prospects for summer planting, despite it being a tough job, it is likely Australia will have no problem meeting our export and inelastic demand.
What will this do for harvest pricing?
Overall, the recent wet weather has seen prices decline as growers, consumers and traders become more comfortable with the production levels for the 2017/18 season. This means we are quickly becoming export competitive. Wheat and barley prices in SA and WA look to have done enough work for the moment and should remain stable leading into harvest. However, if the wet weather on the east coast continues, it looks as though prices could slide lower based on the sorghum prospects, especially in NSW, and close the wide gap to VIC and SA.
Don’t forget though, Australia still has an inelastic export and domestic demand to meet, and rain or no rain, we know our production levels are significantly down from last year, therefore grain prices should remain relatively stable to ensure both export and domestic consumers get there fill.
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