Matt Noonan, Agfarm Account Manager SNSW
NSW has just been declared 100% in drought, so any remaining doubt about the seriousness of the situation has now been laid to rest. For several months now, we have encountered the same scenario in terms of decent rainfall on the horizon dissipating down to 1 – 5mm at a time. While this is better than nothing and keeps the crop from deteriorating too far, many crops are in a precarious situation at the moment. While we keep mentioning the potential out there, we are going to have to get a decent 25-50mm rain event shortly to produce a crop at all in many areas. On the positive side, it seems the historically high prices are causing some volume to trade in areas with more production confidence. Victoria, SA and WA are still the source of feed tonnes for the East Coast and it looks as though this path will be well worn over the next 6 – 12 months.
Exfarm parcels of SFW type wheat are now regularly trading at $400/MT in the Western Riverina and we have heard rumours several parcels have traded at significantly higher than this. To a certain extent, this is occurring due to the buyer’s mindset that if they don’t secure tonnages in the next few weeks, they may have to pay even more exorbitant prices to buy it later on (especially smaller sheep feed-lotters). It is hard to see this situation changing short term until either we receive widespread rainfall or the volume of grain coming from SA, Vic and WA dramatically increases. Surprisingly, protein spreads remain in place with H2 trading at $10-15/MT over SFW prices and APH2 around $20-35/MT over feed values, indicating demand is strong across the board, not just for feed buyers. On the new crop front, bids are being posted at $440/MT Port Kembla. These numbers are somewhat academic, as producers are (not surprisingly) unwilling to engage in sales at these prices or any other price. I suspect even a $450/MT or $460/MT Port Kembla price would have the same effect. In short, it is still not about the price.
The current market on old and new cop barley has gathered more speed, and chances of predicting where it ends up is anyone’s guess. My only assumption at present is the old crop market is being driven from the small consumers and what I will call a ‘fear market’.
Meaning, if you have a parcel of grain in front of you and don’t accept the price being offered, the likelihood it will still be there if you hang up and then call back is low. New crop has been driven by the conditions in NSW/QLD and washouts with basically no one offering grain, so buyers are finding it hard to ascertain current replacement value and, in some cases,, having to go to other port zones to facilitate.
Old and new crop canola values continue to firm off the current new crop conditions. Gains this week have not been in line with cereals but like the past few weeks, it doesn’t seem worth taking on production risk with the high likelihood prices will hold for now. Old crop is around $580-590/MT Port Kembla track and new crop at around $10-15/MT carry. Driving around, it is hard to see there being enough canola in NSW to fill demand, so VIC and SA will be need to supply any gaps.
Prices as at 9th August