Harvest 2019 is kicking off and the usual anticipation jitters have set in for growers, consumers and traders. All market influencers are being watched with a keen eye; the weather, grain prices, overseas news, and production and yield estimates to make an assumption of what grain prices will do during and post-harvest.
So, we’re going to take a look at these elements and how they can help you make informed grain marketing decisions this harvest.
Australia experienced a very good start to the season for most of the cropping belt in Western Australia, South Australia, Victoria and Southern New South Wales. But, since mid-July the tap seems to have been turned off.
This has understandably caused an element of panic about production. After a disappointing 2018/19 season growers, domestic consumers and exporters are all reliant on a more normalised season to replenish stocks and return to a ‘normal’ operating environment.
Unfortunately, as the weather models predicted, warm dry weather assisted to produce a 2019/20 crop predicted to be smaller than last year.
On October 10, 2019 the United States Department of Agriculture (USDA) released their updated 2019/20 projected global wheat production at 765.23 million metric tonnes (MMT), 34.73 MMT above last year’s global production.
More importantly for price direction is the world ending stocks which the USDA has pegged at 287.8MMT, 10.12MMT higher than the previous year.
Despite projected ending stocks being higher in 2019/20 than the 2018/19 season, crops are still to be harvest and most in the industry believe the USDA has wheat production for Australia and Argentina too high at 18MMT and 20.5MMT respectively.
Most analysists and traders are calling Australian 2019/20 wheat production 16MMT, which is 500 thousand metric tonnes below last year. 2019/20 barley production is forecast for 7.8MMT, down from last year’s 8.3MMT. Canola is forecast to be at 2MMT, a decrease of 15 per cent year on year.
Australia’s grain prices
As we move into harvest, we have seen prices for wheat and barley weaken with canola values holding firm.
This has coincided with northern hemisphere grain prices strengthening resulting in Australian grain values getting closer and closer to export parity.
The small crop due to adverse weather conditions and Australian grain values closing the gap for export competitiveness has created the perfect storm of a post-harvest price rally.
It is likely we will see pressure on price throughout harvest as supply hits the market, but post that, it will be the job of domestic consumers and exporters to fight for the little grain we have, which history shows us, bodes well for high grain prices.
When and how should you market your grain this year?
As always, it’s important to recognise a one size fits all approach doesn’t seem to work in Australia’s agricultural industry and spreading your risk across multiples sales strategies is often a good idea.
Based on the market indications above, allocating a portion of your grain to a post-harvest sales program could provide quite profitable this year. However, this isn’t always an option due to cashflow constraints at harvest and many farmers wish to maintain control over the sales process.
Agfarm Advantage Flexi and Structured programs provide a solution to this. The programs boast three cashflow options; advanced payment within three business days, monthly payments or deferred payments.
You get the option of maintaining control of your post-harvest sales strategy or choosing a set program so you can get on with next season’s crop.
For more information on Agfarm’s Advantage programs, give the team a call on 1300 243 276 of visit Agfarm Advantage.