Summer is here, yet it has been hard to find spring heat in the south, let alone summer. Cool, wet conditions continue to delay harvest on the east coast, while in the west, a dry week saw headers on a roll.
The WA report is out early this week, and it shows receivals streaking ahead last week. With over 11mmt of grain received in WA to date, the west is roughly in line with last year’s receivals. Last Friday, CBH received 632,001 tonnes, only slightly less than NSW and Victoria for the week. With a big crop forecast, there should still be three big weeks of receivals to come.
On the east coast, the intermittent rain and cool weather had NSW running around 2mmt behind the same week last year, with Victoria around two weeks behind. SA was similarly slow to week six, and rain over the last week is likely to have seen the harvest further delayed.
On a positive note, there has been little reporting of quality downgrades yet. This might be because the harvest is yet to get going in affected areas. The next couple of weeks will tell whether there will be more feed grain and less milling wheat produced.
On the price front, we’re not seeing any discounts for feed grain yet, which is a sign quality hasn’t been affected too badly. Figure 1 shows the BAR price at various ports, along with ASX Wheat Futures.
US corn and wheat futures have found a base in recent times on the back of easing trade tensions with China. The steady to lightly higher prices have been reflected in prices here, which are yet to get a real boost from the slow harvest. A bit of pent-up export demand might help support prices when the eastern harvest does get fully rolling.
Canola prices are still the shining light for grain producers. Figure 3 shows canola futures prices edging higher, again on the back of better trading conditions. The local discount for conventional canola to Matif futures is between $40 and $100 per tonne, depending on the port. At times last year the discount was well over $100, so canola is reasonably selling for harvest cash flow.
What does it mean?
Canola looks like good selling at the moment, but there could be some downside when the southern harvest starts moving. When canola is so far in front in terms of value, harvest pressure can have an impact.
For cereals, producers looking for better prices will have to continue to wait for something to happen in international markets. We are not far from the winter dormancy in the northern hemisphere, which is historically a time of little movement, so we might be waiting until February or March for serious upside.
Key Points
- Harvest continues to be slow in the east, but is forging ahead in the west.
- Prices remain relatively steady, with canola the standout in terms of value.
- Cereal producers might be waiting until February for any real upside.
Click on figure to expand
Click on figure to expand
Click on figure to expand
Data sources: Graincorp, CBH, Viterra, ASX, CME, Bloomberg, Mecardo
