Grain and canola markets have found some post-harvest strength in the past couple of weeks. Support has come from both international markets and a stronger basis. Here we look at whether we’ve seen the low.
Despite the abundance of grain in Australia this year, feed markets have held up remarkably well. Figure 1 shows the Geelong port price of Australian Standard White (ASW) and Barley (BAR). ASW isn’t typically a feed grade, but it can be and is usually discounted to Australian Premium White (APW).
The good news for barley growers is that BAR has nearly got back to a normal spread to ASW. Barley is of lower feed value than wheat, and all else being equal it will trade at around a $40 discount to ASW. Figure 1 shows that BAR has recovered from the discounts it reached after China imposed tariffs. Furthermore, over the past few weeks, barley has regained its harvest highs.
There hasn’t been much happening in international feed markets, at least for Chicago Board of Trade (CBOT) corn, so the recent increase in barley prices could be put down to selling slowing down post-harvest.
As reported in Friday’s weekly comment, international wheat prices have found some support after falling in January. Figure 1 shows a small recovery in ASW pricing at Geelong in the last week, with prices still very strong compared to last year.
International wheat and corn markets seem delicately poised at the moment. Northern hemisphere production is still largely uncertain, and Black Sea grain could stop flowing at any time. On the other hand, strong prices in the US will encourage spring planting, if seasons permit; which could see prices ease in the absence of other issues.
Canola prices have also recovered from the lows brought on by Germany’s biofuel announcement. There has been a small rally in “Marché à Terme International de France” (MATIF) futures, but it is improving basis which has added most to local prices. Figure 2 shows the canola discount to MATIF is now under $100/t as selling has slowed with the lower prices.
What does it mean?
With an improving basis, canola is moving into sell territory. Those waiting for $800 will be looking for issues in international markets. The upcoming WASDE won’t tell us much, with the market likely waiting for the acreage report before making big moves.
Key Points
- Basis improvement has been found across grain markets.
- Improvement in barley and canola markets following recent externalities which put downward pressure on prices.
- Uncertainty with international supply has further buoyed prices.
Click on figure to expand
Click on figure to expand
Data sources: Refinitiv, Profarmer, Mecardo
