You would think that with disasters at the top and the bottom of the east coast wiping out feed, and again instigating hay drives, the hay market would find some strength. Last week we saw the opposite, and values are now back at last year’s levels.
There is plenty of hay being delivered into flooded areas of North Queensland and fire-affected parts of Victoria. This should mean that supply for the regular markets is weaker and prices should be steadying.
In the last week we have seen the opposite, according to Dairy Australia’s weekly hay price report. Figure 1 shows pasture hay prices in South West Victoria and Central NSW have continued their long decline from winter peaks and are now back at the same price as this time last year.
East Coast pasture hay prices are also now equivalent to those in WA. This suggests that the hay supply squeeze is over and stock has been replenished. We will find out how replenished stocks are if autumn fails again, but for now feeding stock has become a reasonable prospect again.
One commodity which is not cheaper is barley. Strong export demand has feed barley priced at or over $300/t at east coast ports (figure 2). Barley prices are similar to this time last year, despite declining world feed grain markets.
Feed barley is also selling at close to feed wheat prices. Feed wheat is generally higher in energy, which means it trades at a $20-40 premium to barley. With barley currently close to parity with feed wheat, it makes for good selling for barley and good buying for feed wheat.
Barley is also good selling relative to corn. After the USDA report lifting forecast corn stocks, CME Corn futures fell 4.5% back to October levels. In our terms, CME Corn is priced at $258/t, which puts barley at a $35-45 premium; this is strong by historical standards.
What does it mean?
While the drought premiums for stockfeeds have largely dissipated, there remains some value in the barley market for sellers. For buyers there is incentive to use more wheat in rations, but local demand is unlikely to move the market spread.
Key Points
- Hay prices have returned to the levels of this time last year, with east and west equivalent.
- Barley is currently priced well relative to wheat and international corn values.
- Feeding livestock has become much more affordable.
Click on figure to expand
Click on figure to expand
Data sources: Meat and Livestock Australia, Dairy Australia, Bloomberg, Mecardo
