Despite consuming more grain than ever locally, Australian feed grain prices usually follow international values closely as we are still a large exporter. In the north, prices remain at a premium however they are on the move again.
After peaking in late July international wheat prices have been easing. As outlined in Friday’s comment, markets are acting a little counter-intuitively, expecting an end to Black Sea export disruptions shortly.
Locally we are seeing two different markets for feed grain. In the south, both feed wheat and barley have been relatively steady since harvest, tracking around $300-320 (figure 1). There has been a little movement in response to US futures in recent weeks, but it has been marginal in the scheme of things.
It was a little surprising to see feed wheat and barley on the Darling Downs on the move higher again in recent weeks. After coming off thanks to early winter rains, feed wheat and barley prices have rallied again, heading back over $400/t in August.
When feed grain prices first rallied back in March and April it suggested that southern Queensland was having to truck grain in at extreme freight prices as local supplies had run out. It makes sense that delivered prices in the Darling Downs eased when fuel price fell, with rain helping dampen demand.
July dried out again in northern NSW and southeast Queensland, with soil moisture deficiencies showing up on maps for some of the most productive grain growing areas in the country.
On the fodder front markets have remained steady even in the north. It seems that hay supplies in the northern demand sink are adequate, with prices lower than in the central west NSW, but a little stronger than southwest Victoria (figure 2).
The resistance of hay prices to a move higher suggests that the El Nino talk hasn’t got cow/calf producers worried about supplies just yet. Perhaps they’ll continue the trend we saw in autumn, where many were keener to sell than hold and feed.
What does it mean?
A wide feed grain spread will usually disappear at harvest as new season grain quickly flows to higher priced markets. That’s assuming yields will be ok in northern areas, which is no guarantee given current forecasts.
With the southern crop getting a drink this week it’s hard to see them decoupling from international values in the short term.
Key Points
- Feed grain prices are rising again in northern markets as fuel prices and dry weather bite.
- Grain supply remains strong in the south with prices tied to export values.
- Hay prices are trading sideways, with adequate supplies for the moment.
Click on figure to expand
Click on figure to expand
Click on figure to expand
Data sources: Dairy Australia, Bloomberg, Mecardo
