It feels like the Australian grain industry is operating with a sense of calm despite the global chaos regarding China and COVID-19. The cause for this calm in Australia is the rainfall to date or the “seasonal conditions”.

Focusing on the domestic front, growers are content to focus on growing a crop and leaving sales to later. This is not an unusual situation at this time of the year, and with the best seasonal conditions in a couple of years across much of the grain area, the expectation of a good crop is cautiously in consideration.

A look at the difference in price between “old crop”, that is 2019/20 production, and “new crop”, 2020-21 production, helps to tell the story both in regard to price and supply.

Using ASW delivered Melbourne prices from feed millers as the reference, prices bid today are circa $370 per tonne, however, the forward bid for the crop in the ground is $60 lower.

This reflects the drought affected supply of last year with stocks tight to meet domestic demand this year, however, looking ahead consumers are expecting (hoping) that a big crop will lower their costs. They, therefore, have little appetite to secure supply by forward purchasing, content with the outlook for production and the sufficient supply expected.

For Barley the “old crop – new crop” spread is $15. The tighter spread compared to wheat is a result of the recent China tariff announcement which took the wind out of the sails of any unsold barley closing the gap to “new crop” prices. You can read more about these impacts on Mecardo here.

So the summary to buyer and seller activity is wrapped up in the uncertainty worldwide and the Australian crop expectation. Growers are resisting the lower bid prices and following reports from other grain-producing countries of murmurings of concern regarding weather.

On the other hand, buyers have little perceived domestic supply risk so are not providing any aggressive bidding and will remain calm while the good growing conditions persist.

Regardless of which way the weather goes, it will change sentiment in the coming months. Either buyers will begin to accumulate if conditions tighten or growers will start a selling program if their confidence in the season builds.

Commodity Conversations

Next week

The talk about weather this week was dominated by the widespread frosts across eastern Australia. The fact that little concern was raised by growers reiterates the level of comfort they have with soil moisture levels (generally speaking).

The focus on rain will begin to take on more urgency coming out of the winter, with spring rain now the key element in what the eventual crop production figure will look like.

Have any questions or comments?

We love to hear from you!

Click on graph to expand

Click on graph to expand

Data sources: USDA, Mecardo

Make decisions with confidence- ask about our board packs, bespoke forecasting and risk management services
Australian wheat farm
Grains & Oilseeds

Black Swans everywhere

Earlier this week, shivers went through the stock market on news of a debt crisis enveloping Chinese property developer, Evergrande. The company is said to

Read More »
Canola fields
Grains & Oilseeds

Waxing oilseed markets

Canola prices both here and overseas are reaching rare air. It is easy to point the finger squarely at Canada as the reason for the

Read More »
Canola field
Grains & Oilseeds

Canadian canola disaster worse than thought

Statistics Canada has released its latest canola production forecasts yesterday and they are even more pessimistic than previous forecasts. Canola production estimates were slashed 2.1mmt

Read More »

Don’t have an account with us? Join free.

You can have full premium access to all of our content with a monthly or annual subscription. 

Alternatively, create a free account to access our Insights blog and two free premium article a month!

Independent analysis and outlook for wool, livestock and grain markets delivered to you as it’s published

Commodity conversations podcast cover image, a illustration of a sheep standing on a cow's back with grain either side
Listen to the podcast

Join the Mecardo team for the Commodity Conversations podcast, where we provide short weekly market recaps and longer conversations with guests to discuss the drivers and trends in livestock, grain and fibre markets.

Photo of a farmer surrounded by Merino sheep in dusty yards
Research: Analysis of the Australian sheep flock

In this report for LiveCorp and MLA, we analysed the historical trends in the demographics of the Australian sheep flock, examining domestic factors that influence farm-level enterprise decision making. 

Image of harvested grain pouring into a chaser bin
SERVICES AND CAPABILITIES STATEMENT BROCHURE

We don’t just bring you the most up to date market insights. Find out more about Mecardo’s services including risk management advisory, modelling, benchmarking, research & consultancy.