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.
Waiting ….. waiting… waiting.
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?
Click on graph to expand
Click on graph to expand
Data sources: USDA, Mecardo
Categories
Wheat takes a breather
The wheat market has stalled a little in the past couple of days. The bullish reaction to the Russian export tax story has dulled a
From Russia with love
The wheat market is in chaos and it is due to political interference more than any fundamental issue. We know that wheat is riding the
Count on the USDA to knock your stocks off
The USDA published its assortment of January crop reports earlier in the week, with the World Agriculture Supply & Demand Estimates (WASDE), along with the
Wheat and Canola holiday boost
The main driver of increasing international wheat prices over the traditionally slow holiday period appears to be the falling US dollar. There has been a
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
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.
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.
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.