THERE are few bullish signals for grain returns going into the 2014-15 harvest, but the lower Australian dollar should offer some price support.
EP Integrated Commodities owners and manager Steve Whillas and Tracey Lehmann ran a series of grain marketing expos across the Eyre Peninsula recently, where marketers from various companies outlined what was driving commodity prices.
Commodity trader Chris Coore said barley prices would come under pressure due to the decline in the Chinese economy.
Mr Coore works for CHS, a leading US cooperative owned by farmers and ranchers. The company has been operating in Australia since 2013.
"Looking at exports of Australian barley, by destination, China has been the powerhouse for the last three years," he said.
Last year Australia exported close to 4 million tonnes of barley to China.
"The demand from China has taken away some of the demand from Australia's traditional markets for barley, like Japan, as Chinese customers are willing to pay a premium for Australian barley," he said.
"The fundamental shift in diets in China helped drive that demand. Traditionally it was mainly malt barley sent to China. In the past three years the change in people's diet to include more protein has seen the demand for feed barley increase."
Australia produces an exportable barley surplus between 4.5mt and 5.5mt annually, consisting of about 70 per cent feed barley and 30pc malt. But this year, the surplus stands at about 6mt. This comes at a time when China is producing much more of its own feed grains. Farmers in China have switched to growing more corn recently, as their government offers subsidies for the crop.
"A record corn crop is about to be harvested in China," Mr Coore said.
"This will result in lesser demand for imported, alternative feed grains."
China's demand for feed grains has grown by 41pc in the past five years but this year the Chinese government is likely to restrict its imports so they can get through the large domestic stocks of corn.
Glencore Grain SA accumulation manager Benn Oliver said while the demand for wheat had grown every year for the past eight years, production was increasing as well.
"World wheat stocks are quite plentiful," he said.
"The northern hemisphere crop is generally in the bin, so that risk has been taken out of the market.
"We've got the highest carryout stocks in the last eight years, so stock levels are very comfortable."
Mr Oliver said with the dollar hovering about the US70 cent mark, it was helping cushion the price blow.
"Prices could be $60 a tonne lower, if it wasn't for the $A lowering," he said.
The average price for Australian wheat from 2010 to 2014 was $257 and the forecast average for 2015 is $246, so only slightly lower than the five-year average.
"The bullish factors are the value of the $A. SA has very tight carry-out stocks and Australia in general doesn't have a much of a carry-out," Mr Oliver said.
"The bearish factors are the global supply and demand situation, and the fact the Australian crop is generally looking good so far. Crops are looking good, not just here in SA, but in other areas around the country."