THE Australian grain market has certainly had an interesting week with big crops throughout the world, big carry outs, favourable spring weather forecasts, an appreciating Australian dollar and consumers buying hand-to-mouth all weighing on domestic grain prices.
Week-on-week new crop APW values are down $5 on the west coast and $7 on the east coast.
In the same period, new crop barley and sorghum bids have fallen $5-$10 and $7 respectively.
Interestingly, it is basis that has done most of the work.
Following the bearish USDA report released on August 12, wheat and corn futures markets have actually rallied 2.6 per cent and 3.4pc respectively.
It would seem that the futures reaction is the trade questioning the achievability of the record US corn and soybean yields forecasts.
That said, even if the yields are less, the United States summer crop is in great shape and it will be big.
Growers looking to clear their on farm storages prior to harvest are adding pressure to east coast prices, as the domestic consumer seems quite comfortable with their cover leading up to harvest and the trade is in no hurry to buy.
Additionally, the benign weather outlook is adding certainty to the production forecasts and pressuring prices lower as the size of the potential export task increases.
The old crop pricing structure is also suggesting a significant carry out for the 2015-16 season.
In most regions values are reflecting full carry to new crop.
In WA, bulk handler CBH is offering shipping incentives to exporters to move wheat and barley during the harvest period to take pressure off their up country storage and handling system, which is still holding a sizeable carry out.
In late June, new crop APW wheat in the Brisbane zone was trading close to import parity.
Following the significant fall in east coast prices over the past six weeks, and in particular this week, it is now trading closer to export parity and for the first time in many years new crop values traded at a discount to WA.
In a year where all port zones will have an exportable surplus, this discount is primarily a reflection of the higher costs of fobbing through Qld ports compared to the more efficient WA ports.
On the weather front, almost all of the Australian cropping regions have an above average chance of exceeding the median rainfall through to the end of October according to the Bureau of Meteorology.
This translates to a minimum of 100 millimetres of rain across all cropping regions for the three months to the end of October.
The BoM temperature models also give the same regions a less than average chance of exceeding the median maximum temperature in the same period.
Light rains fell across parts of the WA grain belt last week and many parts of SA and Vic also had good falls adding certainty to production in those areas.
This week’s forecast has good rains falling in many parts of NSW and Qld.
We may be in a relatively low grain price environment in Australia at the moment, but at these values Australian grain will start to pick up export demand and with a big crop on the way that is critical if we are to sell out the exportable surplus in the coming year.
