Predicted grain sales flounder as demand softens

For wheat, those who did not sell in December or early January, prices are now $25 a tonne to $30/t lower and barley prices are down $30/t from the January high.

There are numerous reasons being put forward. 

One is that at this time of the year demand is often slow as end users continue to use stocks accumulated at harvest, and as northern consumptive markets begin to make use of the newly harvested sorghum crop. 

That may well be playing a part right now, but the sorghum crop is not in good shape, and we are getting closer to the trade needing to buy again.

There is also a thought that cheap barley from WA is putting pressure on the market by having a supply of cheaper grain that can move east to fill the feed gap. 

The market had been expecting that orders from Saudi Arabia would soak up tonnage and keep supply tension in place, but to date those sales have not emerged.

The other reality is that Australian wheat prices are high and have been for many months. 

That is not just on the East Coast, but also in export port zones like Port Lincoln and across WA.

Australia has an exportable surplus of wheat and barley, but our current high prices are slowing the pace of exports.   

The natural move for prices is therefore down until we can move enough grain to export to renew competitive tension within the Australian market.

The drop in prices since early January has been driven by a drop-in basis, or in other words the price relative to US futures prices. 

This is the part of the price which needs to adjust in order to make Australian wheat more attractive in export markets. 

The problem is that basis levels in the Port Lincoln and Kwinana, WA, zones are still very high, and could easily lose another $30/t, pulling that off wheat prices right across the country.