The past month has certainly given new meaning to volatility in regard to global grain markets.
The Russian invasion of Ukraine has well and truly been front and centre in supply and demand concerns, and rightly so! Ukraine is vitally important to global trade on a number of commodities, including wheat, corn and sunflower oil.
It is a devastating conflict so far that is likely to have impacts that continue for longer than when peace talks come to fruition.
After this conflict does come to an end the downside to price will be felt significantly across commodities.
However, there are still a number of global stories that will have an impact on pricing into the next 12 months.
One such story is what is happening in the United States and Canada.
Last year was marked by a big drought in parts of the northern US and Canada, impacting a number of different crop types and helping to add support to our commodity prices here in Australia.
This year has started with the eyes of analysts watching every forecast rainfall event very carefully, to gauge how the crop will fare as it emerges into spring.
Presently, the winter wheat crop in the US is rated at 30 per cent good to excellent - the average for this time of year is 52pc.
We are already facing a relatively tight balance sheet on grains, thanks to last year, particularly for oilseeds.
If the North American drought improves significantly, there will be some added pressure to the pricing seen here across all grains, including canola and lentils.
The volume out of Canada for canola will be more than enough to offset potential lack of production in Ukraine.
On the flipside, if we see a continued drought and hot, dry weather throughout the region for a second year, the elevated trading range we're in is likely to continue.
The Chinese crop condition is also something to watch carefully.
There have been a few reports of the state of the winter wheat crop in China, which has struggled after planting was delayed last year due to heavy rainfall.
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Food security is a big fear of China's and the country will be looking to secure tonnage, likely from Russia at this stage. There is also a large amount of money being spent by the Finance Ministry to stabilise winter wheat output for this year. This may mean stocks tighten further and add some support to pricing.
A key driver of grain pricing will continue to be freight availability and the container market.
We have seen what lack of containers has meant for certain grades of lentils and the capacity of the trade to move significant volumes is also decreased.
Much more trade has gone out through bulk shipments, with a substantial increase in the amount of trade going through this pathway over the past 12 months.
This is a consideration for those growing harder to market pulses, with no on-farm storage, as the marketing options can be significantly limited.
High input costs are also on everyone's minds, particularly coming into seeding.
With grain pricing as high as it is, there is still a decent return on investment for any fertiliser applied. Obviously, the level of care taken about the right rates, placements, types of fertiliser and conditions for fertiliser use are going to be scrutinised more closely this year, but without fertiliser, we are likely to see a lower quality wheat profile.
There have been a few conversations in the media about the value of our grain here is Australia recently, with some saying our wheat values should be approaching close to $500/t according to the global market.
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But there are a number of drivers that influence our pricing locally and a movement in the price overseas does not always translate to a movement, positive or negative, here. The high volatility, freight costs and capacity of the trade to buy all contribute to the lower, but still record, pricing we are experiencing.
It is also worth remembering that SA, due to competition of ports and a export dominant pathway, has been pricing well and truly above other regions, including NSW.
In fact, grain is being pulled into domestics in SA from many areas of southern NSW and western Vic.
In reality, the range of trade for our pricing for this season is wide and much relies on weather overseas and the stabilisation of a conflict on the other side of the world.
As we start seeding in the coming weeks, be aware that this level of volatility hasn't been seen before.
Any number of circumstances can play out yet, but while we have profitable numbers, risk management should come to the fore.
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