Written by Nathan Pollock, Business Consultant
A look at some of the global commodity market trends suggests a promising outlook with ‘new seasons’ prices for wheat and barley still being at or above the $300/t price point, which is a good sign and may continue last year’s record highs of up to decile 9 for prices come harvest time.
Some grain traders within the industry are predicting the upcoming trading environment to be, by harvest period, a ‘Relocation Market’ for Victorian growers. Domestic prospects still to be strong, as demand continues to build for feed through central and northern New South Wales livestock country as well as into Queensland, the ‘Northern Feeders’ region. The common practice of farmers in these regions is to use the WA grain export prices in addition with the freight prices associated with getting the grain to their area from the port as the gauge of choosing when to stop accessing the Victorian grain reserves. This aspect will be the key driver for a strong competitive price in Victoria and will be the potential building block for prices to creep back closer to decile 9 again come harvest.
So, if the WA export price is such a big driver for dictating the domestic price nationally what global factors are influencing this positive result out of our shores?
Some key global factors influencing this are:
- US market has struggled to plant enough soybean and corn during their sowing period due to poor seasonal conditions. This will allow Australian markets to take up some of the load of the USA slipping out. We also need to watch out for Russia as they move to take over as the leading wheat exporter globally, this may have an effect on our price!
- China continues to hold larger reserves of its wheat inventory internally, choosing not to execute their option to trade it globally.
- Canola meal is being used as a major feed additive for the pig industry, resulting in more global use. Also associated with this is the African swine flu epidemic currently effecting the Chinese pig industry, where there has been a significant reduction in sow numbers. This has an effect on domestic shores as we see a rise in demand for feed domestically from piggery businesses trying to seize upon the shortage of pig supply globally.
To summarise, grain prices on the higher end, above $300/t, could be here to stay for another year.
Here at ORM we help our clients plan for harvest. Sometimes hay is a better option than grain, with our aim being to assist in making informed decisions to target the best returns.
If you are unsure on your current strategy for this harvest make sure to give us a call and we can run through our ‘Hay vs. Grain Gross-margin Calculator’ and find the perfect position for you!
Acknowledgement: Nic Carracher (Lachstock Consulting): Presenter at the Horsham GRDC Farm Business Update, July 20th.