ANALYSIS: AUSTRALIAN growers stepped up their 2015-16 selling pace last week for wheat, barley and sorghum across most port zones.
A combination of a slight increase in price and the prospect of incurring bulk handling storage fees as we roll out of April enticed the grower to collectively market a little more of last year's production.
Sorghum harvest in the Brisbane and NSW port zones is past 95 per cent and 85pc respectively. The Brisbane grower appears to be more heavily sold than his NSW counterpart.
Sorghum’s slower than desired export pace continues to be a concern. Sorghum is displacing a small portion of wheat in stock feed rations however the volumes are not sufficient enough to remove the need for a sizeable sorghum export program. Furthermore, any increase in sorghum feeding results in wheat demand being displaced, adding to the wheat carry out situation.
The overarching picture has not changed significantly from last week. The ongoing support underpinning wheat values can largely be attributed to issues surrounding soybean production in South America combined with a speculative community who had bet so heavily on the short side of the CBOT wheat market they continue to struggle to wind their positions back to a level they are comfortable with.
Global grain and oilseeds markets remain focused on Argentina and Brazil, however we need to ask if conditions have deteriorated compared to last week in South America or is the market just caught up with the same recycled story?
It’s difficult to call from the other side of the world as to where the reality ends and the hype starts, however there are reliable market commentators who remain focused on declining Argentinian soybean crop prospects and dry and warm conditions in Brazil impacting corn and soybean yields.
In the US the market wants to discuss the current wet outlook and link this to concerns over delayed planting of wheat, corn and soybeans. In reality US corn is already 30pc planted and spring wheat is 42pc planted.
Crops can be planted very quickly and it is too early to get concerned about US corn and wheat and the wet weather resulting in planting delays. We are only just entering the serious soybean planting window for the US so again the situation warrants monitoring however it is too early to panic about not getting the soybean crop in the ground.
From a global wheat perspective, it remains plausible to attribute last weeks’ improvement in US futures values to another week of solid gains in soybean values and fund buying.
The market has reported speculative funds, who have for a long period held short positions, continue to buy US wheat futures. Last week CBOT wheat rallied 1.6pc and over the same period French wheat futures fell by 3pc in value. This illustrates the influence the fund buying is having in US markets.
Continuing with the US wheat discussion, we note that the April 25 weekly crop condition report increased the percentage of the ‘Winter Wheat Crop’ classed as ‘good/excellent’ to 59pc. Reports also indicate weather conditions throughout the EU27 and the Black Sea remain very favourable.
Over time we will need more than a ‘short wheat’ speculative community and problems in South American soybeans to provide ongoing price support to the wheat complex. Ultimately a significant downward shift in wheat production forecasts is required to deliver a sustained rally in wheat values.
Steve Sloss is the origination manager at Nidera Australia, based in Toowoomba.