While prospects for the 2016 Queensland winter crops are improving after the recent rains, grain prices continued to list last week as US grain futures plummeted.
Sorghum prices delivered into Brisbane fell by $10 to $232, the lowest in seven weeks as traders accounted for the weakness in global markets. Stockfeed wheat into the Darling Downs declined by $8 to $271.
US hard red winter wheat futures plunged by 8 per cent last week, on reports of record yields through parts of Kansas, the largest wheat producing state in the United States. Kansas City wheat futures plunged to fresh 10-year lows, notching up a weekly decline equivalent to about $20 dollars a tonne.
Bumper wheat yields through the US hard red winter wheat areas means it’s becoming increasingly likely the USDA will make further upward revisions to its estimate of their wheat harvest, which is already larger than last year.
Large carry in wheat stocks adds to the heavy US wheat supplies. Recent USDA data shows that US wheat stocks were already the largest since the late 1980s, before the current harvest.
Fallout from the United Kingdom’s Brexit vote also weighed on global markets. The US dollar rallied by 3pc after it became apparent that British voters had chosen to exit the European Union, making commodities more expensive as they are mostly denominated in United States dollars. A strengthening US dollar is typically bad news for global grain prices.
Analysts are saying the Brexit vote is unlikely to have a major impact on global grain markets, other than further adding to the market volatility.
Uncertainties remain over the quality of the 2016 world wheat harvest, as rain continues to plague early harvesting in Europe and parts of the Black Sea. However it’s becoming increasingly apparent that the world will remain awash with wheat supplies through the next 12 months.
World wheat ending stocks are already the largest on records and another bumper global harvest will further make its worse.
Market declines were not constrained to wheat last week. United States corn futures plunged by 12 per cent last week, posting its largest weekly fall since 2013 on improved weather forecasts for the recently planted crop.
Weakness in the US corn prices weighed on exporter bids for sorghum.
Queensland farmers are finalising the last of their winter plantings with most of the crop already in and germinated. Planting dates are later than what growers were hoping for but are just thankful rains came in time to allow for crops to be seeded.
Early crop conditions are good but last week’s frigid temperatures limited vegetative growth.
Prospects for Australia’s 2016 winter grain crops are generally looking positive timely planting rains and expectations for above average winter rainfall. ABARES is forecasting a national wheat from for 2016 of 25.5 million tonnes up from 24.3 million tonnes last year.
Generally, it’s been an ideal start to the season, although excessive rainfall is presenting problems for some farmers through parts of central western NSW.