Northern grain supplies are expected to remain uncomfortably tight for the next six months until new season’s wheat and barley harvest.
Southern Queensland grain prices rallied sharply in mid-2017 as it became apparent that last season’s Queensland and northern NSW winter crop would be one of the smallest in a decade. Northern markets have maintained the large premium to southern markets as feedlots are forced to seek more than more grain from southern NSW.
Darling Downs sorghum values ended last week modestly lower, the first weekly price decline in two months. Sorghum was $1 lower at $312 delivered into the Darling Downs and Brisbane was down $1 to $326. Buying interest from the container exporters cooled last week as traders’ struggle to sell the high-priced grain to China.
Australia’s sorghum is already commanding a large premium over United States sorghum and Chinese buyers are baulking at the soaring prices.
Domestic grain users are also showing little interest in feeding sorghum at current prices, instead preferring to utilise more wheat in animal rations. Most feedlots are saying they will use wheat as the main grain after the $40 plus rally in sorghum prices in the past 10 weeks. During the same period, stock feed wheat prices have risen by around $10 to $15 a tonne to the current $333 delivered into the Darling Downs markets.
Sorghum quality has also been an issue with more of the harvest struggling to make the number one export grade due to high screenings. Scorching summer temperatures and dry weather during January and February has taken a toll on quality with more than third of the crop now coming off with high screenings.
Many feedlots have already removed or reduced feed barley from the ration as supplies are exhausted.
Feeders are already bracing themselves for the next six months for difficult trading conditions as the higher prices, quality issues and scarce supplies pressure operating margins. The recent 8 per cent rally in cattle prices following recent Queensland rains has put further pressure on margins. Some feedlots have started cutting back on numbers with the tight margins.
United States wheat futures ended last week sharply lower after weather forecasts added much-needed rain for the driest areas of the HRW wheat crop. Benchmark wheat futures tumbled by more than 4pc last week as investors turned sellers.
Like Australia, US wheat exports have suffered as Black Sea wheat exports captured many traditional markets. Drought concerns in the HRW wheat crop further inflated US export prices above Black Sea wheat, making it even less attractive for overseas buyers.
The Bureau of Metrology’s climate outlook for April to June is mostly neutral for Australia’s cropping areas. The April to June outlook, issued March 15 shows eastern parts of Victoria and southeast NSW are likely to be wetter than average while Queensland and NSW are expected to see neutral conditions.