Australian grain markets surged higher last week as the pessimism for the 2018 grain harvest continues to build.
ASX wheat futures for a January delivery ended last week $20 higher at $445 a tonne while barley jumped $38 to $438/t. Although ASX wheat futures are broadly reflective of the south-eastern Australian grain markets, the upward momentum was also reflected in sharply higher northern grain prices.
Prices for new season APW multigrade wheat into Brisbane was $20 higher at $470/t with similar increases seen into the Newcastle zone in northern NSW. Barley and sorghum bids also strengthened with the sharply higher wheat prices.
Increases in the Darling Downs stockfeed wheat bids lagged gains in the Brisbane market. Downs stockfeed wheat was $10 higher at $455 delivered while sorghum gained $15 to $422/t.
Trade bids for wheat and barley also pushed sharply higher in other port zones including southern NSW, Vic, SA and WA.
Shrinking expectations for Australia’s 2018 winter grain harvest appears to be the catalyst for last week’s 5 per cent rally in Australian grain prices.
End user buying was also evident in the past week. Some intensive animal grain feeders, who had been hoping for a cooling in prices, emerged as buyers rather than risk even higher prices at harvest.
Significantly below average September rainfall and widespread frosts have seen expectations for Australia’s grain harvest continue to erode in recent weeks. ABARES, Australia’s government crop forecaster, estimated the Australian wheat crop at 19.1 million tonnes in mid-September, but most now see this as optimistic.
ABARES pegged the combined Queensland, NSW and Victorian wheat harvest at 5.7mt in its September crop report. Most now see the eastern Australian wheat harvest at less than 5mt.
Soaring fodder prices have seen many east coast farmers choose to cut wheat, barley and canola crops for hay instead of harvesting them for grain. Some areas in southern NSW and Victoria have seen as much as a quarter of the cereal crops cut for hay.
After a promising start to the season, WA’s production estimates are also in retreat after widespread frosts and virtually no September rain. Above average winter rainfall in the west had forecasters tipping a near record wheat crop of more than 10mt, but the unfavourable early spring wheat may see the final crop slip below 9mt. Warmer temperatures are also eroding yield prospects in the west with daytime temperatures already holding in the low 30s in the northern areas.
Further general yield declines are now seen as unavoidable with the forecasts showing no sign of rain through to early October. Many traders are now pegging the Australian wheat crop at 17 to 18mt, with some saying it would be less than 17mt when harvest starts.
Chances of sorghum crop in southern Queensland and northern NSW are also fading with dry outlook. A few isolated farmers who benefited from storm rains in winter are planting but the major sorghum areas remain dry.