GRAIN REPORT

Where You Can Find The Latest Information On The Grain Trade In New Zealand.

Local Market Update

Sales over November for both feed wheat and barley have remained slow. Dairy farmers have remained cautious with their purchasing of grain. This was predicted due to slower grass growth and the onset of mating combined with a lift in expected milk pay-out might have caused a lift in demand. However, this has not been the case, helped by the arable farmers wishing to clear storage space for the approaching grain harvest, causing the price to drift downwards.

Feed mills also seem to be adopting a wait and see attitude, mainly covering current needs. The major flour mills appear to have also met the needs for this year and are no longer actively chasing stock. Factors which may influence pricing in the coming months could be; the effect on grain yield from the recent hail which was widespread and hit grain growing areas in both Mid and South Canterbury. Also, if the dairy pricing maintains to rise, it may give dairy farmers confidence to increase their use of supplement grains to chase production through the remainder of the milking season.

Buyers of feed grains are still maintaining a cautious stance on any forward contracts, assessing offerings on a case by case basis. The flour mills also seem to have contracted their quotas for next season although, Goodman Fielders entry to this market has yet to be determined.

A reminder to check storage facilities for pest infestations, and straw build up from nesting birds.

Ruralco Seed is always looking for all types of grain to supply a wide range of end users. If you have surplus or uncontracted grain that you would like to sell please contact Craig Rodgers or John Scott at Ruralco Seed. Drop in your sample at any Ruralco Store, contact, your Ruralco Arable & Pastoral Representative or the Ruralco Customer Service Centre on 0800 787 256 to arrange sample bags or pick up.

Canterbury Growers Pricing Per Tonne

Australian Update

Feedgrain Focus: Warehousing trend, harvest heat lift prices

Growers who can only see upside in the market are warehousing a greater proportion of grain than normal, bids rising by $5-$10 per tonne in the past week as traders and consumers attempt to secure barley and wheat tonnage. The sorghum market has risen by more than $20/t in the past week.

Across southern Australia extreme heat and windy conditions interrupted harvest, and bushfires, which have already caused some short-term road closures, prompted near-term supply concerns.

Based on nominal quotes in thin trade for the sorghum market, prices for the summer grain have risen $40-$45/t since 1 November, but eased a few dollars since rain appeared on this week’s forecast for western Queensland.

Users like the Dalby Bio-Refinery and poultry mills are believed to be looking at alternatives to sorghum, which could still be planted over a large area if more than 100 millimetres of rain falls between now and the end of January in northern New South Wales and southern Queensland.

Protein high

As Western and South Australian farmers finish their barley harvesting and move into wheat, the Australian barley harvest looks like it has passed the halfway mark, while the national wheat harvest may only be around 20 per cent complete.

Early indications are for wheat and barley are high protein and good quality in all regions bar the south-west slopes of NSW, where high screenings plagued barley crops.

The upshot is the eastern Australian consumer cannot expect to have a mountain of low-protein WA new-crop wheat and barley come their way this year.

In southern NSW and the Victorian Mallee, the wheat harvest is well advanced, and with most deliveries registering at least 11.5 percent protein, flour millers are bidding up to secure 2019/20 supplies.

Temora grain trader Bill Preston said harvest on the outer south-west slopes of NSW was all but over, and his business had received about 40 percent of the grain it hoped to this harvest.

The problem is a common one for traders, who are having trouble getting volume because struggling cereal crops have been cut for hay, and those which have been harvested are selling direct to consumers or are being stored on-farm or warehoused.

“Barley has firmed up for sure,” Mr Preston said.

“Everyone was talking about how barley in NSW was too dear, and how they were going to bring it up from Victoria, but what’s being offered out of there isn’t any cheaper.”

Barley on-farm is hard to find at less than $300/t, and the lowest-protein wheat available in NSW is not going anywhere for less than $330/t.

For wheat, that equates to around $350/t delivered Riverina end-user in southern NSW.

Mr Preston said demand from graziers was noticeably smaller than this time last year as cattle numbers in particularly are reduced on the tablelands ahead of what looks like being a long, hot and dry summer.

“The stock numbers just aren’t there.”

Graziers and mixed farmers with sheep are still buying barley. It has traded this week delivered to the Dubbo district at a low of around $360/t.

“It’s all freight related at the moment.”

Victorian deliveries rise

Australia’s biggest-yielding crops this harvest will come from Victoria’s Wimmera and south-west, and south-eastern South Australia, and not withstanding today’s harvest ban due to fire risk, harvest in the Murray-Mallee region of South Australia and north-west Victoria is going at full pace.

Shannon Bros Managing Director Brian Shannon said the company’s Beulah site in the Mallee was receiving barley, canola and lentils, and its Horsham site had received its first barley deliveries this week.

“We’re seeing about 25pc of grain being sold in the cash market and 75pc being warehoused,” Mr Shannon said.

“That’s a lot more warehousing than we normally see, and it tell you that the grower thinks the price is only going to go one way, and that’s up.”

ASX cheaper

ASX wheat and barley markets traded by more than 1pc and 2pc respectively lower during the week.

The ASX feed barley (UB) January 2020 contract traded from a high of $273/t at the beginning of the week and settled yesterday at a low for the week of $266/t.

Trade volume was 404 lots in the January contract. Open interest rose from 2462 a weeks ago to 2662 lots on Wednesday.

The eastern wheat (WM) January 2020 contract traded 500 lots over the week, beginning at the high of $343/t and ending yesterday at $338/t, above the week low which occurred on Tuesday at $337/t. Open interest rose to 13539 lots on Wednesday.

Significant outside-of-regular-market-screen activity occurred on Wednesday, a block trade of 250 lots and various smaller trades after the Australian market closing time which will appear in the subsequent day report.

Spreads shift

Forward wheat and barley contracts (March 2020) traded last Friday, barley 25 lots at $278/t an $8/t premium over January and wheat 50 lots at $343/t, a $2/t premium over January.

The ASX March wheat barley price spread was stable around $65/t, barley discount to wheat, while the January delivery month wheat barley price spread traded in the higher range of $70-$72/t.

It’s a bigger differential than normal, but mirrors the complexities of a relatively heavy barley balance sheet clashing against the wheat supply/demand, and particularly reflects eastern Australia’s strong milling wheat market.

Feed Wheat Comparison

Feed Barley Comparison

World Update

HIGHLIGHTS

The forecast for world total grains (wheat and coarse grains) production in 2019/20 is raised by 5m t m/m (month-on-month) to 2,162m, mainly because of an upgrade for maize. Reflecting better than expected yields, but slightly smaller than predicted harvested area, the outlook for the US maize crop is lifted by 3m t, to 345m (366m last year). With figures boosted from before for the EU and Ukraine, the global barley outturn is now estimated to be a record. At 2,188m t, up 1% y/y (year-on-year), the projection for total grains consumption is 4m higher m/m, with most of the adjustment for maize. Changes to maize and barley add around 2m t to the grains carryover projection, but world stocks are still seen shrinking for the third consecutive year. The figure for trade is 0.8m t higher m/m due to increases for maize and sorghum.

World wheat area for the 2020/21 harvest is predicted to expand by 1% y/y, to 218m ha. Wet weather interrupted autumn fieldwork in parts of the EU, most notably in the UK and France. Dryness has left recently sown crops in Ukraine poorly established ahead of the winter, with a significant drop in area reported. In contrast, the area for harvest in Russia is projected to expand. Seeding in the US was virtually complete, with planted area expected to remain close to historic lows. The world rapeseed area is tentatively seen up by nearly 3% y/y, including gains in the EU and the Black Sea region.

The Council’s outlook for world soyabean output in 2019/20 is maintained at a peak of 341m t, the 5% y/y contraction reflecting a plunge in US output. Consumption is seen broadly unchanged from before but, due to a higher figure for opening stocks, carryovers are lifted by 3m t, to 35m. This is still almost one-third lower y/y, mostly tied to a steep drawdown in the US. With a modest upgrade for forecast deliveries to China offset by reductions for others, the trade projection is kept at 151m t, steady y/y.

Largely reflecting the continued slow pace of dispatches by India and Thailand, the outlook for world rice trade in 2019 is cut by 1.0m t m/m, to 43.5m, a 6% y/y drop. Global production in 2019/20 is forecast at 500m t, little-changed y/y. And with consumption fractionally higher than in October, world inventories are raised by 1m t m/m, to a record of 180m, a 6m y/y gain. The projection for trade in 2020 is cut slightly but, at 45.4m t, would represent a moderate recovery.

The IGC Grains and Oilseeds Index (GOI) weakened by 1% since the last GMR, including falls for wheat, soyabeans and rice, but an increase for maize.

OVERVIEW

At 2,162m t, world total grains (wheat and coarse grains) production in 2019/20 is forecast to rise by 1% y/y, as bigger crops of wheat and barley (a record) outweigh a decline for maize. The increased global harvest is expected to nearly compensate for the smallest opening stocks in three seasons, to leave overall supply only a fraction lower y/y. Total grain consumption is predicted to climb to a new high of 2,188m t (+1% y/y), including gains for food, feed and industrial uses. Global stocks of grains are projected to contract by 26m t, to a five-year low of 594m. The fall is entirely linked to a drop in maize inventories (-39m t y/y), including reductions in the USA (-7m), China (-21m) and the EU (-2m). Carryover stocks of wheat could be the largest in history, but the accumulation is mostly in China and India, while aggregate inventories in the major exporters could be little-changed y/y. Trade (Jul/Jun) in grains is expected to reach a new all-time high of 375m t (+3% y/y), including greater shipments of wheat, maize, barley sorghum and oats.

As the smallest US harvest in six seasons is only marginally offset by potentially larger outturns elsewhere, including in Brazil, global soyabean production in 2019/20 is tentatively seen contracting by 5% y/y, to 341m t. Modest gains in feed, food and industrial demand in Asia and the Americas in particular are anticipated to push up consumption to a high but, at 2%, y/y growth would pale in comparison to earlier periods. Mostly due to a drawdown in US stocks, carryovers are predicted to contract by one-third y/y, to 35m t. With bigger deliveries to China and a host of other markets offsetting smaller shipments to South America, trade is seen little-changed y/y, at 151m t.

With weak demand from several key Asian buyers only partly offset by a slight firming of buying interest from importers in sub-Saharan Africa, global rice trade in 2019 (Jan/Dec) is seen falling by 6% y/y, to 43.5m t. As a consequence, sales by India and Thailand are expected to contract. In contrast, China’s exports are set to post strong y/y growth on bigger deliveries to Africa. Global production is predicted broadly steady y/y in 2019/20 as smaller crops in India and China are offset by gains elsewhere, while accumulation in leading producers could push up inventories to a new peak. Trade is projected to rebound, but stay below past highs.

MARKET SUMMARY

The IGC GOI edged lower in November, as firmer maize export quotations were countered by weakness in wheat, soyabean and rice prices.

With global prices anchored by ample availabilities, the IGC GOI wheat sub-Index dropped by 3% compared to the October GMR.

Net gains in South American quotations, linked to continued strong export demand, more than compensated for a fall in US prices, lifting the IGC GOI maize sub-Index by 2% m/m.

The IGC GOI rice sub-Index dipped by 1%. Market activity was generally quiet, as buyers awaited the arrival of new crop supplies from India and Thailand.

Including modest declines at all major origins, the IGC GOI soyabeans sub-Index retreated by 2% during November.