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Grain & Hay Report: International Wheat Prices Down

Grain & Hay Report: International Wheat Prices Down

16 September 2013

GLOBAL - International wheat prices are down for the week; futures came back as harvest progresses in the northern hemisphere and their corn crop hits the market. CBOT December 13 wheat futures ended Monday night at 641.25 USc/bu, down 12.75 USc/bu week on week.

Dairy AustraliaAccording to Dairy Australia, estimates for global grain stocks have again increased this week with forecasters reacting to better than expected wheat yields in the US northern plains predicting this will flow over the border into the Canadian wheat crop. Southern hemisphere continues to cause concern with ABARES revising Australian wheat production for 2013/14 down 0.932 mill t to 24.47 mill t.

The US corn harvest remains a focal point in determining international grain prices. With the harvest well underway, early reports are indicating better than expected yields. As the harvest progresses corn becomes less responsive to weather news. In the short term it is expected the US corn harvest will continue to create pressure on global wheat prices in a downward capacity.

The Australian dollar has posted strong gains up 2.52USc this week on the back of weaker US fundamentals and increased domestic business confidence with the Liberal-Coalition being elected. Currency alone has seen the $A value of wheat fall A$7-8/t.

Monday night saw Egypt issue their 5th wheat tender in two weeks. Australian and US wheat continues to be uncompetitive against the Black Sea with Ukraine, Russia and Romania successful for the tender.
ABARES released their latest Crop Report this week reducing projected output from 25.399 mill t in June to 24.467 mill t. Overly wet conditions in the Western Districts and Wimmera have reduced estimates in Victoria by 100,000mt. Dry conditions in Northern NSW and WA have also seen production predictions brought back. On the back of further solid rains in SA estimates have been lifted 1.131 mill mt severely reducing the impact on the national figure.

Domestically the old crop remains tight in supply and thinly traded. Recent frosts in the northeastern areas of Australia have increased premiums compared to the southeastern ports. Domestic trade seems to be occurring predominately from on-farm storage. New season crop is rapidly approaching but with limited old season currently available it may be wise to secure required feed over the next month.

It is expected old crop prices will maintain their current level until new season grain begins to roll in off the header and relieve the current supply shortage. Further positive spring weather developments could result in downward pressure on old season prices.

Australian Hay Summary 

  • Generally speaking for the southern half of Australia (south of Dubbo) as the new seasons fodder is becoming available fodder prices are experiencing a market correction. This price adjustment is occurring on a region by region basis as new seasons fodder becomes available, therefore regions that do not have access to new seasons fodder may not have experienced price changes. Reports suggest prices for cereal hay and Lucerne/vetch hay have dropped significantly but these prices are fairly speculative.
  • Early indications suggest that export cereal hay prices for 2013/2014 will be down on 2012/2013 depending on quality. Traditionally export hay sets the floor price for cereal hay traded on the domestic market and with big yields expected new season hay is becoming available at a lower price.
  • Growers in some parts of Victoria are offering very reasonable prices for standing crops intentioned for hay. This poses a good opportunity for buyers who are able to get active and secure their fodder for 2014 now.
  • Growers and buyers entering into an agreement on the sale of a standing crop should ensure they take all pre-cautions to ensure a favourable outcome for both parties. This includes agreeing and recording in writing on all aspects of the transaction before it commences.
  • In Northern NSW (north of Dubbo) the season has dried off considerably, demand for hay is starting to increase from the beef industry in this region as well as drought affected areas of Queensland. There is particularly strong trading activity for new season lucerne coming out of Tamworth. Cattle grade hay was quoted at $330-350t ex farm in Tamworth.
  • In parts of Southern Queensland and Northern NSW growers have taken advantage of the low hay supply and strong demand to cut frost damaged cereal crops for hay.
  • The Demand for hay on the Atherton Tablelands is also very high due to the dry conditions in Western Queensland. Supplies are very low in this region and look set to decrease in 214 as Rhodes grass plantings are being replaced by sugarcane.
  • Reports from around the country indicate that most of the key hay growing regions will see big yields in 2013 which will go a long way to replenishing stocks of hay that have diminished over the past two years.
  • We are hearing more and more reports of both buyers and sellers getting burnt in fodder transactions as the market becomes tighter. It is important to ensure that both buyers and sellers look out for themselves by using written contracts for all fodder transactions, especially in current circumstances. If you would like more information on written contracts for hay please contact the AFIA office on 03 9530 2199.

TheCropSite News Desk

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